The “amen corner” has already spoken–President Obama has delivered another masterpiece in Egypt and the relationship between the U. S. and the Muslim world will never be the same.  Well, let’s take a deep breath and reflect on it in more depth.

To his credit, unlike the first two legs of his international tour in Europe and Latin America, during which his remarks were littered with confessions and apologies for America’s many transgressions over the past century or so and which was highlighted by a 50-minute dressing down from a Marxist thug, an insult which went totally unanswered by anyone in the U. S. delegation, the Cairo speech was much less demeaning to his country and much more relevant. 

It covered the gamut of the critical issues, from democracy to economic development to Palestine/Israel to Iraq to Afghanistan to women’s rights to religious freedom–a pretty comprehensive list.  And he was appropriately candid in his negative references to those who deny or justify the 9/11 attack and the Holocaust, as well as those who practice “violence” (his substitute for terrorism, a word not used in the speech) in the cause of claiming moral authority.  And naturally all of this was couched in terms of “a new beginning” for U. S./Muslim relations (meaning post-Bush, of course). 

So far, so good, and everyone is talking about the numerous applause interruptions.  And there were many, but a review of their prompting phrases reveals an interesting pattern–not one was prompted by a reference to a call for change in the behavior of the Muslim world; every applause line was a reference to what America will do to change its policies in and attitudes about the Middle East or to further support economic development in the region or to stop the growth of Israeli settlements or to close Gitmo or to a commitment that America will never go to war with Islam.  In fact, I could find no significant challenge to the Muslim world to modify its behavior or to condemn global terrorist jihad (another word that was not used) in any way.  The only possible exception was a suggestion that each culture should resist negative stereotypes of the other, a line that was heartily applauded. 

So what we had was vintage Obama–plenty of style points, smooth delivery, well articulated to convey the sense that things will be OK now that he is in charge.  We’ll see. 

But conspicuously missing from the speech was the truth about U. S./Muslim relations in any real depth, which he could have briefly outlined as suggested recently by Charles Krauthammer:  Five military campaigns in the past 20 years engaged by Americans on behalf of Muslims resulting in the liberation of the people of Bosnia, Kosovo, Kuwait, Iraq, and Afghanistan.  These efforts brought little gratitude, it should be noted, but were accompanied by hatred, assassination, mass murder, and economic attack, to wit: the assassination of our ambassador in Sudan, the Arab oil embargo, the murder of our ambassador to Lebanon, the attack on our embassy in Teheran and the holding of our hostages for 14 months, the bombing of our embassies in Nairobi and Tanzania, the attack on the USS Cole, and ultimately the attack of 9/11. 

There is plenty of evidence here that a state of war has existed between America and radical Muslim jihadists for about 30 years, for most of which time the mainstream Islamic world has been at best ambivalent and at worst complicit and enabling.

Likewise conspicuously missing from Obama’s presentation was any reference to the difficult choices that responsible Muslim leaders must make to bring the Arab Middle East into modernity.  He could have referenced Pope Benedict’s Regensburg Lecture of 2006, much maligned in the Muslim world for its alleged blasphemy, but in fact a textbook outline of how the choices made by Islamic intellectual and theological leadership over the centuries have resulted in an inability to reconcile the truths of their religion with those of reason, a critical ingredient that has produced the dominance of the West in scientific and economic development.  He briefly mentioned the Muslim role in paving the way for the European Renaissance and the Enlightenment, but the Muslim world was not a participant in either transformation, nor did it experience a Reformation or the Scientific Revolution. 

Nor was there any emphasis in the speech on the responsibility of Muslim leadership, particularly in the Middle East, to use its vast oil wealth to leverage its development, both economically and culturally, through the education of its young people and the cultivation of the minds of its women.

Beyond these omissions, there was the typical implication moral equivalence of Israel’s defense of its right to exist vs. the Palestinian right to its own state and the equivalence of U. S. installation of the Shah in the mid-1950s as a protection of American Cold War interests with 30 years of serial acts of war by Iran on the U. S.   

I wish the President well in his campaign to “change the image of America around the world”, whatever that means beyond “we’re not George Bush”, but the large majority of Americans still believe in American exceptionalism, which among other things means that, as George Weigel has so well noted, there is no alternative to U. S. leadership in the war against global jihadism, not only because the U. S. has the resources for the job, but because it is, or ought to be, the repository of the ideas, drawn from both faith and reason, that must shape that struggle.  I hope, but wonder if, Barack Obama understands or believes that or really knows the people he is leading.

