Bill Gross: America requires more than a makeover or a facelift. It needs a heart transplant

Bill Gross dons armour and sword  again and cuts a bloody swathe through the rotten financial and political system of America. We like Bill Gross.

Fifty years ago, the highest paid and most prestigious professions were that of a doctor or a 707 airline pilot who flew the “golden” route from Los Angeles to Honolulu. Today the yellow brick road begins on Wall Street or the City. Aside from supernova innovators such as Steve Jobs or Mark Zuckerberg, the money is made from securitizing things instead of booting and rebuilding America. The tallest buildings in almost every major city are banks, with tens of thousands of people shuffling and trading paper for a living. One of this country’s premier investment banks paid each of its 26,000 employees an average of $370,000 in 2010, nearly ten times the take-home pay of other American workers. Almost a quarter of the 400 wealthiest people on Forbes annual richest list make their money from money, whereas only 8% could make that claim in its first issue in 1982, and probably close to 0% when I first read my economic primer in 1966.

Financiers have lost their high ground and, if truth be told, we began to lose it a long time ago when we figured out that money was more than a medium of exchange or a poor substitute for a store of value. We figured out a turbocharged way to make money with money and proclaimed ourselves geniuses in the process. Well, we’re not. We may be categorized as “opportunists,” to be generous, but society’s “paragons” and a legitimate destination for a significant percentage of college graduates? Hardly.

This country desperately requires a rebalancing of priorities. After readjusting the compensation scales via regulation and/or free market common sense, America needs to anoint a new set of Mensans who can create something more than a cash machine and make this country competitive again in the global marketplace. We need to find a new economic Keynes or at least elect a chastened Congress that can take our structurally unemployed and give them a chance to be productive workers again. We must have a President whose idea of “centrist” policy is not to hand out presents to the right and the left and then altruistically proclaim the benefits of bipartisanship. We need a President who does more than propose “Win The Future” at annual State of the Union addresses without policy follow-up. America requires more than a makeover or a facelift. It needs a heart transplant absent the contagious antibodies of money and finance filtering through the system. It needs a Congress that cannot be bought and sold by lobbyists on K Street, whose pockets in turn are stuffed with corporate and special interest group payola. Are record corporate profits a fair price for America’s soul? A devil’s bargain more than likely.

Read the full article.

Quantitative Easing Explained in 6 minutes

I came across this video at Juggling Dynamite. It has ‘gone viral’ reaching 2 million views in the last week. Pass it on to your friends, you can’t make this up.

Integrity

All my life I have been very sensitive of the concept of fairness. I think I have stated before in my posts on anger that I have a very revengeful nature. Certainly if I am wronged or treated unjustly I have a hard time dealing with my anger for that person. I will remember a wrong for years. I will cut out any person who has wronged me; I will ignore them from that time onwards. (I have a long way to go on the spiritual path of forgiveness).

However, if I have deserved a criticism, if I have acted badly, if I have wronged first, that is an entirely different matter. I may grumble, mostly in anger at myself, but I am not infused with the same anger or revenge for that person. Fair is fair.

People who lie, who bear false witness, are the lowest of the low in my eyes. I can’t abide dishonesty and falsehood. Some of you reading this who know me may know what (and who) I am talking about. Anyway, this weekend I had occasion to think about integrity and the malice of those who don’t have any. I looked up some quotes. The following ones are most in tune with my own thoughts at this moment. I will no doubt write more about integrity or the lack thereof in the future. I think it is an important subject.

O, what a tangled web we weave; When first we practice to deceive!  Sir Walter Scott

He who permits himself to tell a lie once, finds it much easier to do it a second and third time, till at length it becomes habitual; he tells lies without attending to it, and truths without the world's believing him. This falsehood of the tongue leads to that of the heart, and in time depraves all its good dispositions. Thomas Jefferson

There is no vice that doth so cover a man with shame as to be found false and perfidious. Francis Bacon

If you have integrity, nothing else matters.  If you don't have integrity, nothing else matters.  Alan Simpson

He who indulges in falsehood will find the paths of paradise shut to him. Abu Bakir

It is an affront to treat falsehood with complaisance. Thomas Paine

If a man does not resent slight injustices, he will soon be called upon to face giant wrongs. Taoist tradition

'Tis better to suffer wrong than do it.  Thomas Fuller

Take care that no one hates you justly.  Publilius Syrus

If everyone were clothed with integrity, if every heart were just, frank, kindly, the other virtues would be well-nigh useless, since their chief purpose is to make us bear with patience the injustice of our fellows.  Jean-Baptiste Molière

Update: if we believe the author of this quote, then it would seem God agrees with me:

All malice has injustice at it`s end, an end achieved by violence or by fraud; while both are sins that earn the hate of heaven, since fraud belongs exclusively to man, God hates it more and, therefore, far below, the fraudulent are placed and suffer most. Dante Alighieri

Sacrifice - from the phlegmatic Michael Caine

I have often been called phlegmatic, calm, not easily angered. (I have been called a lot of other things too…)

Phlegmatic (definition from Dictionary.com)

Adj.

1. not easily excited to action or display of emotion; apathetic; sluggish.

2. self-possessed, calm, or composed.

3. of the nature of or abounding in the humour phlegm.

Synonyms

1. stoical, cool, cold, uninterested, dull, torpid. 2.  cool, collected, unruffled, placid, quiet.

When they call me phlegmatic they usually also refer to my British background, a disposition for phlegm being seen as a typically British trait. I may have some claim to that quality (some would say particularly the cold, dull and torpid part) but I have nothing in comparison to the phlegm of one of my favourite actors: Sir Michael Caine.

I recently saw him in ‘The Weather Man’ (2005) starring Nicolas Cage. It’s a very honest movie, worth your while, even important, particularly for a few lines that Caine delivers with an armour-piercing phlegm.

To get anything of value you have to sacrifice. Do you know the harder thing to do and the right thing to do are usually the same thing? Nothing that has meaning is easy. Easy doesn’t enter into grown up life.

Easy doesn’t enter into grown up life. It’s as simple as that. Most of our problems arise from that one simple fact and our inability to face up to doing the hard thing, the right thing, the thing that takes courage. The minute we stop resisting and accept that, we will start to make progress. And that’s also when we will start to become men. And women.

Here’s the clip, I found it on Youtube. Your whole life has brought you to this moment with Michael Caine.

