The Next Bubbles?

The language of bubbles has permeated the American media and the American psyche. That whole categories of financial flows can grow, glow and then burst revealing emptiness, waste and fraud is now an accepted model for understanding America in the 21^st century.

What these modern bubbles, and most historical ones, seem to share is government "leadership" and government blessings, and a taxpayer (born and unborn) subsidy of this or that investment. Ponzi schemes of all kinds lead to bubbles, promises of easy gains for low risk that, when they come due or are discovered, collapse swiftly and painfully. Bubbles are the predictable result of lies being told about what is wise, what is worthy, and what is good for this or that entity. We are aware of the housing bubble, the financial bubble stemming from mortgage security swaps, the coming college and the municipal debt bubbles, and the bubble growing around the U.S. Federal Reserve notes.

Some bubbles are bigger than others, of course, and different groups are differently impacted when these bubbles explode and investors sort it out and reallocate any remaining pieces. Certainly, government intervention delays and warps any post bubble recovery. What is simple in many ways is made complicated and difficult to understand, but the fundamental facts will inevitably have their day.

Earlier this week I participated in a panel discussing military aid to Israel, and why it should be reduced drastically. One argument against this aid is that Israel misuses US developed technology by stealing it, selling it, trading on it, and using it to compete against U.S. defense and security firms for global sales. Another argument is that this aid ends up costing American taxpayers far more than the actual dollar amount by fomenting tension in the region, reducing American credibility and options, and by creating unnecessary enemies, and expensive but ultimately unnecessary supplicants and "allies" in the region.

When they are in the United States, Israel’s politicians and leaders, most recently Benjamin Netanyahu, pay repetitive lip service to the idea that Israel is a dedicated military ally and reliable friend of the United States. Yet, strangely, the United States and Israel do not have, and have never had, a treaty of mutual defense. Opposition to such a treaty comes largely from the Israeli side (and consequently, from Israel’s many standing and genuflecting ovationers in Congress) who tend to see any treaty as a possible limitation on Israeli government’s ability to conduct "defense." Certainly, territorial expansion, barrier and road building, and control of human movement and trade far beyond the 1967 borders are seen as "defensive nation building" by many Israelis. For the U.S. to be a legally binding party to such activity would be an obvious and public violation of international law, and an open rejection of the ideas that emerged after World War II. Believe it or not, there was a broad-based recoil around the world at the shocking totalitarian abuses of human rights and liberty conducted by governments on all sides against their own people, and their neighbors, during those wars.

To put it plainly, if the United States president signed such a treaty with Israel, and the Congress ratified it, many elected leaders in the United States would be on record as supporting Israel’s "defense" strategy, rather than having it both ways as they do today. A defense treaty with Israel would instantly negate all that President Obama said last week about supporting peace and democratic progress in the Middle East, and specifically contradict his vague statement regarding the 1967 borders as a guide to a two-state solution. A defense treaty would be also a very honest and open thing to do, and it would codify the fundamental and brutal nature of the U.S.-Israel relationship, here and throughout the Middle East. Such a treaty would make the United States less of a hypocrite, and it would help the rest of the world and average Americans fully understand our Middle East basing policies and practices, and our various attempts to puppet-master, promote or topple other regional governments.

One of the key features of a bubble ready to pop is that a small number of intimate observers of the situation begin cry into the wilderness, often pointing to certain fundamental flaws, or unnoticed oversights. These observers and participants who warn of a coming collapse or bursting bubble may be thought of as canaries in a mineshaft. But unlike the humble canary, whose song is welcomed because it means the system parameters are still solid, the naysayers, the cautious critics, and the wise proactive analysts tend to be ignored by the "investors" when they sing, and these canaries are pressured to go silent.

