I listened to Jim Cramer for about 5 minutes on CNBC this afternoon (before, of course, I had to turn it off as his ridiculous ranting was so transparently self-serving). He waxed at length on the fact that it is Obama that is forcing this market to fall. Obama's policies are the problem....his agenda will send us all to the poorhouse. He suggests the market will not recover unless Obama backs off his "threats" to raise taxes on the wealthy and modernize healthcare. Unless he reneges on any other initiative that upsets the status quo then the market will make him pay. Wall Street is in a panic....which brings me back to the idea of the Shock Doctrine. Of the many things that boiled my blood in the Shock Doctrine, the chapter on South Africa and the ANC's attempt to redistribute the country's wealth back to its citizens stands out most. Read a few excerpts below the fold:
First, some background. There were two struggles occurring simultaneously during the end of apartheid, the political struggle to end white rule in a predominantly black country and the economic struggle which was going on under the radar. Unfortunately, the ANC (African National Congress) was concentrating their attention on the political struggle and ignoring the fact that the "Chicago Boys" (the followers of Milton Friedman) were democracy-proofing capitalism as they had in Chile under Pinochet. They basically rigged the constitution and the courts so that it was legally next to impossible to reverse their revolutionary laws.
Want to redistribute land? Impossible--at the last minute, the negotiators agreed to add a clause to the new constitution that protects all private property. Want to create jobs for millions of unemployed workers? Can't--hundreds of factories were actually about to close because the ANC had signed on to the GATT, the precursor to the World Trade Organization, which made it illegal to subsidize the auto plants and textile factories. Need money to build more and larger houses for the poor and to bring free electricity to the townships? Sorry--the budget is being eaten up servicing the massive debt....
Which brings us to the U.S. and the roiling markets today. A young president steps in and threatens to shake up the status quo. He informed us Saturday he knows the special interests are digging in their heels and his response, SO AM I. Here's what happened to South Africa as Nelson Mandela was released from prison and tried to take over reform of his country:
As soon as he was released, the South African stock market collapsed in panic; South Africa's currency, the rand, dropped by 10%. A few weeks later, De Beers, the diamond corporation, moved its headquarters from South Africa to Switzerland. This kind of instant punishment from the markets would have been unimaginable decades earlier.
(snip)
Not only did the volatile market not like the idea of a liberated Mandela, but just a few misplaced words from him or his fellow ANC leaders could lead to an earth-shaking stampede by what the New York Times columnist Thomas Friedman has aptly termed "the electronic herd". The stampede that greeted Mandela's release was just the start of what became a call-and response between the ANC leadership and the financial markets--a shock dialogue that trained the party in the new rules game. Every time a top party official said something that hinted that the ominous Freedom Charter might still become policy, the market responded with a shock, sending the rand into free fall. The rules were simple and crude, the electronic equivalent of monosyllabic grunts: justice--expensive, sell; status quo--good, buy.
Note: Unlike the rand, the dollar, surprisingly enough, is strengthening in this mess, it's stock values that are irrationally falling off a cliff....
I think Obama is playing a high stakes game of chicken with Wall Street. What I find interesting so far is that the call and response game is not being joined by Obama. The markets slide and he stays silent. As I have a rather large stake in the markets, this is, on the one hand, quite disconcerting as I watch my net worth drop to nothing. On the other hand, I support Obama's efforts to shake up the status quo. I would like to think that at some point the WATB's on Wall Street will tire of losing money and step up to the plate.....I hear the number 4 trillion in cash is floating around out there, waiting to jump in.
I think if I have to spend one more day listening to the CNBC talking heads whine and cry over the lack of transparency in Washington (when they were in fact whining and crying just a few short months ago that Washington was being TOO intrusive) I'll lose my mind.
My question in all this is: Who will blink first?