Prophetic Molly Ivins saw this coming nine years ago

I'm confident that Molly Ivins was the most "controversial" columnist the Chicago Tribune ever published, at least to its readership during the time she graced that papers' pages. She invoked STRONG emotional critical responses (from people I actually knew, and also knew to be of the republican persuasion) and strong defenses. Probably more negative responses were published, but that would reflect the Trib's readership.

I doubt that Molly would take any joy, delight, or comfort at being proven right on her insights into the consequences of the 1999 Gramm-Leach Act.

Lordy, Lordy, how I miss her. Here are some highlights from her 26 October, 1999 column:

Which is to say, the new banking bill is a thoroughly lousy idea, and the party most likely to regret it is us.

The 1999 Gramm-Leach Act is about to replace the 1933 Glass-Steagall Act, with the result that bankers, brokers and insurance companies can all get into one another's business. It's a done deal except for the final vote on the conference-committee agreement. The inevitable result will be a wave of mergers creating gigantic financial entities.

In a stupefying moment of pomposity, a New York Times editorial solemnly concluded: "The principle of freer competition is the economic engine of this era. But the other imperative is to demand openness, financial prudence and safeguards so that the vast new concentrations of wealth and power do not create new abuses." When was the last time you saw a vast concentration of wealth and power that DIDN'T create abuses?

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So much money has gone into getting this bill passed during the last 10 years that there is no hope of stopping it.

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Don't get me started on the evidence for my theory that bankers are among the stupidest people on God's green earth. These are the geniuses who loaned all that money to Latin America in the '80s and then had to write it off. This is the system that almost collapsed last year because one hedge fund spiraled out of control — and had to be bailed out by the Fed. These are the clever fellows who didn't notice their banks were being used to launder Russian mafia money.

"Too Big to Fail" will be the new order of the day. And guess who gets left holding the bag when they're too big to fail? One of these monsters goes down, and it will cost as much as the whole S&L debacle.

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Phil Gramm promises us that increased competition will bring about a wonderful world of dandy new services at lower prices. Not a single soul thinks this bill will do anything but cause a tidal wave of mergers and acquisitions, leaving us with fewer options than ever. We'll get fewer and more powerful institutions with the ability to overcharge for products because of their market share.

An ironic reversal of a strategic equation

The keen eye of Jeff Huber peers at the present US financial crisis through through the kaleidoscopic lens of nearly a century's worth of overseas military interventions.

What we're actually observing now is an ironic reversal of the strategic equation that led America to the status of global hegemon. Beginning with World War I (and arguably before that), military intervention overseas both enhanced America's position in the balance of global military power and fueled its economic engine. American has essentially maintained a wartime economy since World War II, the conflict that made the United States the military and economic leader of the free world. Throughout most of that period we have maintained a full time professional force and augmented it with reservists, militiamen, conscripts, and mercenaries. We have also maintained permanent deterrence and first response forces in Europe and Asia as a cornerstone of our Soviet containment strategy.

Ah yes, our Soviet containment strategy. As if the Soviets were ever going to invade the U.S.? Oh, wait. That was before. Back in the days when they were commies.

Oh, and that leader of the free world status? That's what happens when war is not waged on a nation's own soil. But war was waged quite fiercely in Europe (especially in Russia). We didn't have to rebuild anything, merely retool somewhat -- but certainly not retool entirely. The wartime economy has morphed into the Military-Industrial-Congressional-Infotainment-Prison economy, where our major exports are weapons, pot and porn. Oh, and maybe complicated financial schemes.

Meanwhile, on another continent:

The Chinese are keen students of the entirely scrutable history of western civilization and know full well that the Middle East is the traditional graveyard of occidental superpowers. They have been delighted by our folly in Iraq ...

China watched with amusement for decades as the Soviet Union, with its inferior economic model, tried to compete with us in an arms race. Now, the Chinese spectate from the skybox as we pursue an arms race with ourselves, pour national treasure down a sand dune, and continue to depend on a form of national power that has become antithetical to our national interest.

You'll listen to the nattering class babble on the infosphere about how our present economic woes came about as a result of deregulation, and to some extent they'll be correct.

But what you'll actually be hearing is what it sounds like when your country is losing the kind of war that takes place in the brave new world order it created.

Reversal of the historical norm with an overshoot

In another post at FireDogLake, Ian Welsh proposes lowering the "ceiling" to base the government's valuation for any mortgage bailout in order to avoid paying too much for the mortgages.

