Prediction for the Economy, Near-Term

Obama is going to win. People are going to be relieved. He is a level-headed guy, and there is going to be a sense that he just might be able to pull it off -- that, somehow, he can lead Americans back to the road that leads to the road to the promised land. The stock market will shoot up, and then fall down, and shoot up, and trend upwards for a while. Then Obama will make a mistake. There will be some flaw or imperfection. Biden will say the wrong thing. Something funky will happen, anyway, or if nothing else Obama will become old news, long before the financial crisis has leveled out. People will look ahead and see that the sky is cloudy all the way to the horizon. There will be a return to a sense of gloom. Obama will be giving Churchillian speeches: blood, toil, sweat, and tears. Spring will come, and there will be a sense that it is going to be OK, this altered vision of the future of America. It's not going to be pretty, but it will be less fearful. We will have looked into the abyss; it will have looked into us; and there will be stalemate. Obama will be locked in mortal combat with the beast, giving and taking victory and defeat by the inch -- no, by the millimeter. Obama will become old news. The late-night comics will have latched onto his foibles. By the time reruns appear on our tubes next summer, the foibles will be established in the popular understanding. Unknowns about the values of things in the financial world will be unwinding and clarifying themselves. Some things that Obama said and believed will turn out to be unaffordable. Our expectations will be on a long, steady march downward, to join forces with the fiscal realities trying to climb from the valley floor.

Thank-You to the Brain Damage Lady

I was on my bike on a street at the University of Missouri. A pedestrian stopped and asked me if I would consider wearing a bike helmet. I said I had thought about it, but I found them uncomfortable. She said it was possible to have an accident and experience brain damage from which you might never recover. She said it had happened to her. I went home and thought about it, and I decided it made sense to wear a helmet. It helped that so many other bicyclists did so. This seemed to be one of those geeky things that the smart people did, regardless of whether it was geeky. So I started wearing a helmet whenever I biked. Since then, my head has hit the pavement on three different occasions. And I am fine. So thank you, brain-damage lady. You may have saved my life.

Ubuntu and VMware: VPN and Error 769

I was running VMware Workstation 6.0 on Ubuntu Hardy Heron 8.04. Within VMware, I was running a Windows XP virtual machine. I sometimes needed to make a VPN connection within the WinXP VM. To make that connection, I would first have to shut down ZoneAlarm. I had no other antivirus or firewall software running within the VM. I upgraded to Workstation 6.5. I did not make any other changes to the Ubuntu base layer, which continued to run the Firestarter firewall. Firestarter had not interfered with VPN previously, and I did not think it was inclined to start doing so now. On the Windows XP virtual machine level, I installed the latest VMware Tools in the VM. Once this was done, I was no longer able to connect using VPN inside the WinXP VM. When I tried to do so, I immediately got this:

Error Connecting to VPN Connecting to [VPN address] ... Error 769: The specified destination is not reachable.

There did not appear to be any problem with the router, the network card, or Ubuntu. I was still able to use Firefox in Ubuntu to browse the Internet, do new Google searches, etc. Instead, the problem appeared to be between VMware and Ubuntu. I looked at the VMware settings (VM > Settings > Hardware > Network Adapter). Nothing had changed; I was still using a NAT network connection. Setting up a new VPN connection within Windows did not solve the problem. After fiddling with things for a while, I posted a question on this problem. While I was waiting for an answer, I decided it was time to start transitioning some additional functions from Windows XP to Ubuntu. In particular, I was using VPN to access e-mail and also to access some article databases at the university. Since I had been pursuing a long-term project of finding Ubuntu replacements for Windows programs and functions, I thought the logical next step might be to learn how to make VPN work on Ubuntu. I had tried this once before, on my secondary computer, without success. The only thing I had been able to guess, in that previous attempt, was that maybe my router was blocking the VPN connection. But that seemed unlikely, since I had been using VPN successfully from within Windows on the primary computer all along. Nonetheless, to test it, I cabled directly from the secondary computer to the DSL modem, left-clicked on the Wired Network Connection icon on my top panel in Ubuntu -- and still got a connection error. Since VPN had worked within WinXP in a VM on the primary computer, I didn't think it was likely to be a router issue. I wasn't sure about that, because I had set up VMware Workstation to use an NAT network connection, but this was my starting hypothesis. In case the primary and secondary computers did differ somehow, at this point I went through the steps required to set up VPN on the primary computer. In my previous post on this topic, I had written up those steps like this:

I searched in Applications Add/Remove. Well, and wasn't that interesting: I had gotten the impression that Synaptic was more comprehensive and more reliable, but here was VPN Connection Manager, just like the webpage said. I killed Synaptic, checked this one, and clicked Apply. Then I rebooted. The instructions said to look for the Network Manager icon in my system tray, but I didn't have a system tray. Using Ubuntu's System > Administration > Network menu option, I got a Network Settings dialog, but I did not see any VPN Connections option. Nor was there one under Applications > Internet. Using another guide, I found that my mistake was that I was supposed to left-click on the network icon that somehow, at least in my case, had migrated to my top panel; and there, I was to select VPN Connections > Configure VPN > Add. From there, I mostly went with the preferred options.

