Spengler:

To bankers and politicians who insist that the world will come to an end if the US Congress does not approve the proposed US$700 billion bailout package, I wish to say: “It is not the end of the world. It is just the end of you.” Sadly, it won’t be. America’s financier caste will live to fleece another day.

There are no atheists in the trenches, and no free-marketeers in Congress after a nearly 10% fall in stock prices. A chorus of erstwhile conservative voices led by the likes of Newt Gingrich, the Republican firebrand of the 1990s, now argues that the proposed $700 billion bailout package is flawed, but it is better to enact it than to do nothing. This simply is not true.

In the event of bank failures, the government will not “do nothing”. Two of America’s largest banks, Washington Mutual of Seattle, Washington, and Wachovia Bank of Charlotte, North Carolina, were forcibly merged or taken over by regulators during the past several days, without a ripple of disruption to depositors or borrowers.

When a bank runs into trouble, the American government takes it over via the Federal Deposit Insurance Corporation, an entity created during the Great Depression. Why doesn’t Congress vote authority for the FDIC to add capital to stricken banks in order to continue their lending operations – after the existing shareholders have been wiped out?

The trouble is that the banking system is insolvent; that is, it lacks sufficient capital to hold its existing portfolio of assets, let alone to make new loans. Its capital is dissolving as loan losses mount. Banks have written off nearly $600 billion of mortgages or securities backed by mortgages during the past year. Against this, they have raised $350 billion in new capital from investors. But investors believe that losses will continue to rise in the mortgage market – and that is before other asset classes begin to decay, including credit cards, and corporate loans.

The banks need capital. The private market has had a very bad experience giving them capital. Distressed investors, such as the Texas Pacific Group, which invested in the defunct Washington Mutual, or the JC Flowers Group, which unwisely poured money into Hypo Real Estate, have lost money. Sovereign wealth funds have lost even more. It is getting harder and harder to persuade private investors to put more money into banks, given their string of losses.

The US government has no mechanism for giving capital to the banks. It hasn’t done anything like that since the early 19th century. What Treasury Secretary Henry Paulson has proposed is a backdoor way to put capital into banks, by purchasing securities from them at higher-than-market prices, as I observed last week (see E Pluribus Hokum, Asia Times Online, September 23, 2008). Federal Reserve chairman Ben Bernanke quaintly called the higher price the government is to pay a “hold to maturity price”, as opposed to the “fire sale price” now available in the market place.

Which institutions would get the capital injection, and at what price? In effect the Treasury would be dispensing capital gains to institutions it liked, but not to institutions it did not like (such as the unfortunate Washington Mutual). Shareholders in favored institutions would receive an enormous benefit, which is why some amended versions of the bill propose to allow the government to claw back some of the capital gains through the right to buy company stock.

Why anyone believes that the Treasury plan will prevent widespread economic misery is unclear. Assuming that the Treasury overpays for the so-called “troubled assets” it purchases from banks, it cannot overpay by too much. Let us suppose that it overpays by 20%. In this case, it would effectively give the banks a $140 billion boost. That is a small fraction of what they have written off already, and an even smaller fraction of what they must write off as American wealth continues to shrink. It will help the shareholders of a few big institutions, and that is about it.

The banks need a good trillion dollars or so of new capital. The Paulson plan, unfair and indirect as it might be, cannot provide more than a small fraction of that amount. But there is wealth aplenty in the world eager to find a permanent home in the United States, in the sovereign wealth funds and in private equity funds around the world.

If American banks are permitted to fail, and their operations maintained intact by the FDIC, new investors can restart operations with a clean slate.

What is so awful about wiping out the home price bubble of the past 10 years? Suppose home prices were to plunge by half (which is where homes in foreclosure clear the market in California or Florida)? Young people would find it easier to start families and old people would work longer before retiring.

Nonetheless, the bailout package will pass in some form. America’s intellectual class, right, left and indifferent, is too dependent on the begging-bowl proferred to the financier class to conceive of its existence after the prospective demise of its patrons. Republican congressmen whose constituents fervently oppose the bailout quake in terror at the prospect of absorbing blame for a new depression. If the depression comes despite the bailout, of course, they will have even more explaining to do, but that is a different story.

Ultimately, it is the Americans who lack the guts to oppose it. As I argued on September 23, they are like gamblers who pass a tax to bail out the town casino, after unpaid gambling debts threaten to sink it. Americans will not easily give up the illusion that ever-expanding wealth is their birthright.

As I reported on September 29, America’s wealth was about three times family income in 1962, and over 10 times family income in 2004 (see US wealth in shrink mode). Leverage applied to housing created an illusion of wealth on top of a stagnant base of income. Take away the banks, and the wealth illusion will die forever. Americans will actually have to save, rather than speculate in the property market.