The BP Deepwater Horizon disaster - what really happened

At IKN (Inca Kola News), one of my regular financial haunts, I read this post about revelations from industry experts in the know about what really happened leading up to the explosion of BP oil rig Deepwater Horizon. In the comments section I found a link to  this article which sums up what happened in layman’s terms:

BP contracted Schlumberger (SLB) to run the Cement Bond Log (CBL) test that was the final test on the plug that was skipped. The people testifying have been very coy about mentioning this, and you’ll see why.

SLB is an extremely highly regarded (and incredibly expensive) service company. They place a high standard on safety and train their workers to shut down unsafe operations.

SLB gets out to the Deepwater Horizon to run the CBL, and they find the well still kicking heavily, which it should not be that late in the operation. SLB orders the “company man” (BP’s man on the scene that runs the operation) to dump kill fluid down the well and shut-in the well. The company man refuses. SLB in the very next sentence asks for a helo to take all SLB personel back to shore. The company man says there are no more helo’s scheduled for the rest of the week (translation: you’re here to do a job, now do it). SLB gets on the horn to shore, calls SLB’s corporate HQ, and gets a helo flown out there at SLB’s expense and takes all SLB personnel to shore.

6 hours later, the platform explodes.

What strikes me about this story is the probable role of morality in it and the consequences in the real world of moral and immoral decisions. Let me conjecture for a moment…

BP hires Schlumberger for their expertise to do a job. The Sclumberger man tells the BP man he should shut down the well because it is unsafe. Why would the BP man refuse? Schlumberger are the experts on that part of the operation. Could it be that Schlumberger has a company culture of safety first which allowed (and obliged) the Schlumberger man to refuse to work on the rig, whereas BP, as evidenced by the BP man’s decision, has a different culture?

The consequences of immoral decisions on Wall Street have no tangible, immediate, visible effects. The consequences of immoral decisions in the oil industry do: explosions, deaths, pollution, environmental disaster. Those things cannot be fixed by lowering an interest rate. Perhaps if the consequences of Wall Street immorality were a dozen dead brokers and a billion barrels of black crude floating down the streets of New York there would be a different Wall Street culture.

Image from Space Gizmo

I Ching, therefore I Pod - Hexagram 38. Opposition

In my post I Ching for I Pod I told you about a great I Pod application for the I Ching from Flat Earth Studios. And I recently used it to consult the I Ching about that nasty bit of untruthfulness that I encountered at work and that angered me enormously. As I told you before, I have never consulted the I Ching without it being spot on in the pertinence of its advice. But this time I was more amazed than ever, as the answer it gave me was Hexagram 38, Opposition. Here is the text from the translation I use in this app (one of many), A Guide to the I Ching, by Carol K. Anthony (italics are mine):

This hexagram is synonymous with misunderstanding. Opposition arises from misconceptions. Either we misunderstood the Sage, or Fate, or the meaning of life, or the cosmic order of values, or ourself or others. People go in opposition to the correct way because they misunderstand the great truths that would liberate them from their fear to follow it.

If we think, in pursuing our path, that everything is going against us, and we suspect that we are not getting the help we need, this hexagram tells us that we are mistaken; we are being helped, although we don’t realize it. We should not allow ourself to become isolated through mistrust.

Fire and water never mingle. It is the same with enlightenment and worry. We cannot see with clarity as long as we are subject to restless fears. Opposition (misunderstanding) occurs because of mistrust, doubt, fear, or anxiety. Events which appear evil may provide the only means by which matters may be clarified and corrected. Before clarity can be attained mistrust must be eliminated by refusing to listen to our arguing ego.

If we are in a situation of opposition to someone because of misunderstanding, we inwardly go in opposite directions. This cannot be rectified by frontal attacks or brusqueness, or by wooing them. Mistrust bars this. We must simply go on our own way in dignity, and depend on the power of truth to gently penetrate through.

Dark clouds over America - the fabulous Fabrice of Goldman Sachs

The dark, dark, dark side of Wall Street brought into the bright, bright, bright sunlight of day for all to see (from the New York Times):

Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail…

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market…

As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars….

Goldman let Mr. [John] Paulson select mortgage bonds that he wanted to bet against [for Abacus 2007-AC1] — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.

But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

Mr. Paulson is not being named in the lawsuit.

A 31 year old Goldman Sachs employee (vice-president) Fabrice Tourre is named in the suit for his key role in negociating the deal with reputable capital management firm ACA (from the suit):

(Fabrice) Tourre was principally responsible for ABACUS 2007-AC1. Tourre devised the transaction, prepared the marketing materials and communicated directly with investors. Tourre knew of Paulson’s undisclosed short interest and its role in the collateral selection process. Tourre also misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-AC1 (a long position) and, accordingly, that Paulson’s interests in the collateral section process were aligned with ACA’s when in reality Paulson’s interests were sharply conflicting.

Felix Salmon sums it up well:

The scandal here is not that Goldman was short the subprime market at the same time as marketing the Abacus deal. The scandal is that Goldman sold the contents of Abacus as being handpicked by managers at ACA when in fact it was handpicked by Paulson; and that it told ACA that Paulson had a long position in the deal when in fact he was entirely short.

Goldman Sachs has lost more than $10 billion in market capitalization today, in the wake of these revelations. Good. It can go long markets and it can go short markets. But it can’t lie to its clients. That’s well beyond the pale.

Beyond the pale indeed. What a sordid tale. Goldman Sachs may have lost $10 billion in market cap, but they have lost something even more valuable: integrity.

I found this passage in the S.E.C. suit particularly damning:

At the same time, GS&Co (Goldman Sachs) recognized that market conditions were presenting challenges to the successful marketing of CDO (collateralized debt obligation) transactions backed by mortgage-related securities. For example, portions of an email in French and English sent by (Fabrice) Tourre to a friend on January 23, 2007 stated, in English translation where applicable: “More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab[rice Tourre]…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”

You can say that again Fab. What a great man you are.

Read more at Naked Capitalism and Felix Salmon. Read the suit here.

Photo of Goldman Sachs tower by Tattooed JJ

Dark clouds over America - 3 million poor souls not worth counting

I came across the following video at one of my regular financial haunts, Danielle Park’s Juggling Dynamite. You may remember Danielle as the ethical financial advisor.

