Watching the slow-motion train wreck of an economic system collapse unfold

Watching the slow-motion train wreck of an economic system collapse unfold
click pic to reminisce
Showing posts with label bad economy. Show all posts
Showing posts with label bad economy. Show all posts

why didn't we think of that?  

Posted by howard in nyc in , ,

obomney announces that he and the g-8 leaders have reached a consensus that they all will do more to promote growth and create jobs.

brilliant!  damn, someone should've come up with this months ago.  growth! that's the ticket.

austerity measures have resulted in collapse of governments in greece, riots in the streets of spain and italy, and ouster of the president of france in favor of an anti-austerity socialist. and the ability to retire the debts of these nations has not occurred.  in other words, austerity measures have fixed nothing.

so, next they'll try growth.  heh.

what can a government possibly do to promote growth and jobs?  specifically a government that is running deep annual budget deficits?

spend more money.

and where will that money come from?

they'll just borrow it.  and/or raise taxes.  or print the money.

these clowns already borrowed unprecedented sums and spent into the economy in the name of stimulating economic growth.  and they got a little bit of growth.  now the growth has ground to a halt in europe, and is likely to do the same in the usa.  the money they borrowed is still owed, plus interest.  the money they printed caused significant inflation of oil and food prices, sufficient to drag economic growth.

they are stuck.  cut spending and decrease deficits = economic stagnation.  borrow/print and spend = inflation sufficient to stagnate economic growth.

the short-term benefits of borrowing and printing have become shorter term and less effective each round.  here, in europe, and in china.

there is no good way out.  economic pain is inevitable.  all they can determine is the particular path to pain--inflation or debt default.

i wonder if they realize this, and are lying, or if they have managed to swallow their own bs and believe that if they just promote growth and job creation, the economy will be fine?

there is no magic 'growth ' button to push.  borrowing/printing more money will make things worse.  they have already demonstrated this reality, with the borrowing/printing of the past three years, and the subsequent inflation, stagnant job results, stagnant gdp growth and return to recession in europe.

excess debt must be paid off or defaulted.  deficit spending must stop when you have so much debt, no one will lend you any more.

growth financed with debt eventually fails.  eventually is here.  debt shrunk by printing money is accompanied by the inflation caused by printing money.

there is no 'solution'. the fruitless attempts at finding a painless solution are now farcical.  there is only the choice of what flavor pain we suffer.  

decaying into a police state  

Posted by howard in nyc in ,

If you want a vision of the future, imagine a boot stamping on a human face - forever.
~George Orwell, 1984

 
All photos courtesy of www.adbusters.org
The process is sadly well under way.  And I am throwing in the towel on the American people for ushering in the police state.  I’m not going to bother cataloging all the recent behavior, authoritative use of violence, lying rhetoric, or even to define what is a police state.  The line of events, from the patriot acts, the department of homeland security, the groping of children and senior citizens at airports, the wiretaps, rendition and torture, the expansion of wars and assassinations, up to the suppression of Occupation Wall Street protests, are part of the historic record.  As is the blatant serial betrayal and misuse of trust, granted the political leaders and perversely twisted against us, most obviously with wars and bailouts, as prequel to the inevitable misuse of trust in the police state the public had granted, and will have used against them down the future line.  No police state in history has ever acted otherwise, and the American one will not be the first.

A police state in the USA can only take hold with the acquiescence of the people.  That prerequisite has been met. Most recently reconfirmed with the acceptance of police violence in several cities, inflicted upon OWS protesters.  Acceptance being the absence of tens of thousands of citizens in the streets, demanding arrest and prosecution of the police officers who committed violence.  But like the bankers, mortgage brokers and other criminals, these have gone un-investigated and uncharged.  The number of American people demanding justice is miniscule.

My former comfortable conclusion that America could never become a police state did not rest on naiveté or swallowing myths from school days.  It rested on what I saw as I moved from youth into middle age; recurrent, consistent evidence of the American citizen's love of personal freedom and intolerance for encroachment upon that freedom.

For example, back when the Clintons were selling their health care run by the insurance industry scheme.  (Btw, where the Clintons failed, the insurance companies won.  They run the show completely, and pocket billions in profits each quarter.)  Anticipating developing technologies, the government planners hatched a plan for a health care information and coverage card.  It would be like a social security card; it would be your 'proof of insurance', provided by the government, and it would a few years later be able to carry all your essential medical history on this credit-card type document.

People hated it.  Overwhelmingly. So rapid and fierce the objection by the masses, the republican opposition didn't even have time to get in front of the issue for political points.

A couple of pundits recognized the reason this idea was so abhorrent to ordinary Americans.  They saw this would be a de-facto national identity card. Identity papers.  Something routinely carried and produced on demand by authorities in most western democracies.  But not the USA, dammit.

Deep in the gut of the typical American was a rejection of the concept of a national id card.  Despite the ubiquity of the social security number used for identification, how many people actually carry their card?  How often is the card itself demanded?

But that gut feeling has eroded.  Slowly, insidiously.  The zeitgeist of the American people is completely different than just a few years ago, regarding the equation of security and liberty.  (An equation, which as ben franklin promised, never ever balances.)  In the early stages of that change, I thought it impossible to go much further.  But further it did.

