Once upon a time (1945), the United States led the world. This role devolved upon us due to the incredible economic collapse brought on by conducting a war which involved almost every nation of the world.
The conditions of that time, however, could not be maintained naturally, as the crippled nations of the world recovered and reestablished their own economies, no matter how much the neocons wanted unequivocal US dominance to continue throughout Eternity.
Despite that reality, the US maintained a certain authority (admittedly enhanced by a large nuclear arsenal) over the nations of the world - what we said tended to go. That doesn't seem to be the case anymore:
President Bush's slumping popularity at home may be taking a toll on his ability to exert influence overseas. As Bush prepares to depart Monday on a trip to Asia, questions abound about the global consequences of a U.S. president hobbled by domestic setbacks.
Bush has drawn muted responses from many world leaders and a larger-than-usual share of anti-American demonstrations. He never was particularly well-liked overseas, to begin with.
Bu$h'$ popularity is a distraction. These next few paragraphs point out the real problem facing American leadership of the world.
Now, allies might be even more emboldened in opposing positions staked out by the U.S. And antagonistic governments in North Korea, Iran and elsewhere might be less intimidated by Bush's threats, seeing how bogged down the U.S. is in Iraq.
Bush's foreign policy agenda remains ambitious and includes the spread of democracy, but he may not have the resources or public support to carry it out. U.S. forces are spread thin in Iraq and Afghanistan, and the public appetite for additional foreign entanglements seems faint.
"At the moment, the administration appears to be trying to stabilize Iraq, destabilize Syria and denuclearize Iran all at the same time. Completely implausible. You can't possibly do all those things at the same time," said James Dobbins, a former Bush envoy to Afghanistan and veteran diplomat.
The world - and certain former Bu$hCo executives - can see that the US is at the end of its string. This is serious, considering that certain official Bu$hCo behaviors are considered anathema by the world community. They just might - using a principle established by Bu$hCo that reserves the right to change another nation's behavior by force just because WE don't like it - decide at some point to take action against those certain official Bu$hCo behaviors.
This one, for instance:
This week saw the sad spectacle of an American president lamely trying to explain to the citizens of Panama that, yes, he would veto any [torture ban] bill but, no, “We do not torture.” Meanwhile, Mr Bush's increasingly error-prone vice-president, Dick Cheney, has been across on Capitol Hill trying to bully senators to exclude America's spies from any torture ban. To add a note of farce to the tragedy, the administration has had to explain that the CIA is not torturing prisoners at its secret prisons in Asia and Eastern Europe—though of course it cannot confirm that such prisons exist. The revelation in the Washington Post that the CIA maintains a string of jails, where it can keep people indefinitely and in secret, only heightens the suspicion that Mr Cheney wants the agency to keep using “enhanced interrogation techniques”.
If the pragmatic gains in terms of information yielded are dubious, the loss to America in terms of public opinion are clear and horrifically large. Abu Ghraib was a gift to the insurgency in Iraq; Guantánamo Bay and its dubious military commissions, now being examined by the Supreme Court, have acted as recruiting sergeants for al-Qaeda around the world.
Mr Bush would rightly point out that anti-Americanism is to blame for some of the opprobrium heaped on his country. But why encourage it so cavalierly and in such an unAmerican way?
By what method could the world use force against a nation so clearly adrift and out of control as the United States? What could be done to minimize the toll on the American people - who, depite confusing the world over the support given in the past to King George and His Nattering Neocons of Negativity, are still well-regarded by the people of the world?
As Sun-Tzu taught, if "you know your enemy and know yourself, you need not fear the result of a hundred battles." The following is clear and open knowledge to a world which is loaning us the rope to be used to hang us when the time comes. Our own experts can see this. It's time the rest of us did - before the drop that will break our economic necks:
Private equity firms, it seems, now own everything: Hertz, Neiman Marcus, Metro-Goldwyn-Mayer, Toys "R" Us and Warner Music, to name a few. So far this year, buyout firms have spent more than $130 billion gobbling up parts of corporate America. And with more than another $100 billion in unspent money this year still swirling around the industry, there is a lot more buying to be done. The boom isn't limited to America: in Britain buyout firms own so many companies that they now employ 18 percent of the private sector, according to the British Venture Capital Association.
