Smoke screening

Sitting in a bar raised above the gambling floor at the MGM Grand, killing some fizzy water on ice while clearing time for my room to be cleaned. The bar is comfortable, with thick carpeting and heavy drapes pulled back to view rows of machines where patrons pour coins into slots. I haven’t heard the sound of coins pouring into trays yet. Do they still have that? I wouldn’t know. I hate to gamble on anything that’s not only stacked against me, but where I don’t control at least some of the odds. And I don’t get the thrill either. But hey, that’s me.

I also don’t get the appeal of cigarette smoke. I grew up at a time when smoking was standard. My father was a heavy smoker, and I’m sure our house and car stank of it, but I don’t remember. I do remember hating it, and vowing that I would never take up the habit. (And I never did.) Meanwhile I lived with it, as do all people in cultures such as this casino, where smoking is the rule rather than the exception. Back home in Boston and California, I live and work in places where smoking is exceptional, exiled to the outdoors or to “designated smoking areas”. That’s why I picked out my own little “designated nonsmoking area” in a corner of this bar, as far as I can get from other patrons, about half of which are either smoking or have packs and lighters parked next to their drinks.

I think in the long run smoking will become a fringe practice. Even in Europe and Asia, where smoking is still standard, the percentages of people who smoke will come down, both for the obvious reasons and because in the long run rationalizations tend to fail. Think of smoking as a bubble that will eventually burst and crash.

We’re only beginning to face the problems exposed by the failures of giant financial institutions such FreddieMac, FannieMae, Bear Stearns and AIG — and government bail-outs backed by the continuing ability to borrow from China and other creditor nations. Of which we used to be the biggest. Quite the opposite now.

If you’re looking for a far-sighted bubble-burster, Kevin Phillips is your man. He launched his career as a Senior Strategist for Richard Nixon’s 1968 presidential campaign. There he led Nixon’s successful “southern strategy” and followed that with The Emerging Republican Majority in 1969. In that book he not only predicted forty years of future, but named the Sun Belt as well. His latest book is Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, which Tim Rutten in the LA Times calls “a rhetorical shot across the bow of the current presidential campaign, which Phillips convincingly argues is failing to address the causes and implications of our current distress”.

Here he is on Chris Lydon’s Open Source program, on May 8 of this year:

  There’s a growing sense in the United States that the Imperial Era is over almost before it started. We’re seeing the weakness that is the United States allowing the financial sector to take over the private economy. That is now the largest portion: 21-22% of the GDP is finance, pushing manufacturing way down. I don’t think that the financial sector is responsible enough, safe enough, broad-minded enough to fill that position. I think what you’ll see happen to the United States is over-financialization: too much debt, too much over expansion and a degree of an implosion that will involve everything from too much debt and collapsing home prices to rising oil prices and the declining dollar. It’s all converging. It’s all trouble. It doesn’t spell the end of the United States, but it does spell the end of the United States as the Total Big Cheeze in the world. And we are going to lose some of the yardsticks that everybody enjoyed for a long time.

About “financialization”, he says,

  You’re looking at the transformation of the American economy from one that produced things to one that moves money around. But it didn’t happen overnight. One of the major relationships is between the rise of debt and the rise of the debt culture. The debt culture meant rising deficits and “spend now and play and pay later”, the public’s debt tolerance to an extraordinary degree, and this general lackidasicalness of putting a framework around your culture and your economy — they’ve all sort of gone to seed together. And I think that the net outcome of this is a country that is in every way living beyond its means. We used to be the leading world creditor, the leading world manufacturer and the leading world producer of oil. Now we’re the world’s leading debtor, the largest inporter of manufatures and the world’s leading importer of oil. It’s a disastrous transformation. The only part of the economy that has profited is the financial sector, because an awful lot of the transition is toward more debt, more credit, more living on things you can’t afford, more keeping up pretenses, and more ambition around the world with less to back it up. And the consequenses of this in many ways is the George W. Bush administration.

Not that Phillips thinks the Democrats are any better. About Paul Krugman, for example, he says,

  There is a good reason for Paul and the Democrats in general to be upbeat here. Maybe to an extent if things were a lot further advanced in the decay process, you could just flip a leaf and say all of a sudden that we are ferociously concerned about this decay. But they think that liberal policies and the Democratic approach can turn it around. Frankly, I don’t… The Democratic magic is more of the old razmatazz, and government will step in and there’s going to be a Green Deal as well as a New Deal, and we’re going to have five million new jobs for things relating to the Greening of America… The Democrats don’t want to admit that what they di8d for the most part in the two Clinton administrations was for the most part a continuation of the Reagan and first Bush administration — and then was continued and built upon by the second Bush administration. You had a lot of financial deregulation under the Clinton administrations. They repealed Glass-Stiegel, they deregulated credit cards, lots of stuff. They stepped on the gas in terms of private debt. The increase is extraordinary. So I can’t separate out the Clinton years from what preceded them and what came after them. And of course the Democrats need to be able to tell America in this election that … they have the answer. I understand that. But I don’t agree with it.

As for Obama, he says “I don’t think he’s raised enough of these issues to have a mandate… They’re not acting now like people who understand that there’s a problem.”

He also adds, “That clearly goes for the Republicans. It’s hard to believe McCain. His economic program is almost a non-program.” That’s on top of George W. Bush: “I don’t want to do another number on George W. after American Dynasty, but he’s the wrong person at the wrong time andin the wrong place — and unqualified essentially for having been president of the United States during these eight years.

I could go on, but a bunch of smokers just parked at the tables on either side of me, and I’m sure my room is done now. Meanwhile, go check out that podcast.


  1. David Taht’s avatar

    OK, you hit me twice over. I still smoke, but still argue that pipe smoke is vastly to be preferred to those little death and addiction devices called cigs. Too bad tobacco pipes are a dying institution.

    Reading the news down here in South America is genuinely frightening.

    My neighbor, a fellow expat, Kelly Ann Thomas, is in knock down drag out fight with her bank to try and get her trust fund to safety. The dialog between her and her bank is surreal. The emails that she has posted from her frustrated conversation with her bankers – seem eerily like similar ones from the depressions of the 1800s.

    I wonder how many others in the line of fire are finding success in getting into safe havens?

  2. glenn’s avatar

    When we failed to act in 1973 during the first Arab oil embargo and set in motion the process of becoming dependent on others for our energy needs we pretty much defined the path we are on now. Doesn’t help that the folks we are dependent on don’t like us much. Glad I’m old and don’t have grandchildren.

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