Things today are way fucking different.

People are cool with government wiretaps.  People are cool with any and all manner of anti-terrorist action.  Even torture.  People are cool with mass violence and death in the deserts above oil fields far from here.  And now, people are cool with mass numbers of riot police to quash peaceful protest, dissent and free speech.  For complete bullshit reasons (sanitation; curfews and time limits numbered in weeks; hurting small businesses and normal commerce; any other crap Bloomberg’s lawyers come up with).

The tolerance of stupid failed wars, so many historians and philosophers have told us, goes hand-in-glove with acceptance of decreased domestic rights.  Now we are seeing this linkage for ourselves.

Real men don't pull hair
We still enjoy a tremendous degree of personal freedom in the United States.  Setting aside the economic aspects of freedom, the necessity for some degree of economic security for personal freedom to have any meaning, we still have it damn good.  If you compare our liberty to that of the rest of the world, today or looking back in history.

But, our standard is our own history.  Our own recent history.  Most of the current government infringements on our free expression and movement are small and subtle.  But the direction is steady, and the movement is gaining momentum.  Not in a good way.  While the quantity of perceived freedom for the masses of Americans has eroded only slightly, even a hurricane announces itself with but a few raindrops and a moderate wind gust.

The riot-gear clad cops are dispatched not just for drug busts.  Not just for 'riots'.  But for small, peaceful protests.  Frequently for the purpose of intimidation, nothing more or less.  Airport security is engaged in behavior control, ham-handed enforcement of unquestioning obedience, having nothing to do with stopping a terrorist bomb.  Now, tactics of the powers-that-be include centrally planned suppression of the OWS movement. Possibly by the justice department/department of homeland security themselves

But the escalation of police and security acts against the populace is only the symptom.  The sickness is the acceptance of the creeping police state.  The people are cool with it, by and large.

There is exactly one force and one force alone that can stop or reverse the erosion of freedom by authorities.  The people.  The masses of people.  Because left to their own devices, those in power will always choose control over freedom.  And they have been left to their own devices too much for too long.

The suckers who still vote had no trouble re-electing all the clowns who extended the patriot act.  Even so-called 'tea party' candidates who liked the idea of government security powers, voted 'yes' and got returned to congress.  The percentage of people who are not troubled by squads of riot-gear clad thugs swinging batons on peaceful protesters.  That is what counts.  That is the one and only way the police state growing and festering in the United States of America can possibly continue.
If the American people allow it.

Well, the American people are doing far worse than passively allowing the police state to grow.  They are actively approving the suppression of OWS.  Not just a few Americans.  Millions.  Fucking millions.  Maybe even a majority.
Approving the use of riot cops.  Applauding.  Happy with the fact, while befuddled why anyone (like me,) would be disturbed, would think bulldozing the encampments are a big deal.

I never thought Americans would nod approvingly at the things that are commonplace today.  I don't understand why this change in the American psyche came about, even though I have closely and carefully watch it happen.  It makes me sad.

Yes. A fucking tank.  At an 'Occupy' protest.
I suppose comfort and freedom from troubling thoughts has become so necessary to my fellow citizens, that rampant consumer consumption wasn't enough to satisfy the need for comfort.  Order, routine and security from discomfort became more important than rights long ago taken for granted.  Quaint rights like freedom of assembly, of speech, of religion (if you are a Muslim in downtown new york and own a building), to carry a gun, to not be stopped and frisked, rights that people delusionally believe will only be infringed upon for 'other people'; the criminal, the 'terrorist', the political loon or extremist.  Rights people cannot imagine being denied for them.  Completely disconnected in their mind from a little feel-up at the airport, or having to show ID papers to walk down a particular street.

People are more infatuated with stomping on the rights of 'others' who are deemed undesirable, than they are in love with rights for everybody.  They think their personal rights are immune.

Heh.  They got a nasty surprise coming.

So many people wonder how the civilized, politically aware German population allowed the change in their society ushered in by the Nazis from 1933-'39.  Fuck, we Americans of 2011 are so much worse than the German people.  So much worse.  Empty of any common sense or insight regarding the freedom that is the lifeblood of our nation.

By 1933, Germany had suffered their humiliating defeat of 1918; economic privation as a result of the peace treaty; a crippling hyperinflation and currency failure in 1923; ten years of economic depression before The Great Depression even started. Year by year, things went from horrible to much worse; a decade of escalating political violence, deadly violence, on the streets of major cities, political assassinations numbering in the tens of thousands.  And that violence was not monopolized by the rising brown shirts; communists, socialists, monarchists, police forces, private militias, public militias were all shooting and killing one another in the streets.

Hard to blame a people drained by fifteen years of unemployment, economic depression, a failed money system, and blood literally running in the streets, that they were willing to trade a few freedoms in return for some long-denied security.

What’s our fucking excuse?

Traffic was backed up on one day for a big protest march?  Those dirty hippies have taken over one of a hundred parks in your city?  Shit, the cost of police overtime is at least a rational concern when your city is already borrowing to pay pensions and salaries and keep services operating.  And you can be forgiven asking the next question, 'are so many cops working overtime really needed to watch those OWS campers, after a few weeks of peacefully just sitting there'?