[A]s it stands the Dodd bill won't actually bail out the economy or the financial sector.

Why? Well, first of all it's paying too much for mortgages. 15% off current prices is less than most properties are going to drop. I know folks don't want to hear that, but a return to trend is more than that. 30% would be a reasonable number, but the proper way to do it is to figure out what housing prices in an area would have been without a bubble and pay slightly less than that, though that's slightly punitive. But then, why not be slightly punitive? No reason why the government shouldn't make a bit of a profit on bailing out banks. They already booked their profits and gave them to their executives, after all.

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The way a housing bubble works is a reversal of the historical norm, along with an overshoot. That's what the US government should be paying - pay for a mortgage what it would have been worth if there'd never been a bubble, minus about 10%. That's a fair price when you're buying what amounts to distressed property and it means you are setting a real floor that allows for a bounce afterwards.

Sounds reasonable. Still, some banks will go belly up. Institutions that have already made realistic write-downs of their "toxic" derivatives won't want to play. Good. They don't have to and thus a lot of the "big guys" who want in to this "bailout" won't be able to get their hands on the money. Even better.

From personal experience, getting 10 cents on the dollar when you sell your worldly possessions is a good deal, when you need the cash immediately. This proposal is a better deal than 10 cents on the dollar.

The only people with enough money to bail out the financial sector

Ian Welsh blogging at FiredogLake has a fascinating take for the abject terror of the politicians and wall street executives. This too makes more than a little sense in attempting to explain the the reasons for the necessity of doing something (anything) quickly.

If the US doesn't bail out its own financial sector (by borrowing money it doesn't have) then the only people with enough money are foreign sovereign funds and large investors. And they will bail it out for cents on the dollar at fire sale prices. The end result would be that New York is, definitively, no longer be the world's financial center. Odds on favourite to be the new one? Dubai. London doesn't want the job (they want to be middlemen). Tokyo can't quite do it. Shanghai isn't ready. But Dubai is raring to go.

And that's one real reason why Congressional leaders and Wall Street CEO's are panicking.

If Wall Street isn't bailed out by Congress, the executives will all be either working for Chinese and Arabs, or they'll be out on the street, drowning their sorrow in their 50 feet yachts drinking $100,000 dollar bottles of whine. Er, wine.

Partnership between kleptocratic insiders and the Treasury

Michael Hudson, writing at Counterpunch, offers another very useful insight into the nature of the present unraveling of the U.S. financial system.

Present discussions of the mortgage mess are lapsing into an unreal world. Advocates of the $700 [billion] bailout are now rounding up a choir of voices to proclaim that the problem is simply a lack of liquidity. This kind of problem, we are told, can be solved “cleanly” (that is, with no Congressional add-ons to protect anyone except the major Bush Administration campaign contributors) by the Federal reserve “pumping credit” into the system by buying securities that have no market when “liquidity dries up.”

What is wrong with this picture? The reality is that there is much too much liquidity in the system. That is why the yield on U.S. Treasury bills has fallen to just 0.16 percent – just one sixth of one percent! This is what happens when there is a flight to safety. By liquid investors. Many of which are now fleeing abroad, as shown by the dollar’s 3% plunge against the euro yesterday (Monday, Sept. 22).

The question that the media avoid asking is what people are trying to be safe from? The answer should be obvious to anyone who has been reading about the junk mortgage problem. Investors – especially in Germany, whose banks have been badly burned – are seeking to be safe from fraud and misrepresentation. U.S. banks and firms have lost the trust of large institutional investors here and abroad, because of year after year of misrepresentation as to the quality of the mortgages and other debts they were selling. This is Enron-style accounting with an exclamation point – fraud on an unparalleled scale.

How many tears should we shed for the victims? The Wall Street firms and banks stuck with junk mortgages are in the position of fences who believed that they had bought bona fide stolen money (“fallen off a truck”) from a bank-robbing gang, only to find that the bills they bought are counterfeit – with their serial numbers registered with the T-men to make spending the loot difficult. Their problem now is how to get this junk off their hands. The answer is to strike a deal with the T-men themselves, who helped them rob the bank in the first place.

There is a long pedigree for this kind of behavior. And it always seems to involve a partnership between kleptocratic insiders and the Treasury. Today’s twist is that the banksters have lined up complicit accomplices from the accounting industry and bond-rating companies as well. The gang’s all here.