The interviewee is economist Stephen Roach. (That reminds me of a joke about economists, but I digress). Mr. Roach works for Morgan Stanley and after listening to him in this interview my opinion of Morgan Stanley has gone up a couple of notches. Mr. Roach rightly points out that the unemployment figures released recently of 9.7% take no account of the three million U.S. citizens who have given up looking for a job. “For some bizarre reason,” says Mr. Roach, “the U.S. statisticians do not count these poor souls as unemployed.” The actual unemployment rate is 11.5%.

So not only are detainees ‘not persons’, neither are the discouraged jobless. What happened to equality and justice?

Speaking of justice, Mr. Roach ironically ends his analysis with the injunction that, because of the ‘noise’ in the unemployment data, “It’s important for your viewers to keep watching the pithy commentators you get on your show for clarity, truth and justice.”

In other words, don’t expect it from your administration’s statisticians. Damn, I like that guy.

OK, here is my economist joke, but in honour to Mr. Roach, let’s make it a statistician joke instead, it’s much more à propos:

There are three kinds of government statisticians: those who can count, and those who can’t.

Mending the World

Let’s take a break from the dark clouds and the doom and gloom. ‘Why are you writing about that stuff here anyway?’ you ask. ‘This is supposed to be a blog about philosophy and healing for goodness sake, I come here to get away from all that crazy stuff.’ Yep, you may have a point. But I talk about that crazy stuff because it is a consequence of bad philosophy. Just like for an individual, when a country and an economy are governed by short-term selfish immoral goals, bad consequences arise and suffering ensues. Eventually.

We have talked about this before: the swamp plant may grow fast and do well for a time, but it will not last. Only growth based on the firm soil of integrity is lasting and beneficial to all. What has happened in recent years is unacceptable to reasoning people and I feel winds of change are blowing and I feel a desire to give those winds of change a little help. So bear with me if I rant about bad philosophy in the world. I am reminded of this quote of many centuries ago:

Do you know, my son, with what little understanding the world is ruled? Pope Julius III (1487 – 1555)

Not many people see this blog but if only one person reads this post, who knows what tiny ripples of change may be set in motion?

So let us return to philosophy again for a moment and let me share with you a passage from an important little book I have discovered recently: Life’s Daily Blessings – Inspiring Reflections on Gratitude and Joy for Every Day, based on Jewish Wisdom by Rabbi Kerry M. Orlitzky. From compiling quotes for the blog, I have come across several Jewish proverbs and I always found them very succinct powerful and true. So when I fell on this book I was eager to learn more about the Jewish tradition. I was not disappointed. I share with you here a very appropriate passage for this blog and for this world today.

Mending the World

Blessed are You, Adonai our God, Ruler of the universe, for giving us the opportunity to mend the world. Rabbi Ron Klotz

While this is not a traditional blessing – that is, not one of the lists of blessings penned by the Rabbis to be among the one hundred that are to be said each day – it certainly contains what might be called traditional sentiments. We are each obligated to help repair the brokenness in the world, and in others. Of course, we may be simply motivated to do so because it is the right thing to do. But we also want to recognize that when we do so, we are contributing to God’s work in the world. In repairing what is broken and working to bring perfection back to the world by healing it and those who inhabit it, we are acting as channels through which God’s presence flows into the world.

The blessing that Rabbi Klotz wrote acknowledges the sacredness of such an act. It is a privilege to join with God in order to fix what is broken in the world. But the world is not alone in its need of repair. When we contribute to fixing the world, we often end up healing what may be broken in ourselves.

Dark clouds over America - Captain Bernanke and the Navy Rule

I recently read Paul B. Farrell’s article Warning: Captain Bernanke sinking the USS Titanic just before the reconfirmation of Ben Bernanke as Federal Reserve Chairman. Farrell compares Bernanke to Captain Queeg in the film ‘The Caine Mutiny’. I’m not familiar with the film but I can imagine Captain Queeg has some issues.

Worse, Obama's giving ol' Capt. Ben a second chance to pilot into new icebergs dead ahead. The Economist calls them "asset bubbles." Problem? Capt. Ben can't see through his ideological Greenspan/Reaganomics goggles, clouded by his obsessive allegiance to Wall Street's "fat cat bankers."
Nothing new: He failed to see warnings of "icebergs" back in 2007. Yes, and he'll miss any new icebergs, sink the global economy and plunge the world into the eerie depths of the Great Depression 2.

Farrell goes on to quote Jeremy Grantham in his recent letter to investors ‘Lessons Not Learned: On Redesigning Our Current Financial System.’

"Imagine the company representatives on the Titanic II design committee repeatedly pointing out that the Titanic I tragedy was a black swan event: utterly unpredictable and completely, emphatically, not caused by any failures of the ship's construction, of the company's policy, or of the captain's competence. 'No one could have seen this coming' would have been their constant refrain.'"
Sound familiar? You bet. Capt. Ben's "Titanic II design committee" would include his ol' buddies, Alan Greenspan, Henry Paulson, Lawrence Summers and Tim Geithner. "Their response would have been to spend their time pushing for more and improved lifeboats," says Grantham.

I have liked Jeremy Grantham ever since I saw him in this far-reaching interview at Wealthtrack after the meltdown last year (which I encourage you to watch in its entirety to get valuable insight into what has happened in this crisis, including utter condemnation of Greenspan and his protégé Bernanke). My favourite Grantham quote from the interview is this:

Interviewer: New rules of investing: is permanent bullishness about equities out?

I certainly hope it’s out. I like to say that in the short term we learn an enormous amount from these crises, and in the intermediate term we learn a little, and in the long term we learn absolutely nothing.

So a ‘nearly dysfunctional Congress’ dominated by special interests has plucked the Captain of the Titanic from the sea and has promptly given him command of a new ship. ‘Is that wise?’ you may ask. By pure coincidence I came across the following from (Warren Buffet’s partner) Charlie Munger’s book ‘Poor Charlie’s Almanac’:

I like the Navy’s system. If you’re a captain in the Navy and you’ve been up for twenty-four hours straight and have to go to sleep and you turn the ship over to a competent first mate in tough conditions and he takes the ship aground – clearly through no fault of yours – they don’t court-martial you, but your naval career is over.
You can say, ‘That’s too tough. That’s not law school. That’s not due process.’ Well, the Navy model is better in its context than would be the law school model. The Navy model really forces people to pay attention when conditions are tough – because they know that there’s no excuse.
It doesn’t matter why your ship goes aground, your career is over. Nobody’s interested in your fault. It’s just a rule that we happen to have – for the good of all, all effects considered.
I like some rules like that. I think that civilization works better with some of these no-fault rules. But that stuff tends to be anathema around law schools. ‘It’s not due process. You’re not really searching for justice.’
Well, I am searching for justice when I argue for the Navy rule – for the justice of fewer ships going aground.