Exactly what are you getting in return for allowing (or cheering) the violent suppression of protest by riot cops?

Comfort.  Routine.  Not having your normal evening news entertainment 22 minutes punctuated with people saying and doing weird things and drumming.  That’s all.

Bad trade, America.  There hasn't even been a real riot.  A few broken windows in Oakland; one cop in NYC gets hit in the hand with a piece of glass, and three others are splashed in the face with vinegar.  That is it.  And crass attempts to crush dissent, completely illegally, in complete violation of the letter and the spirit of the bill of rights and hundreds of court rulings over the year, all cool.  No problem, in fact, I’m glad my mayor put things back to normal.

Heh.  The turning upside down of the rule of law in the USA had been just some people are immune to the law, and can steal billions. While the rest of us suffer irrational punishment for petty theft or possession of a joint.  Now, people completely in compliance with the law, and following police commands are arrested and charged.  Not just upside down, but completely twisted and distorted.  Of course a police captain is not charged with assault when he pepper-sprays two women doing exactly as they are told; but they are charged with resisting, disturbing, hell, they'll probably have to pay for the pepper spray.

Whether OWS fades away (I doubt it) or grows and thrives (I think likely for several months, but the suppressors will just ramp up their violence and bullshit) is not what I am talking about.  Irrelevant.

The quiet acceptance by millions of Americans (and active approval by millions more Americans) of the suppression of political dissent, with violence, has convinced me.  The decay into a police state is not gonna stop.  A done deal.  I’m crying 'uncle'; throwing in the fucking towel; invoking the mercy rule; no mas, por favor.

Hope he earned another green ribbon for this bit of detective work
It doesn't matter what your personal definition of a 'police state' may be.  A reasonable definition can be applied today, and has been by some friends and pundits.  Doesn’t matter.

Even if the economic catastrophe hits this Monday morning, and causes the slumbering masses of America to wake up and smell the reality, it is too late.  The mentality of the American people has already allowed the advancement on the road to a police state to go too far.   The trend toward sacrificing freedom for the (bullshit) promise of security can't be reversed or undone by anything short of millions of people in the street in opposition.  And those millions ain't gonna take to the streets until they are starving; and that battle will be unnecessarily more difficult and more bloody because we let the enemy arm themselves so well (on our dime).  And gave them ample time to practice.

Sure, I can still write this, without risking arrest and punishment today.  We ain't there yet by my definition.  But that dude who the other day said out loud what a Molotov cocktail can do to a crowded Macy’s store wouldn't have been arrested and punished for those exact words in the exact same context ten years ago.  A 2004 protest of a hundred thousand people in New York City against the Iraq war or the republican convention was met with less violence than an encampment of 200 people in 2011.  Shit has changed significantly, rapidly, and irreversibly.  Until people wake up.

And folks are still sound asleep.

it's not your job to be as confused as Nigel  

Posted by howard in nyc in , ,

9/9/2011  17:55

yet, our leaders seem to be quite confused this week.

the deficit and the debt ceiling were the recent crisis to be solved.  but now, spending $400 billion is imperative to create jobs.  we must cut spending, so important is this need, a congressional supercommittee has been created.  but we must increase spending, right away.

that was president obama, speaking to congress.  he is not alone.  the ben bernanck was confused.

even though he specified severe unemployment, fallen housing prices, high gasoline and food prices and high household debt as current problems.  yet he was puzzled as to why consumer spending is so weak.

now i have yet another reason for unease.  i have been uneasy, dysphoric, and downright depressed because i see the economic calamity unfolding as, well, calamitous.  but nearly everyone around me in america sees things quite differently.

i figured the folks nominally in charge told a bunch of lies (for our benefit, of course) while understanding the score.  the true state of the economy.

now, i am not so sure.  particularly the ben bernanck.  i have vacillated between thinking him evil, knowing exactly what he is doing serving the banks and speculators, and thinking him incompetent, frantically pulling levers and spreading liquidity, not understanding why his drastic monetary stimulus has failed to promote sustained economic growth and prosperity.

the way he sounded yesterday, now i'm pretty sure it is the latter.  he did everything his lifetime of academic work promised would prevent economic depression and deflationary collapse.  he printed up a buttload of money.  he did everything possible to recapitalize insolvent banks.  he manipulated interest rates and the cost of credit to near zero.  he weakened the dollar as far as he dare.  and all he got was energy and food inflation, severe enough to negatively drag on the economy.  no decrease in unemployment, no increase in exports, no GDP growth once QE2 ended.

no wonder he looks and sounds like a broken man.  and no wonder he has nothing new to offer, despite plenty of opportunities (stock market volatility, big jackson hole meeting).  i am figuring we will get little more than words out of the ben bernanck and the fed over the next year.  because the cost of aggressive monetary policy (printing money and buying treasury securities or other 'assets') has become too great--inflation of oil and food prices, weakening of the dollar toward the breaking point.

even if things get so desperate that he tries QE3, those costs will reassert themselves even more quickly than in previous turns.

