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Not Since Mother Courage and Her Children…*

At a high level, Floyd Norris explains it all to you.

UDATED, AND PULLED TO THE FORE: For the more detailed view (h/t Barry R.), the soon to be late, not very lamented, New York Sun presents the details:

The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.

Making matters worse, according to Mr. Pickard, who helped write the original rule in 1975 as director of the SEC’s trading and markets division, is a move by the SEC this month to further erode the restraints on surviving broker-dealers by withdrawing requirements that they maintain a certain level of rating from the ratings agencies.

and the solution going forward (that is, after you give these guys $700 billion) will be an even weaker form:

The SEC said it has no plans to re-examine the impact of the 2004 changes to the net capital rule, and last week, it put out a proposal to revise the rule once again. This time, it is looking to remove the requirement that broker dealers maintain a certain rating from the ratings agencies.

Because nothing says “faith in the institution” like a non-investment grade rating.

*Title explanation: Mother Courage at the beginning of the play has two (2) children. By the end, she has two less than that. The play closes with her “silent scream” as she drags her cart along.

If you had only seen that final scene, you would think it is a tragedy of Mother Courage, not one caused by her. Working from memory: One of her children dies because she sends him(?) something that might be salable—in the middle of a battlefield. The other is similarly sacrificed. It is the reverse of the “because he’s an orphan” joke.

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Enlightenment: You and Me and China make Three

I have been reading the book: The Writing on the Wall. Mr. Will Hutton is the author.

The book is billed as a look at what makes China tick and what the west should do about it. I chose it on the strength of the reviews as I wanted to learn more about China in regard to our discussions concerning globalization. I also wanted to hear a voice not from the US. Mr. Hutton is very established in the economic world in England. Maybe he is their Mr. Krugman?

You can read a summary regarding the subject of China by Mr. Hutton here.

In the book, he looks at the history of China and makes note of the similarity throughout time of the Chinese thinking of life. He seems to have asked: What is their heritage and how does it inform us as to their future? The conclusion: China needs to move through the period of enlightenment just as the west has. China needs to allow the development of the culture that the Enlightenment Period birthed giving rise to people such as Tom Paine, our founders and Adam Smith if they want to succeed in applying a western capitalistic system. This is the hitch in China’s current functioning. Their communist ideology of one party rule can not hold if they are to sustain their historic annual growth. And they must sustain the growth because they are such a large population.

From the above article by Mr. Hutton:

…but there are limits to how far the reformers can go without giving up the basis for the party’s political control. Conservatives insist that much further and the capacity to control the country will become irretrievably damaged; that the limit, for example, is being reached in giving both trade unions more autonomy and shareholders more rights. It is the most urgent political debate in China…
The maxims of Marxist-Leninst-Maoist thought have to stand, however much the party tries to stretch the boundaries, because they are the basis for one-party rule…
Enterprises are accountable to no one but the Communist party for their actions; there is no network of civil society, plural public institutions and independent media to create pressure for enterprises to become more environmentally efficient. Watchdogs, whistleblowers, independent judges and accountable government are not just good in themselves as custodians of justice; they also keep capitalism honest and efficient and would curb environmental costs that reach an amazing 12 per cent of GDP. As importantly, they are part of the institutional network that constitutes an independent public realm that includes free intellectual inquiry, free trade unions and independent audit. It is this ‘enlightenment infrastructure’ that I regard in both the West and East as the essential underpinning of a healthy society. The individual detained for years without a fair trial is part of the same malign system that prevents a company from expecting to be able to correct a commercial wrong in a court, or have a judgment in its favour implemented, if it were against the party interest.

Over stir-fried curried chicken and crispy fried flying sea bass, the Chinese guests repeated politely and persuasively that China was making up new economic and political rules.

Does that last sentence sound familiar?
The aide said that guys like me were ”in what we call the reality-based community,” which he defined as people who ”believe that solutions emerge from your judicious study of discernible reality.” I nodded and murmured something about enlightenment principles and empiricism. He cut me off. ”That’s not the way the world really works anymore,” he continued. ”We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.”

This brings me to why I’m writing about Mr. Hutton’s book. He’s not just writing about China and what the west needs to do, he is writing about us and what we are loosing. By loosing our enlightenment heritage, we will loose our way with China. The most striking thought I had as I read through the chapters on China was that his descriptions were familiar.

Even though the book is in chapters, the layout is in two parts; China and then the US. Though, the US does stand as a sort of proxy for the west in part as Mr. Hutton’s other writings have noted the trends away from enlightenment derived ideology within his country; just not too the extent of the US. I do not recall reading or hearing of anyone of position within the European Commons presenting such a thought as relayed in Ron Suskind’s article quoted above. It is a thought that is not so harmful from the life of delusion it relays as much as it is harmful from the resultant action begot of condescension and dismissal of all other people. I have not heard such personality coming from Europe. Not hearing such, means Europe is more real than US and that means (if Mr. Hutton is correct) that the US of A is no longer the example to be followed by developing nations. It means we are becoming irrelevant in the discussions regarding how to create a better world. The light is on in the Statute of Liberty, but no one is home.

As he describes what China needs to create specifically, I could not help think “but we’re going in just the opposite direction.” There is the distinct possibility that we could meet China half way. This would be a great loss for the world because we would have pulled back from the gains Mr. Hutton attributes to our passage through the enlightenment as much as China would have move toward it. Essentially the movement would result in leaving two mega economic powers in a state of half-fastness. The US having not sustained it’s progress of enlightenment derived social structure, thus a half-fast job of living and China not completing it’s progress through enlightenment derived social structure, thus a half-fast job of living. Where does that leave the rest of the world?

I believe we have seen such a reversal from enlightenment derived social structure in Putin’s Russia. We have in Putin a living example of the danger to a nation that let’s it’s fears pull it away from enlightenment. He has undone much of what Mr. Gorbachev sacrificed for. Mr. Putin has copied the posture of our current president Bush. Most notably was Mr. Putin reserving the right to preemptive strike within I believe 2 weeks of President Bush establishing such a policy. Mr. Putin’s governance is the manifestation of the harm of the implementation of “… and when we act, we create our own reality”. Bush et al acted in all their glory of condescension and begot Putin who happens to be sitting on a lot of raw material the world needs for economic production.

It is Mr. Hutton’s theory, that passing through the Enlightenment Period is the explanation for what we and Europe had accomplished and ably implemented in Japan and post WWII Germany that I want to discuss in the next posting. I believe it will help us understand a lot of what we have discussed here at Angry Bear concerning what has happened in this nation. Why do Cactus’ graph show what they do. Why does PGL say we do not have to fear globalization. Why Mr. Hutton states:

Britain and the West take our enlightenment inheritance too easily for granted, and do not see how central it is to everything we are, whether technological advance, trust or well-being. We neither cherish it sufficiently nor live by its exacting standards. We share too quickly the criticism of non-Western societies that we are hypocrites. What China has taught me, paradoxically, is the value of the West, and how crucial it is that we practise what we preach. If we don’t, the writing is on the wall – for us and China.

END

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