Well, in the case of Captain Bernanke the Navy rule would doubly apply: the Captain was at the helm of his ship the whole time and was fully responsible for running the ship aground. The Captain would have been court-martialed, found guilty and dismissed the service. Next case. Instead, here we are again with the same captain, doomed to live through the whole scenario again. As Grantham points out, in the long term we learn absolutely nothing.



Image from Jeremy Gilby.com

Dark clouds over America - Bill Gross: What has become of the American nation?

Thank you to Shocked Investor for the heads up on the publication of Bill Gross’s new Economic Outlook for 2010.
Bill Gross is managing director of Pimco ‘a leading global investment management firm with more than 1,200 employees in offices in Newport Beach, New York, Amsterdam, Singapore, Tokyo, London, Sydney, Munich, Toronto and Hong Kong.’
This is the same Pimco that recently announced it would be a net seller of UK Government bonds this year and that it would reduce its holdings of American treasury debt (see this post at The Market Ticker).

Shocked Investor comments ‘You’d think something is about to give.’ Since being so shocked, he’s so cool about everything now.

Here is the beginning of Bill Gross’s Economic Outlook 2010 (my bold letters):

Quixotic journeys often make for great literature, but by definition are rarely productive. I am, after all, referring to windmills here - not their 21st century creation, but their 17th century chasing. Futility, not productivity, was the ultimate fate of Cervantes' man from La Mancha. So it is with hesitation, although quixotic obsession, that I plunge headlong into a discussion of American politics, healthcare legislation, resultant budget deficits and - finally - their potential effect on financial markets. There will be windmills aplenty in the next few pages and not much good can come of these opinions or my tilting in their direction. Still, I mount my steed, lance in hand, and ride forward.

Question: What has become of the American nation? Conceived with the vision of liberty and justice for all, we have descended in the clutches of corporate and other special interests to a second world state defined by K Street instead of Independence Square. Our government doesn't work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people. Washington consistently stoops to legislate 10,000-page perversions of healthcare, regulatory reform, defence, and budgetary mandates overflowing with earmarks that serve a monied minority as opposed to an all-too-silent majority. You don't have to be Don Quixote to believe that legislators - and Presidents - often do not work for the benefit of their constituents: A recent NBC News/Wall Street Journal poll reported that over 65% of Americans trust their government to do the right thing "only some of the time" and a stunning 19% said "never." What most politicians apparently are working for is to perpetuate their power - first via district gerrymandering, and then second by around-the-clock campaigning financed by special interest groups. If, by chance, they're ever voted out of office, they have a home just down the street - at K Street - with six-figure incomes as a starting wage.

Read the full report here.

Dark clouds over America - what happened to the Vision?

You have to go deeper than the mainstream media to get an idea of what is really going on in the US. If you listen to the mainstream media you may think that now is the time to get back into the market, the recession is behind us, the government has handled the crisis well and has the situation in hand and things are looking up. If you believe all this I urge you to visit some of the blogs and sites that I follow.

Remember my post last year, A Vision for America , about President Obama’s inaugural speech? Remember these lines?

As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us, watching to see what we do with this moment, waiting for us to lead.
(…)
It is time to put in place tough, new commonsense rules of the road so that our financial market rewards drive and innovation and punishes shortcuts and abuse…

What happened? Via Danielle Park’s Juggling Dynamite I found this article at Rolling Stone by Matt Taibbi:

Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." (…)What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

Then he got elected.

What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.

Read the full article Obama’s Big Sellout.

For knowledgeable and detailed information and no punches pulled commentary and insight on the financial crisis and government’s action and non action in the face of it, you must read Karl Denninger’s The Market Ticker. For a great overview of 2009 and what 2010 holds (not pretty) do yourself a favour and read Where we are, where we’re heading 2010. Here is an excerpt:

If you take nothing else away from this Year in Review Ticker, it should be that singular chart above and a decent understanding of what it means:

To come back into equilibrium, assuming we do not decrease debt in the system at all, we would have to shrink GDP by about 20%. But shrinking GDP means that money available to pay down debt would also decrease which would generate even more defaults.

This is how deflationary depressions happen - years, even decades of playing Ponzi by layering debt upon debt. Bernanke and Geithner, along with President Obama, are well-aware of these facts which is why they are all pounding the table demanding that banks "loan more."

The problem with such a prescription is that the wise person won't borrow, for he knows what's coming. The unwise has no collateral to pledge, and thus can't borrow.

If the government forces (either by persuasion or legislation) lending to those who can't pay they only extend the Ponzi and in doing so make the inevitable collapse WORSE.

Before you get a headache, I will just leave you with a video I found through this post at Shocked Investor. It closes the loop on the opportunity that existed for Obama and that he seemed poised to seize in his inaugural address to reform the banking industry. Instead we are simply back where we started but when this bubble bursts there will be no more stimulus, no more money and no more bubbles to save us.

The eyes of all people in all nations are upon the US alright but what they see, including these eyes, is not good.

Bill Moyers speaking to Simon Johnson of the Peterson Institute for International Finance and representative Marcy Kaptur:

Dark clouds over America - the Supreme Court rules detainees are not persons

One of the blogs I read for insight into the economy is Humble Student of the Markets by Cam Hui. Here I read of an alarming development in his post Two more steps toward Argentina. The original story is this, as told by Chris Floyd at Empire burlesque:

While we were all out doing our Christmas shopping, the highest court in the land quietly put the kibosh on a few more of the remaining shards of human liberty.

It happened earlier this week, in a discreet ruling that attracted almost no notice and took little time. In fact, our most august defenders of the Constitution did not have to exert themselves in the slightest to eviscerate not merely 220 years of Constitutional jurisprudence but also centuries of agonizing effort to lift civilization a few inches out of the blood-soaked mire that is our common human legacy. They just had to write a single sentence.