as for the other folks who are supposed to be less confused, the president and the leaders of the congress bounce wildly from spending to cutting, in their rhetoric.  the third rail of politics is no longer social security, but it is now raising taxes.  woe to anyone standing for election who dares mention increasing taxes, on rich or middle class.

the superficial nihilism of the gop is fake; no one loves big government more than a republican holding office.  they talk 'starve the beast in the cradle' then when they hold power, they nurture the beast on borrowed money, pushing the due date off to the future.  and the superficial populism of the democrats is equally fake; their true loyalty is to the big campaign contributors and to the status quo.  they push off into the future the recognition on the part of their base that they have been bought off temporarily by 99 weeks of unemployment bennies on the wall and 1 in 7 americans being fed with food stamps is a holding action, not true populism.

but mr. obama, railed all summer about the need to cut spending.  even social security spending.  now, he insists $400 billion in new spending is just the ticket.  and he'll explain in 11 days how he will pay for it.

yeah, sure.  one truism, proven over and over again.  the spending always happens.  the paying for it in the future, never happens.  that is how the deficit doubled since the last presidential election (didn't he promise to cut the deficit in half?)  that is how the unfunded liabilities of the government swelled to $100 trillion with a T.  that is how the literal debt, measured by the treasury bond market, grew to $14 trillion so quickly.

an economy built upon credit, once it begins to fall apart because of too much accumulated debt, cannot be repaired with more debt.  an economy built upon consumer spending and consumption, once it tops out because of too much consumer debt, cannot resume growing with more consumer borrowing.

why is that so confusing?

i nearly forgot.  greece is gonna blow up within a matter of days/weeks.  this could spread slow or quick.  but spread it will.  karl thinks "It's Over" and he may be right. 

and here are three good 9/11 anniversary articles.  the first sums up my thoughts precisely.

inflation; deflation; duck season! rabbit season!  

Posted by howard in nyc in , ,

9/3/11  17:50

some of my best lessons have come from people with whom i seriously disagree.  i am often rewarded when i read/pay attention to viewpoints and ideas provided by smart, thoughtful people i think are wrong about one thing or another, large or small.



Jesse, on his wonderful daily blog, Jesse's Café Américain is one of those.  kinda sorta.  there is precious little of his economic and market analysis and opinion with which i disagree.  but, he is an 'inflationist' (horrors!).  no, he does not believe inflation is a good thing; he anticipates the resolution of our economic collapse will be inflation.  he proffers that the commodity inflation we have experienced was an entirely expected result of conditions and behaviors by leaders over the past few years.  he called it before and during QE1 and QE2.  mad props for his profferings.

he writes a wonderful piece today, entitled About Those Falling Interest Rates and the Fallacy of Monetary Deflation at the Zero Bound

folks spend time arguing inflation vs deflation without ever clarifying their definitions of or understanding of the terms.  jargon, technicalities, and lack of agreement over simple historic events confound defining and mutual understanding of the very definition of these words.  even once those chores are complete, inflation and deflation are difficult factors to understand, much less to forecast.

money is an even more difficult, complicated concept.  juxtaposed by the apparent simplicity of the question 'what is money'?

Jesse begins with addressing what is and what is not money, in the context of the events of the last few years.  i appreciated that he and others do not consider credit and debt to be money (many other folks, including me, do so consider).  but i did not understand why he did not consider credit to be money.  until i read his piece today.

Let me give you three things to think about.

First, credit is NOT money. Money can be created from a number of sources throughout an economy. The expansion of credit at the business and banking level, often involving savings and fractional reserve leverage, is the major organic source of money, the point of its creation from economic activity or transactions themselves.   It is the most utilitarian form of money, because it is directly tied to what one might ordinarily expect to be productive investment and economic benefits.

Sometimes this mechanism is distorted and abused, in the case of fraud or reckless lending for speculation as an example, and then the money supply begins to decouple from the real economy.  It is the job of the regulators and the Fed to control this.

Like gold or any other asset or liability, credit must be transformed into a utilitarian form of wealth, or money, in order to effect the exchange. You may HAVE a million dollars in credit somewhere, but at some point someone must agree to transform that credit into actual money for you to use it. If an unused million dollar credit line expires, we do not see ourselves as a million dollars poorer.

When organic credit expansion fails to create money, the Fed or the Treasury can step in and create money non-organically, that is, not as the result of economic activity. In the case of an external standard, the Treasury can formally devalue the currency, as the US had done in the first half of the 1930s. Monetary authorities do not like to do this, because it makes their activity more transparent, and therefore more controversial. 

i don't agree with many of Jesse's points and arguments.  i am not smart enough or knowledgeable enough to counter many of those disagreements clearly or intelligently.  but the essay helps me understand his position and perspective much more than i had previously.  

i will briefly state that i believe his distinction between credit and conversion of same into actual money is a distinction without a difference, when applied to the US economy of the past 15 years.

without bothering to try to find some actual numbers (hey, i'm a blogger, not a frigging economic historian; and i ain't getting paid for this), i am gonna take a wild leap and guess that the vast majority of credit made available during the 90s and 2000s was actually converted into money (and debt).  and further converted into assets.  housing, other real estate, stocks, bonds, wages, goods and services.  and vast amounts of those debts were destroyed, (default), as were many of those assets (housing/real estate equity and valuations, stock share values).

and, in short, at least i now understand why and how Jesse does not consider credit to be money or a money equivalent.  i don't agree, but i get where he is coming from.  and i sure as shit understand he may well be right, and i may be wrong.  (um, i think the betting public would be justified and correct in setting odds on him, and against me.)

unfortunately, Jesse falls into some rhetorical traps (while discussing the mother of all liquidity traps), lumping all of the opposing point of view into a mis-characterization he describes.  and some name calling.  these are tense times; there is a lot of falling into such traps going around.