I did it pretty much the same this time. I did check Synaptic and still didn't find VPN Connection Manager per se. In Add/Remove, I chose the one with four stars, VPN Connection Manager (PPP generic), rather than the ones with three stars (i.e., OpenVPN and vpnc). This added a VPN Connections option to my Wired Network Connection icon. Within the VPN Connections box, I chose Configure VPN > Add, and typed in my gateway. I didn't know what to do about the other options, so I did nothing with them. Now the VPN connection I had just added appeared within the VPN Connections box. But unlike on te secondary computer, this did not add a new VPN entry directly under Wired Network Connection > VPN Connections. Maybe I needed to reboot to add that. I had too many things open at that point, though, so I decided to bag it for the time being. To review, then, the option of avoiding Error 769 -- by using VPN within Ubuntu rather than within a WinXP VM -- was not turning out to be an obvious and easy workaround. I did want to get VPN working within Ubuntu, but at this point the reasons why I could not do so were no clearer to me than were the reasons why I was suddenly getting Error 769. It seemed there must be a solution, but what would it be? People had worked through a bazillion different possible fixes and, so far, it sounded like those were very much hit-or-miss (and usually miss). Experience suggested that this was one of those things that a person could devote an entire day to, and still not have a stable answer. Rather than go through all those complexities, I decided to try a different temporary solution. I could do VPN from within my native WinXP dual boot on the secondary computer. So at this point I bailed out of Ubuntu on the secondary computer and rebooted into Windows. I set up Microsoft Outlook 2003 there and used that, for the time being, as my VPN mail and research center. My hope was that perhaps the next version of Ubuntu, due out within about two weeks, would conceivably provide a solution, or that possibly someone would respond to my posted question in the meantime.

Contrarian Prediction: Deflation

What we have been worrying about, all along, was that the Fed would keep pumping money into the economy, and this would inflate the currency, making it less valuable vis-a-vis other currencies, precious metals, commodities, etc. That is still certainly a possibility. Suddenly, however, it appears that things could also conceivably go in the opposite direction. The dollar is becoming strong, in the past few days, as people fly to quality. The U.S. economy is at risk, we see, but it is not necessarily as much at risk as other economies. If the government intervenes in the market in Russia, for instance, it intervenes in order to seize your investment; but if the government intervenes in the U.S., it typically (and even now) does so in order to preserve your investment. At this time of panic, gold should be flying through the roof. Instead, over the past couple of weeks, it has dropped in dollar terms. It is not that the dollar is safer than gold; it is that gold (for American purposes) is priced in dollars, and dollars are in demand. Especially the dollars produced by the U.S. Treasury (in e.g., T-bills) and backed by the full faith and credit of the U.S. government. The U.S. government may or may not be good for it, in the long haul; but there are an awful lot of nervous people, around the world, who seem to be of the opinion that if anybody's good for it, the U.S. government is. If we're looking for a paradigm shift in the world economy, away from America at its center, it's not setting itself up as a gradual transition. It's an over-the-cliff kind of transition, where the U.S. economy, dollar, and Treasury all wind up at the bottom in a broken heap. Is that where we're headed? Maybe not, or at least maybe not right away. We've got billions of people out there who seem to be wanting the U.S. to hold itself together and go back to a consumerist orientation, buying things that other people produce, and so forth. China is making a bid to unlock a large quantum of its own purchasing power, in its recent real estate reforms; but that will take time, and it is not clear to what extent it will provide as an engine for global (as distinct from Chinese internal) growth. Presumably the Chinese currency will have to appreciate a great deal before Chinese citizens en masse have the wherewithal to make large-scale purchases abroad. In any case, China has placed its own huge bets on the strength of the U.S. Treasury, and has its own incentives to see to it that those bets do not become worthless. So if there's a lot of interest in seeing the U.S. remain strong, then perhaps we've already seen the dollar devaulation run its course for now. If panic money does come into an underpriced U.S., to buy up our land and our companies and in shopping sprees of other kinds, then perhaps the world will continue to find new ways to fund our lifestyle or, more importantly, our confidence. Those defaulting mortgages could get sopped up pretty quickly if, say, the government were to allow people from abroad to become American citizens immediately, provided they can put up the purchase price of a nice suburban home in cash. Does the world have a couple million would-be applicants who could pay that price? Maybe. Would Americans bitch and moan about a flood of immigrants if (a) they hailed from the four corners of the globe (as distinct from e.g., a Hispanic tide) and (b) they were bailing us out financially? Maybe not. Right now, interest rates (on e.g., T-bills) have fallen to extraordinarily low levels. Hmm -- that sounds like the direction in which we would be moving if we were indeed trending towards deflation. Just to have the U.S. dollar is good enough; people seem to be happy to do that, without needing to earn much interest on it. If the bucket tips over, than all bets are off: everything spills across the floor, and the dollar becomes worthless in a trice. But as long as she remains upright, she may just continue to be the best game in town. It could be some time before people espy a better bet. In a deflationary scenario, the dollar becomes ever more valuable, and people have ever less of it. That, too, sounds familiar. Those debts that were difficult to pay before become impossible to pay now, as wages drop or disappear while principal plus interest compound. An acute problem of indebtedness will leave a large number of debtors unable to pay, and a large number of creditors increasingly insistent on being paid. Typically, this kind of problem will be approached on multiple fronts. Creditors will get shafted, to some extent, in liberalized bankruptcy proceedings; simultaneously, debtors will be expected to cough up even more than they do already. To see it another way, our move toward a common global standard of living for workers will entail, not only a lowering of our wages to compete with our good friends in China and India, but also a lowering of our lifestyles to accommodate longer working hours. In the extreme case, to spin out the scenario further, unemployment could come to be appreciated as in some ways a superior form of existence: not much less financially rewarding, and much more fulfilling. Be that as it may, the indebtedness problem, too, is very familiar now. So there do seem to be these serious bits of circumstantial evidence that are compatible with a possibility of deflation.

