You Can't Monetize Self-Rightousness

January 31, 2011

Major market indices were mixed last week. The DJIA gained 0.72%, the S&P 500 decreased 0.76%, and the Nasdaq fell by 2.39%. Value stocks outperformed growth stocks. And the small cap index lost 4.26%. The 10-Treasury yield closed 8 points higher, closing at 3.41%.
Chinese President Hu Jintao arrived last week for a four-day visit. The state dinner in his honor, the first for a Chinese president since 1997, was a posh affair. One would hope. When your biggest creditor comes for dinner, you do not serve pizza. Unless you've ordered $907 billion worth.
President Hu's state dinner was Wednesday. Everyone of political significance was invited. That does not mean they showed up. In fact, much of our congressional leadership begged out.
House Speaker John Boehner, Senate Majority Leader Harry Reid and Senate Republican leader Mitch McConnell - three of the top four congressional leaders, skipped the dinner. Apparently, the thought of dining with the guy who has single-handedly sustained their deficit spending and allowed them to hang flat screens on the walls of their $14-trillion dollar hole was distasteful.
Not that Hu cared. Three bores does not a party make. And there were some heavier hitters in attendance. JPMorgan's Jamie Dimon. GE's Jeff Immelt. Jimmy Carter. Henry Kissinger. Barbara Streisand. And Jackie Chan.
Apparently everyone but our congressional leadership knows the value of a free meal.
We have important disagreements with China. Hu, however, is hardly the problem. He has been described by the Ambrose Evans-Pritchard as a "self-effacing man of Confucian leanings whose father was a victim of the Cultural Revolution, who fights a daily struggle against his own hotheads at home."
Hu is regularly at odds with a contingent of young military officers who increasingly resemble many of those in pre-WWII Japan. Hu is said to be a stabilizing force in a country that - like it or not - will continue to represent an increasingly vital part of the international trade and political dynamic. Rather than skipping dinners, perhaps we could find a less sophomoric means of achieving common ground. Helping ourselves by helping Hu. Thanking him for the loan.
But no. Our congressional leaders, who cannot agree on the weather, determine that this important state dinner will be the rare opportunity to agree on something. And deliver a lecture on moral governance.
The irony is not subtle.
Most agree that China will face problems in continuing its blend of capitalism and socialism. However, the Chinese have dealt with the recent economic meltdown more efficiently than we have.
Our system ensures individual liberty and a dynamic private sector. But our politicians are divided, intransigent and short sighted. Our democracy may have credence, but so long as our two parties remain divided and unwilling to compromise they will not be able to govern through beltway traffic, let alone difficult issues.
China may sometimes run roughshod over its people. But it has been able to navigate the economic crisis. And because China does not provide its corporations and special interest groups with the ability to use their wealth to manipulate the political process, its politicians are able to quickly and efficiently deal with pressing problems. Without consulting their bosses.
Oh, and Hu has so far loaned us $1 trillion. Was dinner asking too much?
China needs a lecture. But not from Boehner, Reid or McConnell. Until the Fed figures out a way to monetize self-righteousness, then these acts of moral indignation buy us nothing.
Boehner, Reid and McConnell better hope the Chinese keep paying the tab so that the service staff remains employed.
If Hu pushes away from the table, management may have to shut the place down. Stay tuned...

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