Jesse correctly (imo) states a pair of truths in his other two of three things to think about:

The second thing to remember is that the extent of inflation or deflation is a policy decision in an otherwise unconstrained environment.

Greece does not have such a choice, for example, because the ECB controls their currency.  The US probably has the most choice of all, because it not only owns its currency, but the dollar is also still the world's reserve currency. While the audience is not captive, it is at a disadvantage.

The third thing is that the creation of money from the Fed or Treasury may result in more money, but it may not result in a sustainable recovery.    Money created by the Fed is high powered money, created as it were from the will of the monetary authority's policy.

Money creation, or monetary stimulus, works well in situations wherein the economy has fallen into a temporary slump, especially because of some exogenous shock or a slack period that is cyclical in nature, such as seasonal variation.

But in the event of a secular crisis or problem, monetary stimulation is a palliative, but no cure.   The remedy lies generally on the fiscal and political policy actions, with the aim of correcting or repairing whatever had caused the problem in the first place.  

Monetary stimulus alone, without the will to effect political reform for example, results in very uncommon economic conditions, one of which Keynes described as a 'liquidity trap.'

even if i reject my own analysis, opinions, and judgments that rest upon what i have managed to learn about our economic collapse, and 100% agree with Jesse's formulation of the finance/macroeconomic world, i can continue to hold tightly to one of my central ideas regarding the path of our collapse.

it is an idea that was little more than a wild-assed guess in 2007.  and today, while i have acquired a rudimentary understanding of macro and finance, this idea is informed much more by human action, than by numbers and exponents.  (wtf did you expect?  i love mises to pieces; and Human Action is a great fucking book.)

as bad as a deflationary depression is for the interests of the true powers that be, the people who actually run the country and the economy (not our puppet president and elected officials), a hyperinflationary collapse is worse.  much worse, if you are a superwealthy former chief executive of a wall street bank, pharmaceutical house, or other mega corporation.

and while collapse is inevitable, particularly since zero significant reform and restructuring has occurred in our banking and finance system, the mode of collapse is ultimately a policy choice.  (Jesse said so!)  and while high inflation is very appealing if you are a short-sighted politician (sorry for that redundancy), it is the only thing more scary to the uber-rich who actually call the shots than deflation.

i learned a lot from this essay, gained tremendous food for thought, and came to value his ideas and opinions that are directly contrary to my own even higher than the price of Apple stock three weeks ago.  like Chomsky, Richard Brookheiser, Gore Vidal, at times Howard Zinn, and tons of others, thank goodness for really smart people whose ideology i do not share, but whose ideas i always value and often find agreement.

i'm tired  

Posted by howard in nyc in , ,

i know how you feel, lily.  sing it girl.
8/6/11 15:27

one thing that fatigues me is continuing to spoonfeed my friends, in real life and on the internets, the facts and obvious conclusions that stem from those facts about the sorry state we find ourselves.  the economy, the political system now 100% captured by the big money interests, the society that embraces lying, cheating and stealing as a way to get ahead, while remain oblivious or in active denial about what is in front of our eyes.  denial most often activated by sinking into emotionally satisfying lies, that one party or another is to blame, that things will get better because they always do, that what we are living through is not unique to our lifetimes (unless you lived through the 1920s and early 1930s).

particularly tiresome is folks who will argue with me over facts.  often after admitting they are not knowledgeable or informed about a particular item or subject, about which i have spent a lot of time and effort to learn.  then they proceed to argue that i am wrong, because they 'feel' it must be wrong.  or they can't 'accept' that what i say is possible, much less is true.

so stop doing it, asshole.

thanks.  i needed that. hey, those voices in my head have steered me pretty damn straight lately. i'd be a fool to stop listening to them now.

and it is not as if i am infallible.  i am often wrong.  like yesterday, about the s+p downgrade of the creditworthiness of the united states of america.  i don't mind being wrong, when i am i promptly admit it and when needed, to make amends.  but facts prove me wrong, not what people feel, or what they can or cannot accept.

i did not think the s+p would downgrade.  wrong, bubba.  fine.  i'm interested in why.  why i was wrong, but much more importantly, why they downgraded.

(hint--it was not because all of a sudden this week the creditworthiness of the nation took a dive.  if these assholes were honestly and systematically evaluating fed credit, this downgrade would have come years ago.  if not decades ago.)

(hint #2--it was not because these assholes are honest, objective evaluators of anything.  their record makes this obvious.  how did they rate AIG?  AAA.  how did they rate all those junk mortgage backed securities?  AAA.)

i don't know, but i have a good idea why.  what led me to my reasoning, the following articles.  read 'em yourself, fish for a lifetime.