There are two dates in early June that should be prominently remembered.  One, of course, is D Day, June 6, the day in 1944 when, according to Herbert London of the Hudson Institute, “the U. S. saved Europe from itself” on the beaches of Normandy.  I often wonder if our young people have a proper understanding of the sacrifices that we then asked and expected of our soldiers and their families, of what was at stake, and how easily there could have been a different outcome.  I wonder also whether or not our country could ever again have the perseverance to successfully prosecute such a total war to unconditional victory.  Let’s hope we don’t have to prove it, while being thankful that we then had a warrior class as well as a political class with the persistence to complete the job.

The other date is June 4, the 20th anniversary of the crushing of the uprising in Tiananmen Square, Beijing, in support of Chinese democracy, human and civil rights.  There is yet no accurate count of the large numbers of people who were killed as the Chinese army moved in to clear the Square of millions of Chinese who had gathered there in peaceful protest.  Why is this important to Americans?  One, because the crowds of people who began assembling over two weeks earlier were instructed and informed by the rhetoric of the American revolutionaries and “the proposition” expressed in our founding documents.  Their most prominent symbol was a replica of our Statue of Liberty.  Moreover, the rights that were demanded and for the appeal to which the assembled crowds were crushed should be the foundation for our continuing efforts to find common ground with the current Chinese regime.  The theme is individual freedom, and we should always be its champion, wherever it springs.  The current Chinese leaders might want to forget this anniversary, but we shouldn’t allow that, no matter how commercially engaged we might be or how much of our debt they own.

It appears that we have finally reached the tipping point at which commercial banking is headed toward becoming a cost-plus monopoly, with rate-based assets much like a public utility and very close to a nationalized industry.  Maybe not for all institutions, but I can envision a two-tiered system in which the 20 or so “too big to fail” entities fit the mold just described, with second tier status for regional and community banks.  What this will mean is a much different culture, temperament and mindset, much less oriented to capital formation, entrepreneurship and innovation. 

I predicted such an outcome over 20 years ago when I left commercial banking as a “refugee” of the banking debacle of the mid-1980s.  All that was necessary was another major crisis of the kind we are currently experiencing at a time when the political left is positioned to reconfigure the regulatory environment.  So now the planets are aligned for the next step, and you can see it coming in the discussions about the carryover Bush administration proposal for a single federal bank regulator with virtually no role for state authorities.  This would be a huge mistake, a violation of the principle of federalism that has served us so well for so long, but one can see a compromise in the making–a sole federal role for the “too big to fail” and shared federal/state regulation for everyone else.  The result will be a significant majority of commercial banking assets in the hands of what would soon evolve into a cost-plus public utility.  Let’s hope that’s the worst outcome and that there remains a largely deregulated and innovative second tier of independent banks under state supervision, and by all means reject what would be an even worse outcome, a much discussed global bank regulatory agency, heaven forbid. 

“Throughout history, what the political class has done is they have turned to the central bank to print their way out of an unfunded liability.  We can’t let that happen.  That’s when you open the floodgates.  So I hope and pray that our political leaders will just have to take this bull by the horns at some point.  You can’t run away from it.”–Richard Fisher, President, Federal Reserve Bank of Dallas, as quoted in the Wall Street Journal.

This kind of talk is obviously not what the nation’s current financial management wants to hear, which is why it’s a great idea to have an independent Federal Reserve with independent regional reserve banks and boards along with independent executives like Fisher who have a voice in monetary policy.  I hope he gets some help with this message, because I believe that all the signs point to inflation as our next big worry–not today or next week or maybe even next year, but certainly in the next two or three years. 

Look at some leading indicators of concern–a sharp uptick in Treasury bond rates as we prepare to sell $2 trillion (that’s with a “t”) in Treasury bonds this year; the prospect of a $1 trillion deficit with no conceivable way to finance it without the monetization of debt by the Federal Reserve; comments by Treasury Secretary Geithner that he wants China to exercise “greater exchange-rate flexibility”, which means a cheaper dollar vs. the yuan; the price of gold has recently bumped $1,000 per ounce; and comments by no less an authority than German Chancellor Angela Merkel rebuking the world’s central banks, most prominently our Fed, for “being too politically accommodating”. 

Federal Reserve Chairman Bernanke has recently made some pointed remarks himself, cautioning Congress about the ever growing projected federal deficits.  But let’s face it:  the Federal Reserve has severely undermined its independence from government fiscal policy over the past 6-12 months, and its involvement with the various bailouts makes it increasingly difficult to restore this independence.  It has a big decision to make at its upcoming meeting as to whether or not and by how much to increase its purchases of Treasury bonds.  It really seems to have no choice, given the market response to the recent auctions, which means that the monetization of the debt will continue as long as we continue to write hot checks to finance the Obama regime.   Not a great prognosis.