Here's how the bad deal went down. After hearing passionate arguments from the Obama Administration, the Supreme Court acquiesced to the president's fervent request and, in a one-line ruling, let stand a lower court decision that declared torture an ordinary, expected consequence of military detention, while introducing a shocking new precedent for all future courts to follow: anyone who is arbitrarily declared a "suspected enemy combatant" by the president or his designated minions is no longer a "person." They will simply cease to exist as a legal entity. They will have no inherent rights, no human rights, no legal standing whatsoever -- save whatever modicum of process the government arbitrarily deigns to grant them from time to time, with its ever-shifting tribunals and show trials.

Cam Hui asks what happened to ‘inalienable rights’ and compares the road that the US is now taking to that taken by Argentina:

This Supreme Court ruling sets up the preconditions for a Dirty War that Argentina saw in the late 1970s and early 1980s, where government forces made suspected left-wing guerrillas and their sympathizers “disappear”. Just as the repeal of the Glass-Steagall did not result in immediate consequences, I don’t believe that we will see the effects of this ruling overnight but the long term effects are potentially disastrous.

What about ‘Land of the free, home of the brave’? What about the Constitution?

This ruling tramples on the Constitution and one of the most powerful symbols of America. Just understand this - that Constitution was paid for by blood, not only of the Founding Fathers, but by every American soldier. Every G.I. that ever enlisted swore an oath, not to the president of the day, but to the Constitution of the United States.

When the Supreme Court of the nation that champions freedom and justice in the world comes out with a ruling like this, at the fervent request of the President of the nation, one has to take note and wonder where this is all going to lead.
Some may say that in war there are no rules. Certainly Churchill made it clear to Hitler that if he invaded Britain, the British would use all means available to them to defend themselves, the implication being biological weapons would be used. But where is the threat to the US today that faced Britain in her darkest hour?
I would say this: war can be waged without rules but the nations that wage war without rules always lose in the end. War can be waged without rules but philosophy teaches that life cannot. Such victors sow the seeds of their own ultimate destruction. Remember: sincerity is the treasure of a land and by sincerity we also understand integrity and the moral life. The US has a proud record of going to war to defend those values, now it must look in the mirror. The US does not need such a ruling, it is an act of weakness, an act of fear, and it is a shame and a disgrace to all the American men and women who have given their lives so we can enjoy freedom and justice, not just Americans but the whole world.

Yves Smith at Naked Capitalism points out that Romans of 2,000 years ago now enjoyed more rights than Americans today:

Roman citizens enjoyed a right to a trial, a right of appeal, and could not be tortured, whipped, or executed except if found guilty of treason, and anyone charged with treason could demand a trial in Rome. We have regressed more than 2000 years with this appalling ruling.

I am reminded of my recent reading of ‘The Peloponnesian War’ by Donald Kagan. The Athenians were blessed with a noble and capable leader in the form of Pericles of whom Plutarch says:

For whereas all sorts of distempers, as was to be expected, were rife in a rabble which possessed such a vast empire, he alone was so endowed by nature that he could manage each one of these cases suitably, and more than anything else he used the people's hopes and fears, like rudders, so to speak, giving timely check to their arrogance, and allaying and comforting their despair. Plutarch

While Pericles lived the Athenians kept to the noble path and could hope for victory. When he died, the war became more desperate, more brutal and hope receded. I can’t help but think that the US is in need of a Pericles today.

Courage - the wiser brother of Fear

Humility may the root of virtue but courage is its spirit. Courage is the spirit of virtue because as C.S. Lewis said, courage is the form of every virtue at the testing point. Virtues are by definition qualities we choose (if we are wise) and develop and by definition they are often not easy to practice, otherwise everyone one would be virtuous all the time. Therefore we sometimes need courage to stick to the path of virtue when it would be easier and safer not to.
But what is courage?

Courage is not the absence of fear, but rather the judgment that something else is more important than fear. Ambrose Redmoon

Courage is doing what you're afraid to do. There can be no courage unless you're scared. Edward Vernon Rickenbacker

Valour is a gift. Those having it never know for sure whether they have it till the test comes. And those having it in one test never know for sure if they will have it when the next test comes. Carl Sandburg

There is no such thing as bravery; only degrees of fear. John Wainwright

Courage is fear holding on a minute longer. George S. Patton

Some have been thought brave because they were afraid to run away. Thomas Fuller

Fear and courage are brothers. Proverb

Courage is subordinating fear to the background as we give priority to a higher purpose, more important to us than our safety or comfort. Courage hears the voice of Fear, as an older wiser brother hears the complaints of his sibling, but he doesn’t allow it to stop him.

Do not take counsel of your fears. George Patton

The goal is too important to be left in the hands of fear. There is a kind of necessity to courage, a kind of obligation. That is why often heroes will say they did nothing courageous, they only did what had to be done, what anyone would have done. They did not hesitate.

If you have a strong enough why you can bear almost any how. Nietzshe

Real valour consists not in being insensible to danger; but in being prompt to confront and disarm it. Sir Walter Scott

Courage is not recklessness. Courage has confidence, wisdom, awareness. It is a conscious choice, not a moment of panic. There is no honour in recklessness, there is much honour in courage.

Courage is a virtue only so far as it is directed by prudence. François de Fenelon

Courage is... the knowledge of how to fear what ought to be feared and how not to fear what ought not to be feared. David Ben-Gurion

Life is a series of choices. Every moment we decide what we will do in the next moment, either through good habits or by considered thought. This is the beauty of life, our ability to consciously choose. And with courage, we assure that our choices will always be consistently good when what is happening to us is not.

Facing it - always facing it - that's the way to get through. Face it! Joseph Conrad

As we shall see, fortune smiles on the brave. But that is not the reason to be brave, though it is a nice side benefit. Virtue is its own reward, courage also. What does it matter that we succeeded or not, as long as we acted virtuously with courage? By definition, courage will have no regrets.

Our doubts are traitors, and make us lose the good we oft might win by fearing to attempt. Shakespeare/De Vere

There would be nothing to frighten you if you refused to be afraid. Gandhi

Let me not pray to be sheltered from dangers, but to be fearless in facing them. Let me not beg for the stilling of my pain, but for the heart to conquer it. Rabindranath Tagore

Every difficulty slurred over will be a ghost to disturb your repose later on. Rabindranath Tagore

Health, happiness and success depend upon the fighting spirit of each person. The big thing is not what happens to us in life - but what we do about what happens to us. George Allen

The best way out is always through. Robert Frost

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Image from Documents and Designs

The Bailout Bubble

In my last post Amy Luft’s question on Answers I said ‘the lack of morality in the financial system has brought us to the brink of disaster.’ I was speaking from the generally accepted viewpoint that the worst of the credit crisis is over. But perhaps the worst is still to come.