Is Too Much Significance Given to U.S. Credit Rating?

 

Police raid Milan offices of Moody's and Standard & Poor's

 

that first article is long; skim it and you get the jist.  there was another good piece on S&P's abysmal record of collecting fat fees for marking shit AAA, from michael shedlock's blog, but i cannot find it now.  him, and yves smith, are my first reads darn near every morning.  the ponds where i do my fishing.


but i'm also tired of repeating where i get my news and analysis.  i guess i'll start a blogroll on the right side, like all the cool kids.

last thing that makes me tired.  my personal dissonance.  seeing the facts, rejecting the overwhelming sea of lies, thinking instead of emoting, that is hard enough.  but recognizing the realities of our economic and political failures, while almost everyone else is unaware, or blissfully wallowing in the lies, delusions and emotional salves provided by the folks running the show for their own benefit, this disconnection from the mainstream weighs me down.  makes me tired.  really really damn tired.

at least that is coming to an end.  folks are starting to wake the fuck up; lights are flickering on, dots are being connected.  it is about damn time.




 

hide yo kids, hide yo wife!  

Posted by howard in nyc in , ,

7/11/2011  14:23

I have not ranted and spewed venom, errr, I mean I have not crafted a thoughtful and restrained essay on economic and financial collapse in a few weeks now.  I have not been moved to words by any recent non-events.  All due respect to Casey Anthony and the federal budget farce coupled to the juvenile lie of 'pending default', the two leading non-events being tracked faithfully by the joke of our news media and the sugar high distraction of the cultural consciousness.  I don't know which is more surprising:  the number of friends and acquaintances who were outraged over some white lady's acquittal, which i would've expected them to be unaware of, much less so strongly opined about; or how many of the same folks believe that TBTB are in any danger of failing to make a $30 billion monthly interest payment, out of $300 billion monthly expenses, when monthly income is ~$175 billion.

The interest on the national debt will be paid before salaries of all those government employees who do not carry weapons, or the social security/medicare/food stamps payments to the hoi polloi (yes, that includes doctors, or 'health care providers', which I am told is the preferred term.

Every fucking news report has the word 'default' in the lead.  And it is a big fat hanging lie.

See?  I have nothing much new on my mind about real events in the world.  Wars, rumours of war, unemployment, bank fraud, sovereign debt crises (at least that is heating up--finally).  Just waiting for another big shoe to drop, in Damascus, Tripoli, Brussels or Wall Street.

In the meantime, two things I read that I really liked, and wanted to share.

First, from Jesse's Café Américain, one of my daily reads.  A wonderful descriptive analysis (or maybe analytic description) of our horrible, hated president:


A bright fellow no doubt, but unseasoned by things like family, tradition, and the personal experience of hardship: a great story teller, a rationalizer, a perpetual outsider, and a thoroughly modern relativist. You have to keep your eye on what he does, rather than what he says. But that is a given with all modern managers.


The other, from a source I do not regularly read, but via Yves at Naked Capitalism, her daily news and commentary links are a daily don't miss for me.  A blog called Decline of the Empire, a clip from a post non-sarcastically (and non-ironically) called This Time Really Is Different:

I've got some news for people like John Mauldin, Barry Ritholtz, Carmen Reinhart and Ken Rogoff—this time is different, but not in the sense you intend. To understand what is happening in the United States, it is necessary to go far beyond an historical survey of financial crises. You must consider the specific historical circumstances that led to the current crisis. Such a review would include but not be limited to the following observations—
  • The United States has been hemorrhaging manufacturing jobs for 30 years.
  • Almost all of the income gains made during that time went to the top 10% of wage-earners, with most of them going to the top 1%. Wealth inequality grew accordingly.
  • Health care costs have been soaring all that time.
  • College tuition costs skyrocketed at a pace far beyond the rate of inflation.
  • Households took on more and more debt to replace lost income.
  • We had not one, but two, substantial economic bubbles during the last 15 years. Without those bubbles, how much would the U.S. economy have grown?
  • The private debt to GDP ratio grew and grew, clearly indicating that more and more debt was required to add an additional point of GDP.
  • The Federal Government more and more became the tool of monied special interests.
And so forth. When people endorse Reinhart and Rogoff, we are supposed to understand that the Tough Times we're experiencing now have a well-defined beginning—the financial crisis after the fall of Lehman—and will have a well-defined end—however many years it takes to work through the credit problems. This is utter nonsense. The "historical obversations" I listed above are in fact the root causes of our current predicament.

And in each case, the historical trend has not changed, or has gotten worse. Households now have only slightly less debt than they did before the crisis, but trillions of dollars of housing wealth has disappeared. Health care costs continue to soar, as do college tuitions. Income gains still go to the wealthiest Americans. In short, nothing has changed.

That leaves those who want to believe that All Will Be Well with the same unsolvable dilemma we started out with: how do you tell a credible story that everything will turn out OK? I'm sorry, but no amount of convenient, hopeful rationalization is going to change the American disaster while the roots of the crisis remain in place. The financial meltdown was the proximate, not the ultimate, cause of America's economic woes.

This time really is different.

are we collapsed yet?  