The bailout will pass in some form. But the next time you see a talking head on television telling you that the bailout is imperfect, but that it is the only choice, remember: it just ain’t so.

The Globe And Mail:

Exposure of expectant mothers to phthalates, a common ingredient in many plastics, has been linked to smaller penis size and incomplete descent of testicles in their baby boys, according to a new research paper that found the chemical also appears to make the overall genital tracts of boys slightly more feminine.

The findings are sure to add more controversy to phthalates, a chemical that is added to polyvinyl chloride plastic to make it less brittle, and to many types of personal care products including fragrances, hair sprays and nail polish.

The research was conducted on children from three different areas of the United States, and found a strong statistical correlation between expectant mothers who had above-average levels of the chemical in their urine while pregnant and the feminizing effect on their sons.

Phthalates are “probably reproductive toxins and should be eliminated from products gradually because we don’t need them,” said Shanna Swan, director of the Center for Reproductive Epidemiology at the University of Rochester’s school of medicine, who led the team of scientists who examined the boys.

The paper is published in the current issue of the journal Environmental Research.

The Virginia-based American Chemistry Council, which represents the makers of the chemical (Exxon Mobil, BASF, Ferro Corp., and Eastman Chemical), issued a statement saying it “cautioned against over-interpreting any individual study.”

Scientists have been investigating the possible effects on boys of phthalates because rodent studies have shown the chemical has the peculiar ability to shorten the space between the anus and the genitalia in male mice exposed during fetal development. This space, known as anogenital distance or AGD, is normally about twice as long in young male mice than in females. For mice, AGD is considered a measure of masculinity and a way to determine the sex of the pups. Scientists are so confident of the effect that they’ve given the impact of the chemical on male rodents a name – phthalate syndrome.

Surveys of children have also found that there is a marked sexual difference for this trait in humans, too, with the length in boys about 50 per cent more than in girls.

Dr. Swan’s research, conducted on 106 boys from Los Angeles, Columbus, Missouri and Minnesota, is among the first to raise the possibility that phthalate syndrome may also be at work in humans, because it found pregnant women with the highest amount of phthalates were markedly more likely to give birth to boys who had shorter anogenital distances.

When the boys were compared, none of the 29 with a shorter AGD were born to women who had low amounts of phthalates, while among the boys with a long space, only one was born to a mother with a high amount of the chemical.

The difference in the genital distance between the high-exposure and low-exposure boys was slight – around 3 to 4 per cent.

The paper also showed that incomplete descent of the testicles was “significantly” associated with mothers having more of the type of phthalate used in polyvinyl chloride plastic.

This phthalate, known as DEHP, has been listed as a toxic substance in Canada, and Health Canada has proposed but not implemented a prohibition limiting the chemical to no more than 0.1 per cent of the weight of toys used by young children.

Phthalates may have adverse effects because they are able to reduce testosterone synthesis by interfering with an enzyme needed to produce the male hormone. This raises worries that they may alter any process dependent on the hormone that choreographs male development. Phthalates can easily leach out of products, enabling humans to absorb them through diet, skin and inhalation.

Dr. Swan cautioned that the research was conducted on a relatively small number of boys, and the findings need to be independently verified by other investigators. It also isn’t known what effect, if any, the chemical might have on the fertility of the boys, later in life, because the group would need to be followed into adulthood.

Nonetheless, Dr. Swan said she believes labelling laws need to be strengthened to allow consumers to choose whether to buy products or packaging that contain phthalates.

Cosmetics often contain phthalates, but the chemical isn’t specifically mentioned because it is included in other listed items, such as fragrances.

Dr. Swan says she tries to buy phthalate-free cosmetics and doesn’t store or microwave food in plastic containers, among other steps, to minimize her own exposure.

Commentary:

It’s taken no time for the lunatic media and the ever-beleaguered Obama camp to turn John McCain’s use of the term “that one” into the biggest election scandal since, oh, since John McCain dared to suspend his campaign and do some work. In Maureen Dowd’s column today titled, “Mud Pies for ‘That One,” Dowd writes that the Republican nominee warned that, “white Americans should not open the door to the dangerous Other, or “That One,” as McCain referred to Obama in Tuesday night’s debate.”

It would be pretty hard for McCain to have done that, seeing as he was referring to Barack Obama’s support for a 05’ energy bill sponsored by George W. Bush and Dick Cheney that lavished oil companies with a few extra billion dollars. But hey McCain is “out of touch,” right? So, I guess he thought the best way to stir up hatred in rich white people was to point out that the black guy on stage with him wanted to make them needlessly wealthy.