My view of the present financial crisis, as conceived by my being a regular reader of certain financial sites, compelled me to move from equities to cash in my retirement plan many weeks ago (since the TSX reached 10,200 and the Dow 9,000). So I was already very sceptical about the strong recovery priced into the market at this level and expected a pullback. But the last few days (just as the mainstream media is getting lathered up about ‘the end of the recession’) I have come across some articles that frankly give me the willies.

First there was this post at Danielle Park's Juggling Dynamite, Risk aversion is back on :

At present levels, the S&P 500 is pricing in a significant earnings rebound for 2010 and emerging markets have been pricing a hearty resumption of western consumption. Both of these assumptions are seriously in doubt.
Today the Singapore Minister of Trade and Industry threw a blanket again on resurgent decoupling hopes, saying there were "few signs of a decisive turnaround in final demand in Singapore's key export markets." (…)
This time, thanks to the massive credit overhang, rate cuts alone are not able to revive the housing sector. Without the housing catalyst to kick-start and lever renewed consumption, growth has a massive headwind.

Danielle includes a clip, ‘Housing Mess is not over’, which gives a sobering update on US housing.

Then it was Marketwatch’s Paul B. Farrell and his article New bull, new bubble, new meltdown by 2012.

Yes, folks, a new bubble cycle is already in motion. You can feel the energy building, the kind that fuelled the meltdowns of 1998, 2000 and 2007. We never resolved the problems fuelling the dot-com insanity. We made matters worse feeding the subprime credit-derivatives disaster with cheap money, Reaganomics ideology and two costly wars. Lessons were never learned, nothing was resolved. Today matters continue deteriorating.
Behind the hoopla, the Wall Street conspiracy has dumped $23.7 trillion new bailout debt on taxpayers. The bill will come due.

What we are seeing is a new market bubble in the making fuelled by bailout-money. Instead of lending, banks are putting the money into the stock market. (I read that 75% of trades since the March low have come from the desks of Goldman Sachs). When this bubble bursts, it will be ugly.

Expect a major house-cleaning, a second American Revolution. We predicted the "Great Depression 2" around 2012. Well, we doubt taxpayers will passively sit one more time, like in the 1930s, in 2000, and the past few years. Next time voters will take a page from the history books about past revolutions in the American Colonies, France and Russia. A perfect storm will erupt in a massive global credit meltdown, bringing down Wall Street and the clandestine $670 trillion shadow central banking system.

But the article that really gave me the willies was this one from Global Research, Entering the greatest depression in history, by Andrew Gavin Marshall.

While there is much talk of a recovery on the horizon, commentators are forgetting some crucial aspects of the financial crisis. The crisis is not simply composed of one bubble, the housing real estate bubble, which has already burst. The crisis has many bubbles, all of which dwarf the housing bubble burst of 2008. Indicators show that the next possible burst is the commercial real estate bubble. However, the main event on the horizon is the “bailout bubble” and the general world debt bubble, which will plunge the world into a Great Depression the likes of which have never before been seen.

Marshall ties together many threads and introduces us to Gerald Celente, head of the Trends Research Institute, the major trend-forecasting agency in the world.

Celente’s forecasts are not to be taken lightly, as he accurately predicted the 1987 stock market crash, the fall of the Soviet Union, the 1998 Russian economic collapse, the 1997 East Asian economic crisis, the 2000 Dot-Com bubble burst, the 2001 recession, the start of a recession in 2007 and the housing market collapse of 2008, among other things.

And what is Gerald Celente predicting will happen in the present financial/economic/moral crisis?

Phantom dollars, printed out of thin air, backed by nothing ... and producing next to nothing ... defines the ‘Bailout Bubble.’ Just as with the other bubbles, so too will this one burst. But unlike Dot-com and Real Estate, when the "Bailout Bubble" pops, neither the President nor the Federal Reserve will have the fiscal fixes or monetary policies available to inflate another.

And just when you thought it couldn’t possibly get any worse. Guess what? It gets worse:

Given the pattern of governments to parlay egregious failures into mega-failures, the classic trend they follow, when all else fails, is to take their nation to war... While we cannot pinpoint precisely when the 'Bailout Bubble' will burst, we are certain it will. When it does, it should be understood that a major war could follow.

You can watch a video of Gerald Celente embedded in the above article, and at the end of the video there is a selection of related videos.

I know all this has very little to do with my blog about Healing Philosophy, but I felt I had to share it with you since we are facing very challenging times and the more we can all be forewarned the better chance we have of getting through it.

And then again, perhaps it has a lot to do with philosophy and, eventually, healing.

Amy Luft's Question on 'Answers'

Amy Luft is a freelance journalist based in Montreal. She has worked for such organizations as The Associated Press, The Gazette, CTV and Reader’s Digest Canada. This time she has a question for Answers.

What would it take to make people under 30 more interested in serious news issues than in celebrity gossip?

The answer to this question is tied up with the fact that we live in a consumer-driven society rather than a morals-driven society.
Money and politics are the driving forces of society, rather than spiritual, moral values.
The media, especially television, are the expression of these driving forces, perpetuating the status quo of the consumer mentality.
Spirituality and morality have no multi-national companies financing their advertising campaigns.
We do our best to raise our children with moral values, but are we qualified? Do we have the knowledge, the time and the skill? Do we even know the basics about philosophy?
And don't expect our schools to take up the slack. Schools teach many things but they don't teach how to live a moral life.
The lack of morality in the financial system has brought us to the brink of disaster.
The one good thing about the credit crisis is it has placed the spotlight on moral risk and moral hazard.
Perhaps in hindsight it will be considered a turning point, the point when we began to see the need for a morals-driven society.

Experience teaches only the teachable.
It takes wisdom to understand wisdom.

On being attuned to the spiritual

‘There are two ways to live your life, ‘ said Albert Einstein. ‘One is as though nothing is a miracle. The other is as though everything is a miracle.’ Which is another way of saying you can live as though there is no spiritual basis to life or you can live as though there is.