A truth uniformly overlooked by kibitzers

James Kunstler has been writing about the unsustainability of the American way of life (massive suburban sprawl totally reliant on automotive transportation and cheap oil and the perpetual decline of industrial production) for a long time. He has issued dire warnings for a long time. His observations on the cultural and environmental landscapes have always been coherent, insightful, and logical. In addition, he is one hell of a writer.

Here are excerpts from Kunstler following the weekend of the Fannie Mae / Freddie Mac bailouts:

Since [2005], the US economy and the financial part of it ... has been held together with baling wire, duct tape, and band-aids. All the debt run up by all parties -- home-owners, credit-card holders, business, banks, hedge funds, government -- is not being paid back reliably, and all the leveraged arrangements that depend on it being paid back are coming apart. Thus, capital disappears. The wealth of a nation disappears. All that remains is the pretense that we are still a wealthy society.

Fannie and Freddie are near the center of this black hole of debt. So far, the black hole has been "papered over" by the old stage magician's trick of diverting the audience's attention. The systemic wound that Bear Stearns represented, was covered up with a band-aid applied by the Federal Reserve's exchange of loans for worthless securities. In fact, the capital of Bear Stearns actually did disappear -- a mere residue of it, a few cents on the dollar, was shifted to JP Morgan as payment for taking the wrapper off the band-aid. But, basically, the money is gone.

One thing this points to is a truth that is uniformly overlooked by kibitzers: that what we developed over the past decade in America was not an "information economy" or a "consumer economy" but a suburban sprawl building economy, meaning an economy dedicated to building a living arrangement with no future. The climax of the sprawl building economy occurred in absolute lockstep with the climax of peak oil. You can date it virtually to the month -- May, 2005. After that, the future asserted itself and all the financial expectations bound up with sprawl-building went up in a vapor -- including the value of mortgages on suburban houses. Everything that followed has been an attempt to cover up this basic reality: that the way we live in America can't continue.

The reason our energy debate is so hollow and idiotic is because we can't face this basic reality.

A mere week later, Lehman Brothers and Merrill Lynch had both exited the financial scene and Kunstler wrote:

[A]s our industrial base waned, and our factories got old and brittle, and our labor force was steeply under-bid by cheaper labor forces, we embarked on a quest for "the new economy." This was represented in successive turns as the information economy, the consumer economy, the high-tech economy, et cetera. They were all ruses, aimed at concealing the truth -- which was that we had become a society no longer producing things of value, no longer generating real wealth. The final act of this farce has been the so-called "financial industry."

That "industry" turned out to be most earnestly devoted to the production of complex swindles. They were so finely engineered that it took twenty years for the swindles to stand revealed, and they were cleverly hitched to the primary thing that the American public vested its identity in: house-and-home. Thus, much of the public finds itself in very real danger of becoming homeless and broke.

Some great questions to ask

Over at PoynterOnline, Jim Romenesko has posted some terrific questions posed by David Cay Johnston that need to be asked, and to which answers need to be DEMANDED from Paulson and the Cheney administration regarding the proposed $700 billion "bail out".

Is there a market solution to this? If so, why impose a government solution? If not what does that tell us about our entire economic theory?

Is there a less expensive solution?

How do we know this will not just be a downpayment on a much bigger bailout?

If AIG and others are too big to fail, what does that tell us about government anti-trust policy and regulatory policy and inaction?

Why have both Goldman Sachs and Morgan Stanley made clear that they want IN on this deal? Get skeptical and ask the basic questions -- who benefits, how much and what makes this plan so attractive that Goldman and MS want to participate? Ditto for GE. That they [and] others want to be included should prompt a great deal of skeptical questioning.

The problem with a one-trick pony

Caught this interesting NYT piece about Alan Greenspan:

Wall Street was initially skeptical that Mr. Greenspan could match the towering Mr. Volcker. But Mr. Greenspan won respect in responding to Black Monday, the stock market crash on Oct. 28, 1987. The Fed slashed short-term interest rates, pumping billions of dollars into the banking system. Within months, the stock market resumed its upward climb.

Lesson learned: decreasing short-term interest rates causes the stock market to go up. Perhaps, but maybe not.

But where did the billions of dollars that were pumped into the banking system come from? Did all these billions of dollars come from market investors who bailed the market before they lost everything?