Posted by howard in nyc in ,

6/11/2011 15:33
 
You said it, mang.  We are all having fun, zip!
i have been too disheartened to post much, or think about the short-term future of the united states economy, and everything else.  i see little to be heartened about.  unemployment; housing prices continuing down, down; sharply increasing gas, oil and food prices; 100% disconnect of the political system from the needs of the people; global war and revolution spreading, due to our sending armies and to our feeding speculation in the food commodity markets; environmental disasters looming (yes, me, of all people, the anti-tree hugger, the one determined that if oil is running dry, let me drive at 110 mph until the day comes--ionizing radiation in massive deadly amounts has that effect on a boy).

a world of hurt.  but so many people i encounter are oblivious.  either they are misinformed by the media and their own lack of curiosity, or they are trapped by their human tendency to counter bad news and bad facts with denial and delusion.  i know people who are intelligent and well informed, who sincerely believe obama has done a good job of managing the economy, and his failures are due primarily to his objectives being blocked by 41 republican senators. or folks in the other tribe who sincerely believe obama is trying to institute a socialist program, that the phoney health care reform was actually socialized medicine, and will hurt doctors tremendously.  (what other industry would think a government subsidy and government coercion herding 40 million new customers to your door would hurt your income?  only doctors' logic.)

people can't/won't/don't think.  trapped in their habits, delusions, comfort zones, what have you, they so very often emote rather than think.  and are confused that the two are the same.

a lifetime of having emotional buttons pressed to shape buying decisions, by literal hundreds of thousands of television commercials over the 18 years of a childhood, having those same emotions tickled by teachers, bosses, and politicians, then by the sources of news, who specialize in triggering emotive responses to attract and hold on to viewers.  

people even use the words 'believe' and 'feel' in place of think, conclude or decide.

i have decided to no longer do this.  i will only say 'i believe' when i am referring to a moral, ethical, or religious (well, maybe not religious) belief.  not, 'i believe obama has been a horrific president'.  or 'i believe the stock market is going to suffer a sharp correction this summer, maybe even this week'.

use of 'believe' is technically appropriate in such instances.  but it has been way overused, and the meaning has seriously shifted.  as people get more defensive if you challenge their 'belief' than your opinion, assessment, conclusion or what you think.

jihad declared on my use of the words 'believe' and 'feel' when i mean think.  save believe for 'i believe white people are evil', or 'i feel hatred for the dodgers'.  

but when asked, 'how do you feel'? i reserve the right to answer, 'with my hands'.

more evidence these guys are fucking clueless  

Posted by howard in nyc in ,

Gretchen Morgenson at the NY Times had an interesting column Saturday, based on the documents the Federal Reserve Bank was court-ordered to publicly release. here's a snip:

The Bank Run We Knew So Little About
By GRETCHEN MORGENSON
Published: April 2, 2011
IN August 2007, as world financial markets were seizing up, domestic and foreign banks began lining up for cash from the Federal Reserve Bank of New York.
That Aug. 20, Commerzbank of Germany borrowed $350 million at the Fed’s discount window. Two days later, Citigroup, JPMorgan Chase, Bank of America and the Wachovia Corporation each received $500 million. As collateral for all these loans, the banks put up a total of $213 billion in asset-backed securities, commercial loans and residential mortgages, including second liens.
Thus began the bank run that set off the financial crisis of 2008. But unlike other bank runs, this one was invisible to most Americans.
Until last week, that is, when the Fed pulled back the curtain. Responding to a court ruling, it made public thousands of pages of confidential lending documents from the crisis.
The data dump arose from a lawsuit initiated by Mark Pittman, a reporter at Bloomberg News, who died in November 2009. Upon receiving his request for details on the central bank’s lending, the Fed argued that the public had no right to know. The courts disagreed.
The Fed documents, like much of the information about the crisis that has been pried out of reluctant government agencies, reveal what was going on behind the scenes as the financial storm gathered. For instance, they show how dire the banking crisis was becoming during the summer of 2007.
Washington policy makers, meanwhile, were saying that the subprime crisis would subside with little impact on the broad economy and that world markets were highly liquid.
These details of this 2007 episode are telling.

The guys in charge, Bernanke, Paulson and Geithner (chief of the New York branch of the Fed at the time), experienced this hidden bank run. And they experienced the collapse of Bear Stearns in March 2008.

Yet, when the shit really hit the fan in September 2008, despite months of forewarning, they were caught completely unprepared.

Learning these details of the fragility of the international banking system due to overextended bad credit, as exposed by these events of 2007, two of my major conclusions are reinforced:

~These guys are truly incompetent. They do not know what they are doing, from one crisis to the next. They just make it up as they go along.

~These guys have exactly two tools for 'managing' the economic crises. Throw money at the problem, and talk a bunch of words to calm the public and markets. Print, lend or lower interest rates to zero. Their response over and over is throw money and bullshit. That's all they got.

People like me expected the adverse effect of all that easy money to be rising costs of borrowing for the US government. Hasn't happened; I was wrong on that one. But other adverse effects--rising cost of oil and food--are coming to bear.