Obama’s campaign issued several outraged missives in regard to McCain’s use of the innocuously paired adjective and noun. One, written by Obama’s campaign manager David Plouffe read, “John McCain was all over the map on the issues, and he is so angry about the state of his campaign that he referred to Barack Obama as ‘that one’ – last time he couldn’t look at Senator Obama, this time he couldn’t say his name.” Obama’s communication director Robert Gibbs said, “It reminds you that McCain is sort of angry and agitated. He looked uncomfortable. I guess the pillow seat wasn’t soft enough. He stood and walked around.”

Correct me if I’m wrong, but I thought we were a country that wants answers about the economy. I thought Americans don’t know if they’ll have a job by the end of the year, or even if they’ll be able to afford the gas to go out and look for one. Moreover, weren’t we told it was wrong for John McCain to bring up Bill Ayers because all people are concerned about right now is watching their life savings go down the sinkhole with no recourse? Barack Obama called the Bill Ayers issue a “distraction” from the wrongheaded GOP policies that are making average Americans suffer. Yet, somehow, “that one” is worthy of campaign statements and New York Times columns.

There is a pattern here. Mentioning the anti-American rhetoric of Michelle Obama constitutes a scare tactic, but the contents of Levi Johnston’s myspace page are a pressing national security issue. Allusions to Barack Obama’s business dealings with Tony Rezko are smears, but John McCain’s houses are legitimate Democrat talking points. Obama’s inexperience is beside the point, because what we need now is new blood, but Sarah Palin’s inexperience is a dangerous insult to the nation. Obama’s infractions, no matter how worrisome,  are either ancient history or simply justified. But McCain’s every word or deed is elevated to the level of war crime.  

Fort the record: “That one” is not racist or dismissive or a sign of anger. “That one” is most often (in my experience) a playful way of apportioning guilt. It’s almost familial, in fact: “We were supposed to go away, but then this one got a cold and that one had work to do,” or “Don’t look at me, I didn’t break the dish, it was that one.” That kind of thing. And if Obama doesn’t understand the use of this harmless colloquialism, he’s broadcasting a bizarre sense of otherness all on his own.

The American Spectator:

When James Carville insisted in 1992 that the Clinton campaign should pound home its message that President George H.W. Bush had mishandled the economy, he wasn’t laying down a marker for all time that the economy is always the best presidential campaign issue. Instead, he was astutely insisting that his campaign focus on his opponent’s greatest weakness.

But sometimes the most pressing issue isn’t the best issue to press — because it’s not the one where your candidate can draw the best distinction with the opponent.

That’s the situation John McCain finds himself in today. Yes, in Carvillian language, today’s biggest issue is indeed “the economy, stupid.” But John McCain talks about the economy no more convincingly than a hippopotamus dances ballet. And while Barack Obama’s economic prescriptions are about as wrongheaded as Linda Blair mid-spin in The Exorcist, he at least sounds quite cogent and reasonable (until you actually think about it) when discussing them. Yes, the McCain campaign needs to find a way to undermine Obama’s current polling edge on the economy, but the only thing “stupid” would be an attempt at a head-on assault from McCain’s position of weakness on the issue.

McCain’s a military man. He should know that it’s best to attack from strength to weakness, not the other way around. Sometimes that requires a flanking maneuver.

The way to undermine Obama’s apparent (if unearned) credibility on the economy is to undermine his credibility, period. Make Obama’s worldview in general anathema, and you make his economic worldview anathema. And the way to do that is to place Obama outside the common culture, while rooting McCain firmly within it.

Yes, absent another national security surprise, “culture” is the best, indeed the only potentially effective, battleground available for McCain to fight on. It’s a battleground on which Obama is extraordinarily vulnerable.

Without putting it as bluntly as this sentence does, McCain’s campaign must pound home the message, in a coherent way, that Obama is not “one of us” — meaning that he is estranged from, not part of, middle America. And the way to make that message relevant is to say that when times are tough it is not any one economic theory that will get Americans through the crisis, but rather that it is our American-ness, our exceptionalism, our national character that guarantees that we shall overcome.

McCAIN IS SKILLED, utterly convincing, at carrying this message. His best moments in Tuesday’s debate came when he said that “America is the greatest force for good in the history of the world,” and when he answered the last question by saying, “I know what it’s like to have to fight to keep one’s hope going through difficult times. I know what it’s like to rely on others for support and courage and love in tough times. I know what it’s like to have your comrades reach out to you and your neighbors and your fellow citizens and pick you up and put you back in the fight. That’s what America’s all about. I believe in this country. I believe in its future. I believe in its greatness.”