John Williams Shadow Government Statistics web site suggests a slightly different interpretation of how Greenspan et. al. "solved" the 1987 stock market crash.

Systemic changes were introduced during the Reagan administration to boost reported GNP/GDP growth on a regular basis. The wildest manipulations, however, happened at the time of the 1987 liquidity panic. In addition to intervention in the futures markets by the New York Fed to help prop the stock market after the October 19th crash, direct and heavy manipulation of the trade deficit data, under the direction of the Federal Reserve and U.S. Treasury, was used in conjunction with massive currency intervention to help bottom the dollar and to contain the currency panic at year-end 1987.

Perhaps the wrong lessons were "learned." While reducing the interest rate and increasing the money supply appeared to "jump start the stock market," the Greenspan game plan merely propped it up. Reducing the interest rate by fiat, and increasing the money supply, again by fiat, failed to address any underlying systemic weaknesses.

The political lesson "learned" was that the financial system could be gamed to political advantage. Here are some more examples from John Williams:

As former Labor Secretary Bob Reich explained in his memoirs, the Clinton administration had found in its public polling that if the government inflated economic reporting, enough people would believe it to swing a close election. Accordingly, whatever integrity had survived in the economic reporting system disappeared during the Clinton years. Unemployment was redefined to eliminate five million discouraged workers and to lower the unemployment rate; methodologies were changed to reduce poverty reporting, to reduce reported CPI inflation, to inflate reported GDP growth, among others.

And of course, not to be outdone by Clinton:

The current Bush administration has expanded upon the Clinton era initiatives, particularly in setting the stage for the adoption of a new and lower-inflation CPI and in further redefining the GDP and the concept of seasonal adjustment.

All of which might well explain why, according to Richard Clarke, in Against All Enemies, President Bush's foremost concern after 9/11 was that the markets should open the next day.

So long as the health of the nation, and its financial well being is defined in terms of the DJIA (recently reconstituted to reflect the subtraction of AIG and the addition of Kraft), itself a fictitious number, and the GDP, another inflated figure, then we can all be happy because the "economy is growing" on some macro level.

Are you happy?

I'm not.

One big steaming dungheap that should be leveled

At Counterpunch, an outraged Mike Whitney writes:

Does it concern the members of congress at all, that the present financial crisis was brought on by the proliferation and sale of trillions of dollars of mortgage-banked garbage which were fraudulently represented as Triple A rated bonds by the very same people who now claim to need unprecedented and dictatorial powers to fix the problem? Or are they more worried that the steady torrent of contributions which flows from Wall Street to congressional campaign coffers will be inconveniently disrupted if they fail to ratify this latest assault on democratic governance? The House of Representatives is one big steaming dungheap that should be leveled and turned into an amusement park instead of a taxpayer-funded knocking shop. What a pathetic collection of cowards and scumbags.

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Paulson's plan to revive the banking system by buying up hundreds of billions of dollars of illiquid mortgage-backed securities (MBS) and other equally poisonous debt-instruments; ignores the fact these complex bonds have already been "marked to market" in the recent firesale by Merrill Lynch. Just weeks ago, Merrill sold $31 billion of these CDOs for roughly $.20 on the dollar and provided 75 percent of the financing, which means that the CDOs were really worth approximately $.06 on the dollar. If this is the settlement that Paulson has in mind, than the taxpayer will be well served. But this will not recapitalize the banks balance sheets or mop up the ocean of red ink which is flooding the financial system. No, Paulson intends to hand out lavish treats to his banker buddies, while interest rates soar, pension funds collapse, the housing market crashes, and the dollar does a last, looping swan-dive into a pool of molten lava.

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One minute everything is hunky-dory; the subprime meltdown is "contained" and "the fundamentals of our economy are strong".(Paulson) And, less than a week later, congress is forced to surrender their constitutionally-mandated right to oversee spending in order to forestall economic Armageddon. Which is it? Or is the real objective just to keep the country on an emotional teeter-totter long enough for all state-power to be subsumed by the Wall Street Politburo?

Quick-'n-easy explanation for the outcome

I've posted my concerns about the GOP stealing elections before. And now Mark Crispin Miller has written an article that hurts my head. Key grafs:

In fact, the only way that Palin and her doddering partner can prevail in this election is by stealing it, as Bush and Cheney did (both times). Certainly the ground has been prepared for yet another stolen race, Bush/Cheney's party having made enormous strides in sabotaging our election system (while the Democrats just sat there, whistling). Now, from coast to coast, it's far more difficult (for Democrats) to register to vote, and far more difficult (for Democrats) to cast their votes, while countless (Democratic) voters have been stricken from the rolls, through purges carried out by the Department of Justice.

