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Discussion in 'Financial Cents' started by Tango3, May 30, 2008.

  1. Tango3

    Tango3 Aimless wanderer

    (Wouldn't want any body hurting themselves....)
    James howard Kuntslers'take on the economic sheit storm:
    bernanke "far from normal" (page2)
    sorry(clusterf*** nation) linky no worky.

    "Far From Normal"

    My new novel of the post-oil future, World Made By Hand, is available at all booksellers.
    Those were the words that Fed chairman Ben Bernanke used to describe the financial markets (and by extension the economy) these heady spring days when everybody else with a rostrum, it seems, has pronounced the so-called liquidity crisis contained. There's a great wish for American finance to return to business-as-usual -- raking in fantastic fees for innovating new modes of tradable paper, and engineering mergers and buy-outs that generate huge fees plus $100 million kiss-offs for corporate CEOs in the noble struggle to dismantle America's productive capacity -- but apparently events are still out of hand.
    The Federal Reserve itself has been instrumental in promoting abnormality by doing everything possible to prevent the work-out of bad debts in the system. Since money is loaned into existence, and loans are debts, the work-out of bad debt suggests the discovery that a lot of money has disappeared -- which is exactly the case. The Fed has postponed the work-out by sucking up truckloads of impaired, untradable securities in exchange for loans to giant banks who don't have enough cash on hand to pay their janitors.
    Personally, my theory has been that the specter of peak oil pretty clearly implies the inability of industrial economies to continue producing real wealth in the customary way. In the face of this, either consciously or at a more mystical level, the worker bees in banking recognize that, in order to maintain their villas in the Hamptons, money has to be loaned into existence some other way (than in the service of industrial productivity).
    We've tried just about everything else. There was the so-called service economy, an attempt to replace manufacturing with hamburger sales. Then there was the information economy, in which work would be replaced with knowing about stuff. Then there was the tech thing, which was about bringing internet companies that existed only on the back of cocktail napkins to the initial public offering stage of capitalization -- which allowed a few-hundred-or-so thirty-year-old smoothies to retire to vineyards in the Napa Valley, while hundreds of thousands of retirees lost half the value of their investment portfolios. Then there was the housing boom, which was all about the creation of more suburban sprawl under the theory that houses (or "homes" in the jargon of the realtors) represent an obvious sort of wealth, and therefore that using houses as collateral would allow humongous sums of money to be loaned into existence -- along with massive fees for structuring the loans into bundles of bond-like thingies.
    This has all failed now because the racket went too far. Every possible candidate for a snookering got snookered. Too much collateral for which there were no takers went into the ground. The insane run-up in house values made a downward price movement inevitable, and as soon as the turnaround happened, it fell into the remorseless algebra of a deflationary death spiral. More importantly, however, this society ran out of tricks for loaning money into existence and instead began to experience the pain of money thought-to-be-in-existence being defaulted into a vapor -- and worse, these defaults led to logarithmic chains of money destruction in its places of origin, the investment banks that had created the racket.
    The important part of this is that the money is gone. What makes matters truly eerie is that the "bubble" in suburban houses has occurred at exactly the moment in history when the chief enabling resource for suburban life -- oil -- has entered its scarcity stage.
    The logical conclusion of all this is not what the American public wants to hear: we have become a much poorer society and are now faced with the unavoidable task of making major changes in how we live. All the three-card-monte moves at the highest level of finance lately amount to an effort to avoid the unavoidable, acknowledging our losses. Certainly the political fallout of all this will be awesome. But it's not about politics, really. It's about the entire society's inability to form a workable new consensus of reality.
    It's hard to predict how long these institutions at the heart of our economic system can linger in the "far from normal" limbo of pretending that money has not been defaulted out of existence. Since the same process is underway in Great Britain and Spain, places beyond the control of Bernanke, Secretary Paulson, and the Boyz on Wall Street, and since actions and reactions there will affect the destiny of money here, its hard to escape the conclusion that we're at most months away from the brutal recognition that Wall Street has managed to bankrupt itself (and, by extension, the United States). This is dark heart of the matter of which no one dares speak.
    Meantime, on the ground, every mook and minion in the land sees the gas pumps levitate beyond the $4 hash mark, and notes with bugged-out eyes the double-digit price stickers on common supermarket items, and feels the rush of blood from the extremities when some check-out clerk at the WalMart declares that a certain proffered credit card is maxed out, and some strangers in overalls -- the neighbors say -- managed to hot-wire the GMC Sierra in the driveway, and took it away....
    The candidates for president will have a lot to talk about. I wonder if they'll dare to.