You can live as though you and your desires are all that matter. Or not.
You can live in selfish ignorance of a moral code. Or not.
You can live in a void of gratitude and reverence. Or not.
You can live…

Well, you get the drift.
There are two worlds existing around us at the same time. The material and the immaterial. The visible and the hidden. The mundane and the spiritual. Most of the time the spiritual is not obvious unless you train yourself to look for it. Unless you are awake to it. Unless you are attuned to it.
Look at an airplane. If you are not attuned, you simply see a big piece of technological hardware, so many hundred tons of metal and a nice paint job. But an airplane is the embodiment of man’s infinite creative genius. A great deal of imagination, dedication, hard work and sacrifice over time from a great number of men and women like you and me was necessary to perfect that flying machine.
Look at the banking system. It was designed and perfected much in the same way as an airplane – it is also the embodiment of man’s infinite creative genius. Normally you would not think much about it, when it works properly. But unlike an airplane, the banking system is built on relationships between people. And these relationships are subject to moral law. And recently, the consequences of neglecting moral law became visible in a spectacular fashion. To everyone. Looking for it or not. Awake or not. Attuned or not.

The power of spiritual forces in the Universe – how active it is everywhere! Invisible to the eyes, and impalpable to the senses, it is inherent in all things, and nothing can escape its operation. Confucius

At World Scripture I came across this quote from the Bhagavad Gita in the section on Ignorance. Here you have in a nutshell the two ways to live your life: as though you are but a higher form of animal living in a sensual world or as though you are a human being attuned to the spiritual in the material. Think of the credit crisis as you read it.

The demonic do things they should avoid and avoid the things they should do. They have no sense of uprightness, purity, or truth.
"There is no God," they say, "no truth, no spiritual law, no moral order. The basis of life is sex; what else can it be?" Holding such distorted views, possessing scant discrimination, they become enemies of the world, causing suffering and destruction.
Hypocritical, proud, and arrogant, living in delusion and clinging to deluded ideas, insatiable in their desires, they pursue their unclean ends. Although burdened with fears that end only with death, they still maintain with complete assurance, "Gratification of lust is the highest that life can offer."
Bound on all sides by scheming and anxiety, driven by anger and greed, they amass by any means they can a hoard of money for the satisfaction of their cravings.
"I got this today," they say; "tomorrow I shall get that. This wealth is mine, and that will be mine too. I have destroyed my enemies. I shall destroy others too! Am I not like God? I enjoy what I want. I am successful. I am powerful. I am happy. I am rich and well-born. Who is equal to me? I will perform sacrifices and give gifts, and rejoice in my own generosity." This is how they go on, deluded by ignorance. Bound by their greed and entangled in a web of delusion, whirled about by a fragmented mind, they fall into a dark hell.

Bhagavad Gita 16.7-16

This was written centuries ago. Human nature is the same today. We cannot expect human nature to change overnight. We can only try to change ourselves. One person at a time, starting here, with me and you.

Humility - Lessons from the Past

One of the financial blogs I visit regularly is Juggling Dynamite by Danielle Park. Danielle is the advisor I spoke about in my post The Ethical Financial Advisor. I encourage you to visit her blog also if you want to keep abreast of what is happening and where we are at in today’s turbulent financial arena. I say arena in the sense of gladiatorial arena where you can lose a financial arm and a leg if you’re not careful. I was struck by her recent post ‘Bouncing away’ which you can read in full here. In it Danielle talks about the recent rally since the March 9 low. But what I would like to share with you here is Danielle’s observations on her recent visit to Malta.

This will be a baby steps recovery. It will take time and real work. But it will be a healthy wake up call. The tiny Island of Malta is one of many examples of this phenomenon. Malta was one of the most bombed countries of the Second World War. It was pummelled to rubble. A German blockade brought the people to the verge of starvation just days before the British navy came to their rescue.
When I was visiting Malta recently, I asked the local people about how the world credit crunch and downturn is affecting them and their economy. They noted that tourism was somewhat slower. But they said Maltese people had generally not been caught up in over-consumption and credit abuse the past few years, so they were not suffering the consequences of deleveraging now. When I asked why, they explained that the older generation in Malta had lived through the utter decimation of their Island in the war. They had lived through the life-altering experience of losing one’s wealth, property and loved ones. They had worked for the past 60 years rebuilding their country brick by brick. They had taught their children the importance of not wasting and not taking more than they need. They own houses, but not mansions and no one has a three-car garage. They have no fresh water on the island. They developed the expensive process of desalination and now properly value clean water as the source of their life. They tend to walk and ride bikes, they drive smaller cars. Adversity brought a humility and wisdom to the Maltese people that has served them now for 2 generations.

With adversity comes humility and ‘with humility comes wisdom’. The adversity the Maltese people went through, though painful, had the seeds of something good in it. Likewise, the adversity America and the world is going through today is perhaps a necessary purging, a necessary winter to kill off the swamp plants that were growing to excess. And hopefully it too will have the seeds of something good in it, as Danielle says:

Some of the solutions to coming problems have yet to be designed. But there is now great effort focused on getting the world back to growth and in the end, we will succeed. That said, those looking for a resumption of reckless consumer spending and bubble-like prices will no doubt be frustrated and disappointed, at least for some time. Dark as many now feel, there is strength in this experience and we will bounce.

Philosophy - an essential luxury good

I read an interesting article Is philosophy a luxury good? at the Economist’s Free Exchange blog. The author notes that according to Maslow (of heirarchy of needs pyramid fame) ‘you can only ponder the state of your soul when your most basic physical and material needs have been met’. In a downturn students tend to choose programs with more practical job prospects, and universities and governements tend to cut back on the humanities.

But cutting back on humanities could be a false economy. Studying subjects like philosophy does impact critical thinking and communication skills. Intellectually diverse societies often are the very ones that tend to thrive. Amar Bhide argues that India did itself a great economic disservice by producing too many engineers. Also, law professor Anthony T. Kronman argues that economic and social upheaval only highlights the need to re-examine moral issues. But “the need for my older view of the humanities is, if anything, more urgent today,” he added, referring to the widespread indictment of greed, irresponsibility and fraud that led to the financial meltdown. In his view this is the time to re-examine “what we care about and what we value,” a problem the humanities “are extremely well-equipped to address.”