Obama, though, sneers at the culture of middle America. Obama is the one who said that working-class Americans “get bitter, they cling to guns or religion as a way to explain their frustrations.” It was Obama whose own autobiography portrays himself not as somebody who transcends race but somebody who wallows in it, somebody not integrationist but separationist, somebody who sees white people not as able to be redeemed of racism but as people to whom racism was endemic.

“The other race would always remain just that: menacing, alien, and apart,” he wrote.

Obama is the one who went to Germany and proclaimed himself “a fellow citizen of the world” while apologizing that the United States has “struggled to keep the promise of liberty and equality for all of our people” as “our actions around he world have not lived up to our best intentions.” Somehow, though, middle Americans won’t quite cotton to a presidential candidate assuming the responsibility or right to apologize to foreigners for our country’s supposed sins.

Obama is the one — The One! — so arrogant that he said his own nomination would be “the moment when we began to provide care for the sick and good jobs to the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal….” So arrogant, too, so presumptuous, that he designed his own presidential seal.

Also, a person in concert with our culture does not, as Obama did, start his political career in the house of and serve in co-leadership, closely consultative roles on two boards with the founder of a domestic terrorist organization, while using the boards to funnel money to groups that promoted racially separatist and other radical educational causes.

It is not enough to say that the former terrorist had somehow become a respected member of the community — not when that terrorist remains so radical that even to this day, at least 13 years (and as many as 20 years) after Obama began his association with him, he defends his long-ago bombings and praises those who attack the United States.

Those boards also gave money to the church Obama attended for 20 years, a church whose pastor from the start told Obama (in Obama’s own words in his autobiography) that life for a black man in America “probably never will be” safe and who spewed hatred from whites and America from his pulpit; and also to a radical American pro-Palestinian group.

Obama has praised the radical, hate-spewing Catholic priest Michael Pfleger. His wife has said she was never proud of America until her husband started winning presidential primaries. And they together have accepted what amounted to a real-estate gift from their state’s most notorious convicted influence peddler.

What’s worse is that Obama would impose his culture on the rest of us, through judges that go beyond the text of the Constitution to give legal status to their own expressions of “empathy.” Empathy for the criminals, like the terrorist Bill Ayers, who go free on a technicality. Empathy for the people offended by a Christmas tree on the public square. Empathy for the 13-year-old who doesn’t want to inform her mother about the abortion she is procuring, even though her mother would have to give approval for any other surgery for the daughter. Empathy for the student so offended by the presence of Army ROTC on campus that he demands that ROTC be banned. Empathy for the father offended that his child is exposed to the Pledge of Allegiance in school. Empathy for the horrible brute sentenced to death for the grisly rape of a little girl.

Oh, wait — Obama says he himself did not approve of the decision outlawing the death penalty for child rapists. But that hardly exonerates him: Every one of the Supreme Court justices he says he admires, and who would be his models for future appointments, decided on their own authority that the death penalty, even for a grisly child rapist, violates their own standards of decency.

Finally, of course — and this is an issue McCain’s campaign should mention every hour of every day between now and the election — Obama was the only member of the Illinois state senate so radically dismissive of human life that he spoke on the senate floor against a bill mandating care for babies who survived “botched” abortions. Obama’s position was beyond despicable; it was monstrous. It puts him so far outside of the mainstream of American culture that he might as well be in his own moral desert.

EVERY ONE OF THESE issues is an indicator of culture. Every one of them is an indicator that Obama himself can’t possibly empathize with most of us as we struggle with an economic crisis, because he not only misunderstands how we feel and how we see the world but also has contempt for our very point of view.

“Look,” McCain could say. “My friends, we have tough times ahead. But we will survive because Americans know how to pull together and because we know the value of hard work and voluntary community spirit, and because we have a native toughness. We will pull together not because some orator with a smooth, deep voice cites some pie-in-the-sky economic theory, but because we know how to roll up our sleeves, trust each other, and get the job done. My opponent doesn’t share our faith in ourselves and our common culture. My opponent thinks bureaucrats in Washington know best. But we know better. My friends, we know better. We know that we don’t need Washington to serve as a national community organizer pushing newfangled theories and taxing us to do it; we know that our communities can organize on our own, if only we use our common values to rebuild the real economy of real goods and real services.

“And when we go to church for sustenance, we won’t be blaming our country or clinging to our religions out of bitterness. We’ll be going there because we know that ‘perseverance produces character, and character, hope, and hope does not disappoint us.’

“Hope does not disappoint us, because of our faith — and because we are Americans.”

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