    May 19, 2008 in Commentary on Cur

    A Real Freak Out

    Note: This is the official publication week of my new 'post-oil' novel, "World Made By Hand," a vivid depiction of life in The Long Emergency. Visit the book's website:

    Things are getting very weird very fast -- and will probably get even weirder, faster, as the train wreck of bad debt meets the Saint Paddy's Day Parade of bacchanalian excess at the grade-crossing of destiny. The train is carrying America's financial system, but the engine driving it is peak oil, because declining energy resources necessarily means declining capital wealth -- and declining value of all the institutions, instruments, and markers that denote that wealth or hope to profit by trading in it. The fiasco leads straight to the necessary reinvention of American life on other terms and by other means.
    I've maintained for a long time that, even among those who recognize we have a big problem, there are many impediments to imagining a credible outcome. One thing I've noticed is that in any given public meeting (or lecture hall) you can divide participants into two groups: those who believe we will 'high-tech' our way out of this predicament; and those who believe we'll organize our way out.
    I don't subscribe to either point of view, strictly speaking. Both POV's assume that there will be an orderly transition between where we're at now and where we're headed. They're tainted by the kindergarten ethos of entitled happy endings and outcomes, which has been the chief operating system for the Baby Boomers, a therapeutic bias for placing 'good feelings' ahead of reality -- which also has obliterated the tragic sense of life that acts as the only brake on humanity's inherent hubris.
    Ultimately, in my view, the issue of what happens next will be settled not by the fantasies of the algae-biodiesel geeks or the wishful thinking of the sustainable futures organizers, but by the natural, self-organizing properties of a society responding 'emergently' to new circumstances. One of the implications of destiny-as-emergence is the probability that we will try any damn fool thing besides the right things to keep the old game going for a while -- even in the face of obvious failure.
    I'm sure our political leaders will mount a campaign to rescue the futureless infrastructure of suburbia. It will necessarily be an exercise in futility. But it has already started. That's what the swindle of ethanol has been all about. And the touting of hybrid cars, and the flimflam of "energy independence." Even the "environmental" crowd" squanders most of its attention these days on how to keep all the cars running on something other than gasoline. They don't question the assumption that we will remain a car-dependent society.
    As much as I loathe the suburbs in their grotesque late-stage efflorescence, I can understand why those stuck in them would wish to defend their misinvestments. I just hate to think of the political consequences when their disappointment catches up to the reality that the suburbs will not be rescued. And by that I mean not just the houses but the way-of-life associated with them and all its accessories, furnishings, and activities. Bewilderment will soon turn to rage out in the highway-strip-and-cul-de-sac empire.
    Now, apparently, we'll also opt for a bail-out of all those who tried to become rich by getting something for nothing at both ends of the Ponzi scheme called the housing bubble -- the "little guys" who signed mortgage contracts they could never hope to pay off, and the Wall Street playerz who bundled these hopeless contracts into fraudulent securities (and their enablers in the ratings agencies, plus the hedge fund smoothies who tried to cash in by using recondite algorithms to dissolve the risk associated with imprudent lending.) The bail-out is likely to accomplish nothing except the more rapid bankruptcy of government at all levels and a second Great Depression at ground level (worse than the first one).
    Over the weekend, the Federal Reserve engineered a $30-billion dollar Saint Paddy's day present for the JP Morgan bank by handing them the corpse of Bear Stearns. The object of the game is to prevent the "assets" of Bear Stearns from going to the auction block, on which they would be discovered to be nearly worthless, which would instantly render all similar assets held by the other big banks to be similarly worthless, and would result in a universal margin call that would pretty much unwind the hallucinated "wealth" acquired the past ten years.
    Despite the heroics around the fate of Bear Stearns, it looks like the financial system is tottering anyway. Perhaps the last trick left in the rescue bag will be the 100-basis-point drop in the Fed rate rumored to be announced tomorrow. It won't help any of the big banks, since their problem is holding liabilities in excess of assets. Almost certainly it would crater the US Dollar.
    The next thing in store for America, in my opinion, will be a rather new surprise: oil-and-gasoline shortages. While frightened money pours into the oil futures markets, driving the price up, strange behavior will start brewing in the actual physical allocation process. Imports of oil and gas to the US may not be as reliable as it had been when America seemed to be a solvent nation. The exporters may be changing their terms of doing business with us -- and that's nearly two-thirds of all the oil we need. The public would probably suck up oil price increases indefinitely, but shortages are going to be something else. A real freak out.

    March 17, 2008 in Commentary on Current Events | Permalink

  2. gunbunny

    gunbunny Never Trust A Bunny

    I can agree with that. I've seen vast tracts of farmland disappear and gigantic, no hugemongus, homes built out of little sticks and drywall. As long as they are built straight and square, that's all that mattered. No thought was given to traffic flow; and now shopping malls and businesses clog up roads with red lights making one feel as though they are held prisoner in their very own vehicles.

    I digress, I hate riding my bicycle. The mountains are a real pain-in-the-ass. There are still trucks on the road with the drivers (steering wheel holders, as I was told) talking on their cell phones, ready for the chance to flatten me stupid.

    I digress again, it seems that my garden hoe will be of greater use to me than a cell phone, my car, or my retirement accounts.
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