Thus Bush's government has legally diminished the electorate (the Roberts Court approving every step). Meanwhile, the regime also continues to suppress the (Democratic) vote illegally, either through voter "caging" prior to Election Day--or, far more effectively, by fiddling with the numbers electronically at every level, and/or simply dumping countless names (of Democrats) from the electronic voter rolls, and/or putting far too few machines in (Democratic) polling places, and/or disinforming (Democratic) voters as to when and where to cast their votes, and/or simply scaring (Democratic) voters into staying home.

That is what it takes to steal elections in America--all of that, and also something else: a quick-'n-easy explanation for the outcome. For if those final numbers are surprising, there must be some rationale that can (apparently) account for them. And that is why the Bush machine put Sarah Palin next to John McCain. By arousing the hard core of vocal Christianists, they prepared the ground for the eventual redeployment of the same canard with which they justified their last unlikely "win": that millions of believers did the trick.

Indeed, it was not just the choice of Sarah Palin, but the whole convention, that was clearly calculated not to pull in undecided and/or independent voters, but to get the fringe alone to stomp and holler for the ticket. The party platform--crafted under the command of Christianist election-rigger J. Kenneth Blackwell--is a (literally) scorched-earth "faith-based" document, calling even for a ban on stem cell research in the private sector. And the convention spectacle itself was basically one long display of cultural resentment, with lots of loud, self-righteous jeering from the stage and on the floor (with an epic show of ridicule by that fine Christian, Rudy Giuliani).

A great chance to re-assert Congressional authority and relevance

Posting at The Left Coaster, Paradox makes some astute and compelling points, arguing that now is NOT the time to ram legislation through to bail out the Republican Party BECAUSE legislation produced "fast and on the fly" is generally terrible, and we have overwhelming evidence of this administration's incompetence.

As a general rule anything Congress produces fast and on the fly is terrible legislation. As the Patriot Act so aptly demonstrates, out of nowhere vast powers and discretion were handed over without any deliberative thought or legislative processes at all. Legislation needs time to craft carefully, yet the panicked Bush administration is demanding what possibly could be a trillion dollars worth of legislation in just the next few days to save the global financial industry.

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The whole political and ideological structure of conservatism lies in total ruins before us. Vast amounts of money and policy are at stake in somehow trying to clean up the incredible stinking mess, yet Bush and the Republicans are demanding all of the money to let their market philosophy off the hook without any new rules or safeguards in place, just hand over all of the dough now.

Now is not the time to argue how we got here, right, how convenient that if we don’t hand over our future for the next term you’ll put a gun to our head and say the world financial system will crash. Y’all said Saddam was the greatest threat ever, why should I believe you now?

Here is a great chance for Pelosi and Reid to re-assert Congressional authority and relevance, they don’t have to obstruct, not in the least, just not be lead by the nose to slam the little people with no accountability and no financial environment change moving forward. If in fact some huge bailout happens in the next forty-eight hours we can be precisely sure that has in fact happened.

Okay, so the situation is bad now. Don't make it worse simply for the sake of doing something quickly. PLEASE, Pelosi, Reid - take note.

My cynical sixth sense tells me that the republicans WILL politicize the issue. (What a surprise.) They will come up with a hastily drawn up scheme (perhaps incorporating crap they've wanted to get passed for years) and scare the democrats shirtless by threatening to accuse them of playing politics with the economy should they not acquiesce. We WILL get some crap legislation that will create FAR more problems than it will solve.

Isn't it nice?

Blogging at The Left Coaster, Turkana asks an important question, that begs its own answer.

Isn't it nice how there's always money for wars of choice and corporate bailouts, but never for less expensive indulgences such as education and health care? This government is not of, by or for you.

Unqualified to deal with economic realities of this nation

Michael Klare, writing in The Nation, analyzes republican V.P. candidate Sarah Palin's credentials to govern and finds them woefully wanting:

The question thus arises: how does Palin's experience as a maestro of petropolitics bear on her candidacy for vice president? To begin with, it should be clear that she has nothing in common with the leaders of any other state. Although it is true that Texas produces more oil per day than Alaska, Texas is no longer a petrostate, since its economy has become so much more diversified. Alaska is virtually alone in possessing a large (oil-supplied) state budget surplus--now about $5 billion--at a time when most states and the federal government are facing massive deficits and citizen groups are rising up in fury at the prospect of budget cuts. Palin is simply unqualified to deal with the demanding economic realities of any nation that is not a petrostate.