I’m with him. Of course, with someone who is hungry it is difficult to discuss anything more than the next meal. But in modern-day society hunger is not a problem, basic needs are not a problem. Philosophy is a luxury good that everyone can afford. Philosophy matters. I find it impossible to think of a time and a place where philosophy would not matter. Certainly it matters today more than ever, in the new era of responsibility.

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Image from Wikimedia: Maslow's hierarchy of needs

A Vision for America

As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us, watching to see what we do with this moment, waiting for us to lead.

Among the eyes of all people of all nations watching President Obama’s first address to Congress were my eyes. And they saw an inspiring, charismatic leader, leading. Of course, he is a product of the times. He not only has ‘the Mandate of Heaven’, he has the mandate of an angry American people who want action and a more enlightened and effective government.

Those qualities that have made America the greatest force of progress and prosperity in human history we still possess in ample measure. What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more… Now, if we're honest with ourselves, we'll admit that for too long we have not always met these responsibilities, as a government or as a people. I say this not to lay blame or to look backwards, but because it is only by understanding how we arrived at this moment that we'll be able to lift ourselves out of this predicament… The fact is, our economy did not fall into decline overnight. Nor did all of our problems begin when the housing market collapsed or the stock market sank.

My italics. Straight talk, honest words, sincerity! Compare Obama’s words with this from the I Ching 41st hexagram: ‘What matters here is to understand the time and not to try to cover up poverty with empty pretence’. Only when you recognize and accept the truth of a situation can you hope to correct it.

Now, I understand that when the last administration asked this Congress to provide assistance for struggling banks, Democrats and Republicans alike were infuriated by the mismanagement and the results that followed. So were the American taxpayers; so was I.
So I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you: I get it.
But I also know that, in a time of crisis, we cannot afford to govern out of anger or yield to the politics of the moment.

Ah yes, anger; we know about the evils of anger on this blog, but what about the politics of the moment? I am put in mind of a quote by Joseph Campbell: ‘Economics and politics are the governing powers of life today, and that’s why everything is screwy’. The governing powers of life should be universal truths, spiritual values. Of course there is need of economic discipline. But is the present method of 4-year terms of office propitious to a wise, consistent, impartial, enlightened approach to public finance? Someone said that a nation is too important to be run by politicians (maybe it was me). I don’t know the answer, but a kind of politically independent ‘Supreme Court’ of Economic Planning might be worth considering.

It is time to put in place tough, new commonsense rules of the road so that our financial market rewards drive and innovation and punishes shortcuts and abuse…

Yes, the way of the swamp plant will not be tolerated any more. A pity that we had to look over the brink into the abyss of financial meltdown to admit the problem and to gather the political resolve to do something about it. Still, we are there now. Every crisis brings its opportunity. Perhaps this recognition of the swamp plants in the system will be the positive development out of this financial crisis, the tipping point that allows us to weed out the problem. Whenever I have a personal Waterloo, I always try to look at what the lesson is and I even tell myself ‘This was a cheap lesson’. In other words, the lesson, though expensive, will allow me to avoid even costlier mistakes in the future.

The only way this century will be another American century is if we confront at last the price of our dependence on oil and the high cost of health care, the schools that aren't preparing our children and the mountain of debt they stand to inherit. That is our responsibility… I see this document differently. I see it as a vision for America, as a blueprint for our future.

Could it be that Big Oil and Big Pharma lobbyists stood in the way of energy and health care reform? Could it be that a nation as technologically advanced as the United States could not have developed advanced biofuels 10 years ago? Could not have developed electric cars 10 or 20 years ago? Could not have been the leader in solar and clean energy use decades ago? Could not have implemented universal health care reform and efficiency? ‘Economics and politics are the governing powers of life today…’

History reminds us that, at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas… Now, none of this will come without cost, nor will it be easy. But this is America. We don't do what's easy. We do what's necessary to move this country forward.

The sleeping bear has gotten a wake up call. Whether Big Oil, Big Pharma, Big whatever-you-care-to-name like it or not, there will be changes around here, oh dearie me yes. That swamp-plant special-interest mentality has bankrupted America. Energy, health care and education reform will go forward now. How sweet it is.

Finally, because we're also suffering from a deficit of trust, I am committed to restoring a sense of honesty and accountability to our budget. That is why this budget looks ahead 10 years and accounts for spending that was left out under the old rules and, for the first time, that includes the full cost of fighting in Iraq and Afghanistan.

A deficit of trust. What a telling phrase. Such a deficit is worse than a budget deficit because it undermines the moral fabric of the nation. Sincerity is the treasure of a land.

To overcome extremism, we must also be vigilant in upholding the values our troops defend, because there is no force in the world more powerful than the example of America…Those of us gathered here tonight have been called to govern in extraordinary times. It is a tremendous burden, but also a great privilege, one that has been entrusted to few generations of Americans, for in our hands lies the ability to shape our world, for good or for ill.

For all its faults, I still feel that the United States is the closest thing to a utopia that we have on earth (perhaps with the exception of Canada!) The people are generous, hard working, tolerant and courageous. It only needs a leader and a government to harness those values, that strength and channel it in an enlightened way.

These words and these stories tell us something about the spirit of the people who sent us here. They tell us that, even in the most trying times, amid the most difficult circumstances, there is a generosity, a resilience, a decency, and a determination that perseveres, a willingness to take responsibility for our future and for posterity.

Here are echoes of the I Ching again: ‘If a time of scanty resources brings out an inner truth, one must not feel ashamed of simplicity. For simplicity is then the very thing needed to provide inner strength for further undertakings’. Churchill said the same thing: ‘We shall draw from the heart of suffering itself the means of inspiration and survival.’

Obama closes his address in a charismatic appeal to a simple, basic truth and common interest: love of country.

There are surely times in the future where we will part ways. But I also know that every American who is sitting here tonight loves this country and wants it to succeed…That must be the starting point for every debate we have in the coming months and where we return after those debates are done. That is the foundation on which the American people expect us to build common ground. And if we do, if we come together and lift this nation from the depths of this crisis, if we put our people back to work and restart the engine of our prosperity, if we confront without fear the challenges of our time and summon that enduring spirit of an America that does not quit, then some day, years from now, our children can tell their children that this was the time when we performed, in the words that are carved into this very chamber, "something worthy to be remembered."

Something worthy indeed. The stakes are high. Failure is not an option. Time to roll up the sleeves and work, sincerely, for a new vision.

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Photo from Wikimedia