Certainly this is the case of those who challenge the idea that the congressionally forced U.S. taxpayer funding of Israel’s defense industry is a worthwhile investment in American security. The $3 billion in annual financial military financing and other military aid, and the other lending of diplomatic and military credibility to the Israeli government, no matter what that government does, or how it does it, is an expensive policy. Unlike most other military aid doled out around the world, the United States attaches no substantive conditions on this and the massive in-kind gifts to, and cached weapons we store in, Israel. We require no U.S. basing rights, no standing overflight rights, and do not require, as we do for all other FMF, that the tax money be 100% spent on U.S.-produced products and services. We do not require that Israel abide by international law or norms in the use of American military products, such that American cluster bombs and white phosphorus artillery shells may end up used on civilians or on civilian infrastructure, incriminating the American taxpayer in collateral maiming and murder, and illegal destruction of habitats and economies. Instead, Israel has been able to game the free money system such that today, 25% of the assistance may be spent solely on the burgeoning Israeli defense industry, which competes with the major American defense sector for customers around the world – without the constraints U.S. companies have in selling goods, services, and technologies to the United States’ antagonists and sanctionees of the day.

As we speak of bubbles yet unpopped, I will suggest two. In general, the United States defense industry constitutes a bubble, even as contrarians accurately understand that governments in financial trouble and facing a discrediting national collapse tend to go to war to silence domestic critics and squeeze the last nickel from the collective coffers for their political and corporate friends, and as both parties fight to save the industry as a last ditch "jobs" program for the children. It is the way of all empire, and will be so for us. Thus ultimately, big state debt- and deficit-funded defense spending is a bubble overdue for a collapse, a sputtering and then a raging rush away from this wasteful, unnecessary and over-hyped industry. When during budget debate time, every other radio advertisement you hear in Washington demands you heart Boeing, Lockheed Martin and Raytheon, overwhelming even the incessant push for antidepressants, one can sense the concern that someone will find out about this house of cards, and observe that it struts upon the stage, as Shakespeare would say, full of sound and fury, signifying nothing.

Far more vulnerable to an imminent pop, with few tears by average Americans, will be foreign financial aid to all countries, including Israel, the largest recipient of such aid. AIPAC is stale and aging, an old man’s commiseration club, sufferable only because it is habitual. Christian Zionists, some of whom I witnessed earlier this week engaged in verbal and physical violence towards a CNIF member, are losing their cool in more ways than one. For the first time, I met an infamous supporter of U.S. tax-funded assistance to Israel and its geographical expansion, a retired three star Army general and helpful contributor to our current pro-Israel policy that includes several wars and occupations in the Middle East, and our torture and rendition of detainees. He worked as a second to Stephen Cambone and was part of the neocon cadre so prominent in the Pentagon and Executive corridors in 2002 and afterwards. The portly and emotion-driven Jerry Boykin must have been a weak and angry shadow of his former self, I thought to myself.

But indeed, he is what he is, and what he always was. What changed was my perception of him, my new and concrete awareness that he was a fraud, a walking sale pitch for more war and war spending when, in fact, none was or is necessary. Oil will be pumped, processed and traded, and Israel will survive and prosper, even as the United States withdraws financial aid and symbols of military might from the region. The great build-up of bases in the region, from Saudi Arabia to Iraq, in Bahrain and Kuwait, in North Africa and Afghanistan – all without a serious defensive debate or justification is amazingly typical of a bubble in the months and years before it decisively collapses. It’s the hurry up and get on board phase of the Ponzi scheme, the mad rush to get in on the deal, because it is almost too good to be true.

Americans are beginning to ask questions, and the answers they are getting from the U.S. Government, the Israel lobby and Israel’s political leadership amount to "…move along, nothing to see here, folks." When pressed for details, Americans are getting congressional obsfucation, bumper sticker-style labels, and a bit of self-righteous anger. By now, Americans know all about the nature of bubbles, and hopefully they won’t be surprised by these coming collapses.

May 30, 2011

LRC columnist Karen Kwiatkowski, Ph.D. [send her mail], a retired USAF lieutenant colonel, blogs occasionally at Liberty and Power and The Beacon. To receive automatic announcements of new articles, click here or join her Facebook page.

Copyright © 2011 Karen Kwiatkowski

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