The President Comes Full Circle On Iran

If the president doesn't want to meddle in Iran, and make himself the story, then, given his behavior over the last couple days, I'd hate to see what he'd do if he were trying to meddle. It started a couple days ago when he cancelled invitations by U.S. embassies to their counterparts in Iran for Fourth of July celebrations.

This was a somewhat inconsequential though noticeable first step in the president's evolution of his stance toward the Iranian regime. After all, the whole idea was kooky to begin with. It was unlikely that any Iranian diplomat would take us up on the offer. If they did, we could only imagine how uncomfortable that scene would be. Rescinding the offer was really merely fixing an error.

Then, the president responded to Mahmoud Ahmadinejad's latest accusation that the U.S. was meddling in Iran's internal affairs.

President Obama said Friday that he doesn't take Mahmoud Ahmadinejad's demand for an apology seriously after the Iranian president accused him of interfering in the country's affairs.

"The United States has gone out of its way not to interfere with the election process in Iran, and I'm really not concerned about Mr. Ahmadinejad apologizing to me," Obama said in a joint White House appearance with German Chancellor Angela Merkel after they conferred privately.

"I would suggest Mr. Ahmadinejad think carefully about the obligations he owes to his own people, and he might want to consider looking at the families of those beaten, shot or detained. That's where Mr. Ahmadinejad and others need to answer their questions," he said.

If the president was looking to maintain a diplomatic stance, this mix of Alinsky like mockery as well as righteous indignation toward the Iranian regime was likekly not the best approach.

President Obama then made a statement that was seconded by Angela Merkel.

Today we speak with one voice," Obama said. "The rights of the Iranian people to assemble, to speak freely, to have their voices heard -- those are universal aspirations. And their bravery in the face of brutality is a testament to their enduring pursuit of justice. The violence perpetrated against them is outrageous. And despite the government's efforts to keep the world from bearing witness to that violence, we see it, and we condemn it."

He finished by stating the obvious about future diplomatic relations.

There is no doubt that any direct dialogue or diplomacy with Iran is going to be affected by the events of the last several weeks," Obama told a White House news conference, adding: "We don't yet know how any potential dialogue will have been affected until we see what has happened inside of Iran."

So, the president who only days ago continued to speak cautiously and carefully so as not to appear to take sides has come full circle. He spoke with a clarity that has been lacking for nearly two weeks. He didn't mince words in the way he had the previous two weeks. Finally, he made no equivocations or morally relative statements like he had in the past.

The president was no longer worried about meddling or choosing sides. Instead, he condemned the violence in no uncertain terms and the regime perpetrating it. Many of us would have liked to have seen him make this evolution a bit quicker, but as the old saying goes, better late than never.

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Bailout Addiction

If you have been following the major equity markets over the last few days, it is clear that in the short term the bailout did little to subside the fear. Almost all major markets have continued to tank after the bailout passed. On one level, it would have been entirely too optimistic to have expected the bailout to settle the markets down. On the other hand, the sell off continued in part because the bailout does nothing to firm up a growing list of European banks that are now getting close being obliterated.

Now, we have the unintended consequences of the bailout. The Europeans had better be careful what they wish for. Folks like Chancellor Merkel were imploring the U.S. Congress to quickly pass the bailout. One of her own looks like it will be in need of its own bailout. Both on a policy and political level, Merkel will soon have no choice. The dominos will begin to fall. The Europeans are now attempting to work on a coordinated bailout. So, after we have forked over $700 billion, look for the Europeans to drop a similar figure.

We won't be done. Banks in China, Japan, South Korea, and Australia to name just a few all have significant capital in these bonds. Soon, they will all need a bailout and the governments will have no choice but to give them one. For one, the worldwide markets will demand it. The worldwide market may even continue to drop precipitously until they all get one. They may even at some point realize all these bailouts are worthless. They might reach a bottoming out after we are through with the bailouts. Two things appear clear. First, there is no end in sight in how much governments will need to borrow to bailout their financial institutions. There is also no end in sight for how far world markets will go until we get them.

Of course, this rash of bailouts has opened the flood gates. We all barely raised an eyebrow when the big three autos got a $25 billion "loan". (I say "loan" because they have something like 20 years to pay it back) California has asked for a $7 billion bailout. We are just getting started. The atmosphere is primed for any populist politician to run against anyone that voted for this bailout promising a Main Street bailout. It is only a matter of time before someone suggests a credit card bailout. What is any business owner or consumer to think about any risky behavior? Everyone will soon expect a bailout for any risky behavior. The proverbial genie is now out of the bottle, and we can't put it back in.

There is a saying in criminality...it's not the crime but the coverup. In this case, we will likely one day say it's not the crisis but the response. No matter what the short term consequences would have been of withholding the bailout, I think we will regret the long term consequences of this bailout much more. First, the precedent has been set, and any risky behavior by anyone will demand the same bailout. It will be difficult for any government anywhere, worldwide, to justify not suppling after the multiple trillions that will be spent on this one. Second, the massive increase in government spending worldwide will lead to massive inflation worldwide. Third, it is unlikely that any of these bailouts will have the desired effect. Bailout or no bailout, it appears we are running headlong into a recession and even a depression. Fourth, the massive amount of new power each and every government will consolidate as a result of these bailouts will be felt for generations. The worldwide nanny state has now just multiplied exponentially.