The trillion-dollar question is whether these shopaholics are setting themselves up for a giant fall.
If the market begins to show even the faintest signs of strain, this bubble may pop, say many financial analysts as well as private equity players themselves. If that happens, the leveraged-buyout boom and bust that Michael Milken led in the 1980's could end up looking like a dress rehearsal for the mess to come.
As Mr. Kravis said during his speech: "Unfortunately, there is a flip side to having access to plentiful capital. It means that too many people without experience in building businesses have too much money."
As our wrong-wong friend like to occasionally remind us, 'growing' a business is what creates jobs. What is one to think when one of the biggest money men in America, Henry R. Kravis, issues a veiled warning that maybe certain people have far too much economic power? And that they are misusing it?
The numbers tell the story. Over the last three years, private equity firms have had record returns through a series of quick flips, spurred in part by superlow interest rates that allowed them to borrow huge sums of money. As a result, big institutional investors like pension funds have poured $491 billion into the business, according to Thomson Venture Economics, a firm that tracks data for the industry. If you figure that the firms can borrow three to five times that amount - a conservative assumption - the industry has more than $2 trillion in purchasing power.
But here's the rub:
In the next three years, to reap returns on all those big-name investments they have been making, private equity firms are going to have to sell $500 billion worth of assets.
The question is, to whom?
The Japanese recently announced that come April 2006, defending the yen will be their primary focus, which will mean less support for stabilizing King George's hyperinflatable borrowed dollars. The Chinese have been making certain military noises recently which leads one to be cautious in dealings with them. The rest of the world seems to be taking China's lead, so waiting for them to buck China might cause Godot to show.
It is doubtful that much business-purchasing rescue capital will come from them. They just might already understand what America's 'entrepreneurs' are just discovering - we've become too expensive to invest in safely:
"I'm pessimistic about the economy, interest rates, credit markets, and all that," said Hamilton E. James, president of the Blackstone Group. "I feel people are paying prices that are too full. I think some mistakes will be made. We've pulled in our horns a little. We've become more conservative about the types of companies we buy, the prices we pay, the exit multiple assumptions and so on and so forth."
The American economy is huge, and it takes a great deal of effort to make it change course or speed. A great deal of effort has been expended since 1978 just to create the current economic dog-eat-dog corporatist climate. It isn't going to change overnight just because some see difficulties in maintaining the party much longer:
Even in the last three years, in as big a bull market as they come, private equity has never sold more than $153.2 billion in a year, according to Freeman & Company. At the same time, the investment firms will have to keep spending. And the low-hanging fruit has already been taken.
Remember - it was claimed in the quote contained in the yellow box above that $500 billion worth of assets will have to be sold just to keep up the levels of profits being taken over the last several years. Those who keep an eye on the cookie jar, like Kravis, are noticing that there are now more crumbs that cookies in that jar:
Firms may have a particularly tough time exiting some of their investments because investors are taking a more skeptical view of initial public offerings backed by private equity.
In recent months, several high-profile quick flips have left critics wondering whether buyout firms were using such offerings simply to line their pockets, rather than using the proceeds to support companies.
Take care of themselves before anything else? Just WHERE could they have gotten THAT notion!
Earlier this year, the Blackstone Group sold a German chemicals company, the Celanese Corporation, to the public after owning it for less than 12 months.
Only now does the 'moralizing' begin:
"There's no question this is going to end badly for some," said Colin C. Blaydon, a professor at the Tuck School of Management at Dartmouth and the dean emeritus of its Center for Private Equity and Entrepreneurship. "It's almost a classic boom-bust cycle. When you see a big boom, people see the returns, go rushing in, stuff more money in than can be dealt with. Suddenly, something will happen that makes people say: 'Oh, my God! Look at the leverage we've got on these things. Isn't this way too risky? Shouldn't we pull back?' And then the question becomes: Does it crash like a rock or is there an adjustment down over time?"
Now add in to the mix a batch of irritated countries which hold the majority of US debt and don't like what we are doing with their money.
It will be very ugly.
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