Second, Palin's only real nitty-gritty legislative experience is in measures aimed at expanding oil and gas production, to the virtual exclusion of other factors, including the environment. Although critical of the cozy ties between her GOP predecessors and Big Oil, Palin, like them, views Alaska as an unlimited source of raw materials to be exploited for maximum economic benefit, much like the leaders of comparable petrostates (Kuwait, Nigeria and Venezuela). She says she cares about the environment, but her support for drilling in ANWR and her eagerness to push the AGIA pipeline through forests in Alaska and the Yukon suggest otherwise. We can only assume that, as veep, she would favor similar policies in the Lower 48, entailing more drilling, digging and pipe-laying in environmentally sensitive areas.

Finally, much like the leaders of other petrostates that depend on oil sales to fill government coffers, Palin is leery of efforts to promote renewable sources of energy and other petroleum alternatives--the exact opposite of running mate John McCain's proclaimed objective and that of most members of Congress. At a meeting of the National Governors Association in February, Palin argued against providing subsidies for alternative energy sources, claiming that domestic sources of oil and gas--many located in Alaska--can satisfy the nation's needs for a long time to come.

Could this be the turning point?

In a hard-hitting editorial from The Nation:

Only when the press decides to take its job--and the job of US president--seriously will this election see a debate about the crucial economic and foreign policy issues at stake ...

Only in a personality-driven, contentless climate will John McCain be able to pass off his two-faced promises of reform as a populist crusade. Railing against "multimillion-dollar payouts to CEOs," McCain now promises to bring "regulatory oversight" to Washington and "transparency and accountability to Wall Street." But his rhetoric is just lipstick on a pig. ...

Senator McCain--along with every Republican and Democrat who pushed financial deregulation--is responsible for today's economic woes. McCain voted for the Gramm-Leach-Bliley Act, signed by Bill Clinton in 1999, repealing the Glass-Steagall Act, which since 1933 had kept a wall between commercial and investment banks. When that wall came tumbling down, and when the Internet bubble burst, the housing frenzy took off, as financiers sought new ways to create paper profits.

As for the press, its chance for redemption is here, in the presidential and vice presidential debates, the first on September 26. It must put questions about the economy center stage: What has caused this crisis? Does it signal the failure of market fundamentalism, and if so, what is the alternative? What role did deregulation play in it, and what role should re-regulation play in forging a way out? Why does the government intervene when financial institutions fail but do so little to help jump-start the real economy when there is deepening economic pain for ordinary people? What do you plan to do about America's spiraling trade deficits? How will you transform the economy to ensure that all Americans enjoy the benefits of sustainable economic growth?

A virulent form of Western self-delusion

Writing in The American Conservative, John Laughland explodes some myths of "democracy" in Georgia:

As soon as he seized power, Saakashvili’s regime unleashed an orgy of arrests of officials. In the name of that old Communist chestnut, an “anti-corruption campaign,” hundreds were rounded up. For months, Georgians were treated daily to live broadcasts of ministers, officials, and judges being bundled into police cars in the middle of the night. No doubt some Georgians relished the sight of the mighty falling, but many probably feared that one day they might get the 3 a.m. knock on the door themselves.

This was all lapped up by Saakashvili’s cheerleaders in the Western media. The Georgian president has indeed achieved extraordinary success in presenting his fiefdom as a Jeffersonian paradise. This is partly due to Georgia’s use of operatives in Washington, such as John McCain’s foreign-policy adviser Randy Scheunemann, and a PR firm in Brussels. But more importantly, it is the result of a virulent form of Western self-delusion. Faced with seemingly intractable domestic problems, in which different political actors have to be balanced, Western states like to indulge in occasional but dangerous flights of foreign-policy escapism. We imagine that we can free subject peoples with our bombs. The image of a victim nation has now become an easy psychological trigger that can be applied indiscriminately to Bosnian Muslims, Iraqis, and now Georgians. These unknown peoples and nations are but a blank screen on which we project our fantasies. Our image of them says much more about us that it does about reality.