I have been reading a lot about the financial crisis and have come to realize that the current crisis is structural. By that, I mean that no amount of tweaking of the current system by law or regulation is going to work. We have reached the inevitable end of the international currency system established after WWII. Let's call it "the dollar standard". Rather than go into lots of detail, essentially the dollar standard is where foreign currencies are pegged to the dollar and the dollar has value primarily due to its status as reserve currency.

After the financial crisis, organizations like the G-7 and G-20 discussed the idea of going off the dollar standard and developing a new world currency. Several suggestions were bandied about but no actionable plan develpoed. Don't assume this inaction means that the dollar's supremacy is safe -- it is just that the time is not yet ripe to take drastic action. Governmental bodies, especially international ones, never make major decisions unless there is a dire emergency pushing them to. No matter how bad you think the situation is now, it hasn't gotten really bad yet.

Eventually, the crisis will metastasize and the powers-that-be will decide that "something must be done". Unlike the Bretton-Woods conference after WWII, America will not be in a strong position and able to dominate the discussion. Then, the US was the strongest country with an intact industrial base after a devastating war. The other nations needed US foreign aid to help rebuild after the war. Any new negotiations concerning development of a new world currency regime will be quite different. America is now a debtor nation with a hollowed-out industrial base. The US will have a much harder time pursuing their interests this time around.

Which brings me to my main point. In this new world we find ourselves in, where there is a coming realignment and readjustment, the United States desperately needs leadership who will fight for American interests. But the biggest problem with the current ruling elite in America is that they do not share the values and aspirations of average Americans. Rasmussen's latest poll shows the wide gap between ordinary Americans and the ruling class.

Recall at Treasury Secretary Timothy Geithner's confirmation hearing he talked about how he had spent time in his childhood in foreign countries due to his parent's work. He stated that this allowed him to be able to understand and emphathise with how foreigners think. But what we need are leaders who understand and emphathise with how Americans think!

We need someone who spent their formative years in the US, not a foreign country. We need someone who embraces rather than mocks "fly-over country". We need someone who believes there is nothing wrong with Kansas. We need someone who embraces American ideals of limited, constitutional government and individual freedom.

Its sadly funny how the progressives came to power just as the progressive agenda of building a European-style socialist state is unraveling. Years ago prescient people like Reagan warned against "creeping socialism" and Thatcher said "the problem with socialism is eventually you run out of other people's money". But true believers in the socialist/progressive program wouldn't hear those warnings. Instead, they continued to pursue their plan until the inevitable occurred -- unsustainable debt and impending economic collapse.

The Europeans prided themselves on pursuing the "third way" -- a system between what they perceived as "cut-throat capitalism" and Soviet-style authoritarianism. But their "third way" is crumbling. For the leftists, this collapse is a disaster not unlike the revelations in the 1950's that the Soviet Union was not the "future that works". I refer here to the Kruschev speech that acknowledged the evils of Stalinism. True believers in the West were rocked by these admissions because they had long held up the USSR's system as a shining example of true socialism.

Perhaps some leftists and progressives will snap out of their stupor and realize that their program is fatally flawed. But for many, I suspect, the state of denial will continue. When someone's cherished world view is threatened, he violently opposes those who speak the truth. Just think of the many who even today refuse to believe that people like Alger Hiss really were communist agents and traitors.

The attempts to destroy Sarah Palin were, before Obama got elected, the actions of leftist/progressive true believers who feared their long-sought march to power was threatened. But now it will get even worse because the very reasons they wanted power -- to build a European-style socialist state -- is proving to be an unworkable mistake. Reality is a b*tch.

The incident with Rep. Etheridge's "beat down" of two student journalists illustrates the desperation of the mainstream politicians. For so long now politicians have been in "caretaker" mode that they cannot respond appropriately to our current economic and political crisis.

Caretakers are given power in an environment where the established order is running in autopilot mode. The caretakers only job is to go with the flow and not screw things up. I experienced this same situation when I worked for a time at a phone company. As a regulated monopoly, they were guaranteed profits. All the executives had to do was continue doing the same things they had been doing for years. But when the environment changed, when true competition entered the telecommunications industry, the caretaker executives didn't have a clue about how to respond.

Our government has been in the same situation for years. Politicians simply had to accept the status quo, maintain the system of entitlements and government growth, and continue with deficit spending to be successful. In other words, be a caretaker of the existing system.

Now that the existing system is breaking apart, the caretaker politicians are adrift. Their quiet panic is revealed in the heavy-handed way Etheridge responded when asked a simple question by the student journalists. Unfortunately, we can expect more of the same in the near future.

Government Pensions

The New York Times is concerned about the future of Western Europe's welfare state:

"Across Western Europe, the “lifestyle superpower,” the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II." (http://www.nytimes.com/2010/05/23/world/europe/23europe.html?hp)

Among the concerns are generous public pension plans. With many Europeans able to retire shortly after 50 and lifespans increasing, the cost of paying for extended retirements is breaking the budgets of many European states (and many US States as well).

On proposal on both sides of the pond is to raise the retirement age. Let's just think about this for a moment. Why is the government telling us when we can retire? If each person were responsible for his or her own retirement savings, we each could decide on our own when we wanted to retire. If someone wants to work 14-hour days to earn a bunch of money and retire at 45, that should be their prerogative. If another person wants to keep working until 70, that should be their choice as well. That's what freedom is all about. When the government tells you when to work and when to retire, I call that serfdom.

Of course the big problem with government run pension plans is that any money collected by the government is immediately spent rather than saved. So by the time we retire, current workers have to pay our retirement. In contrast is a true savings plan where each person has a "nest egg" to spend for retirement.

Transitioning away from government-run plans toward the freedom of individual retirement accounts has the problem of what to do with current retirees. It is too late for them to build up their own retirement savings. Those still working would have the dual burden of paying into their own account and paying current retiree's benefits at the same time. Any plan to phase out Social Security would have to take that into account

Deficit Complaints

When discussing the Tea Parties, I often read commentators complain that “the Tea Partiers criticize spending now, but where were they during the Bush years?”

I think this graph explains it pretty well:





Note how in the last year of the Bush presidency, the deficit was a tick over 400 billion dollars. That's pretty bad. But Bush was a piker compared to Obama's projected 1.75 to 1.85 trillion. Although 2008 was bad, 2009 is clearly in OMG! territory.

The 3AM Call

During the recent presidential election campaign, the candidates' readiness for office was judged by their hypothetical response to an national emergency. Campaign spots asked voters to imagine the president being awakened at 3am to respond to a crisis. Which candidate would handle the emergency best? When asked in an interview “How would you respond to the 3am call?”, what should a presidential candidate say?

I think the best answer would be “I would activate the pre-arranged response for that emergency situation.”

If you have to scramble to decide how to respond after-the-fact, it's too late. In both government and business, the job of executives and managers includes disaster planning. Not only must the plan exist, but it must be up-to-date and clearly communicated to participants. When needed, participants should engage in practice drills.

Most of us have participated in fire drills, tornado drills, or earthquake drills (familiar to those in California), so the idea of disaster planning is not a foreign concept. I am sure that in the bowels of government there are people whose whole job is to think up “what if” scenarios and come up with a plan. Heck, there probably is a plan about how to respond to an unknown disaster.

Responsible leaders, whether they be in government or private business, should anticipate crises or disasters and plan ahead. A wise candidate would point out that fact.