American Progress Report: Many Still Favor Bush

The prospects are not good, for democracy as we know it. I know how it is supposed to work, and I like that vision. But we are now looking at our third election in a row where people would elect someone like George W. Bush or John McCain. McCain is indubitably smarter and more experienced. But he does appear to agree with Bush on the large majority of issues. Bush has been disastrous and McCain would likely be damaging at best. This is, unfortunately, not the first time this has happened in recent years. People liked Ronald Reagan for his personality and his leadership. It's understandable. But he imperiled the national economy and, with his deregulation, gave us the savings & loan collapse. It cost us about $160 billion, I believe was the final figure. Nonetheless, people looked back fondly to his two terms and to that of the smarter, more experienced, and yet goofier George H. W. Bush, Sr., who followed him. For decades, many Soviets wistfully recalled the days of Joseph Stalin, who murdered tens of millions of their countrymen. For that matter, in Germany, people elected Adolf Hitler. We, ourselves, have elected people in Congress and elsewhere, term after term, despite our bitter complaints about them and the many ways in which they have proceeded to squander our resources and opportunities. It doesn't matter whether you agree with me. I'm not arguing that this or that should happen next. I'm predicting what *will* happen next. If you disagree, maybe your prediction will turn out to be correct, instead of mine. My prediction is that democracy, as we know it, will increasingly go out of fashion. I hope Barack Obama makes me very wrong. But when half the country (give or take) is prepared to elect people like John McCain and Sarah Palin -- or, before them, George W. Bush and Dick Cheney, or Reagan and Bush -- there is a serious problem. Over time, this kind of pattern seems likely to lose supporters. Much depends on what happens in other countries -- China, Russia, and so forth -- where autocratic leadership may be perceived as producing superior results. That is how it looks in the short term. If we go through another Obama bump, like the Clinton years, there will apparently nevertheless remain a hard core of angry Americans who will want yet another clueless Republican president. So in 2012 or 2016, we will again face the prospect of another eight to twelve years of leadership in the wrong direction. We don't presently know what will happen to our economy. Extended hard times and resentment over national humiliation brought Hitler to power in Germany. If we should find ourselves in the basement for a number of years, that portion of society that would admire a strong leader like Reagan or Stalin may well clamor for stronger leadership from our president. It certainly is possible that we could continue the Bush legacy of an overreaching presidency. Even if our own form of democracy endures more or less unchanged -- and I would think it would take many years to achieve a constitutional amendment by popular vote -- it does appear likely that American government will not provide a compelling example of democracy for people in other countries. Even if Obama does a fantastic job, that will only serve to enhance the impression that the American government boils down to a president of greater or lesser quality, plus an enormous and frequently inefficient bureaucracy. Again, I hope I am wrong. But I do find it discouraging to imagine that so many people would so frequently elect this sort of president. The idea that people can make good decisions without adequate knowledge just does not make sense; and to the extent that our democracy is based upon that principle, it does not produce superior results. You can't have this kind of government with uninformed voters -- and, for that matter, with uninformed congresspeople, who cannot hope to understand more than a fraction of the bills they are voting on. Perhaps the best we can hope for, given the prevailing pattern, is that power will devolve from government centers to more local governmental and community units, with centralized quality control checkers. Voters stand a better chance of understanding and voting sensibly on smaller and more localized issues. Progress in this direction could reduce the trend toward placing so much power in a central leader. At this moment, it seems like a superior alternative.