The fed painted themselves into a corner. A different corner than I predicted, but just as bad a corner. Keep printing money, and the economy slows on the back of $100 a barrel oil, and recession returns. Stop printing money, and the economy slows on lower stock prices, lower system liquidity, and probable increased borrowing costs for the govt, and recession returns.

I'll guess they keep throwing money until they are force to stop. And lots of words.

great documentary movie everyone should see  

Posted by howard in nyc in , ,

march 13, 2011
first, every thinking american should watch this feature-length documentary film, a wonderful description of our horrific economic plutocracy and the hoax of our puppet political leaders.

Lifting the Veil
http://vimeo.com/20355767
or
http://www.metanoia-films.org/compilations.php

this is how severe things are. a right-leaning, fiscal conservative, social and economic libertarian guy like me has more and more common ground with the far left. me and noam chomsky, hand in hand.

i'm incredibly frustrated by friends and acquaintances who are so invested in their political dogma of either flavor, red or blue, that they are unable to recognize or process the obvious truths of our situation. the true nature of obama's actions and policies. the true nature of the relentless direction of the nation and the economy: theft and concentration of the wealth by a tiny number of folks at the top; horrible deadly wars for oil, profit, and power for the sake of power; restriction of information and freedom as the security state grows in power and blatant oppression; and political leaders who have zero accountability to the people, 100% accountability to the power elite, via money and lobbyists.

people support obama from the blue side, completely ignoring the facts of his actions. people hate obama from the red side for completely wrong and bullshit reasons. and people allow themselves to be distracted by the wisconsin sideshow, with the delusion that a handful of public employees are an important proxy for the progressive cause, or suppression of those teachers and cops is a great victory for the free market. wisconsin is a meaningless distraction, supremely effective.

i am desperate for people to recognize what is important, and what is trivial. so many still see democrats and republicans as the division in this country, when it is the tiny number of power elite against all the rest of us.

the biggest tool is preserving the deception is the false calm of the last two years. the fake economic recovery, that channeled a relatively small amount to soothe appearances and preserve optimism while channeling many more trillions to the top. and the wars spread and increased in killing alleged enemies, with few squawking.

the calm can't last forever. and it may crack soon. but sadly, i expect the masses to continue to miss the truth, only to be distracted by new sideshows, new deceptions. leading up to the next election no more democratic than the elections staged by stalin, castro or hussein.

the choice between a greater or a lesser of two evils is not a choice. evil red, or evil blue. evil obama or evil (fill in the blank--because it truly makes no difference).

i think it is gonna crack soon. as i have said, before egypt and libya, oil was up to $85. of course no one will remember that. before japan's triple threat--earthquake, tsunami and nuclear meltdown, the macro picture was precarious (europe debt, falling dollar, dead housing market, and stalling job growth and stock market). but no one will remember that.

the recovery was always fake. even the fake will be finished in weeks or months. the bigger deceptions will continue, but resumption of the easily visible proof of economic collapse hopefully will focus minds.

the brilliant carlin gives a three-minute summary of the doc. this clip is included in the above linked film.

should be played in every schoolroom every morning, instead of the pledge of allegiance.

"It's a Big Club; and You Ain't In It!"

happy new year 2011  

Posted by howard in nyc in , ,

cause 2010 sucked balls for me. would've been horrible, except my team won the friggin world series. and that is the only thing i will remember from this year. well, that and the hard lessons learned.

the hardest to accept lessons are those regarding the sorry state of our country. and worse than the hard truths are the constant lies, and the refusal of most americans to admit to even a few of the hard truths that define our america today. simple, obvious truths that if you speak them in polite company, folks excuse themselves from the conversation, and they don't invite you next time.

simple unambiguous gems such as:

--the wars in afghanistan, iraq, pakistan, yemen, and soon to come to somalia, are bankrupting our treasury, are immoral, are pointless, are making us less safe, and are absolutely unwinnable. the people who become 'terrorists' hate us because we are over there making war and killing people.

--the economy is completely wrecked, being looted as it dies by wall street and the bankers, being artifically supported by trillions of printed and borrowed dollars that cannot be sustained for very much longer. as soon as they stop printing, the whole thing falls.

--98% of congress are bought and paid for by big money interests, and serve 100% of big money interests, and 0% of the public good. this is also true of 100% of presidents, immediate past, present and immediate future.

--the war on drugs has been a spectacular failure. legalization/decriminalization could not possibly increase drug use and drug addiction from the current all-time high levels. the proof is in the history of alcohol prohibition, and in the experience in various european countries that have legalized. crime would plummet, the war in afghanistan would come to a quick halt (no more money for the taliban), only one-tenth of the savings could fund rehab and treatment on demand for every single addict in america. but too many folks in the usa (prisons and cops) make too much money from drug crimes.

--the status quo is completely unsustainable, and when the efforts to maintain it fail and/or are withdrawn, things are gonna go from bad (true unemployment of roughly 1 in 5; 1 in 7 americans on food stamps; residential real estate values are going down again and nothing can stop this;) to much much worse.

i have great difficulty not thinking about these truths. the wars and the complete corruption of our leadership make me supremely sad. the continued economic enrichment of a small number of american elites at the direct expense of the masses makes me feel like a broke sucker for not jumping on the greed train and getting mine before the whole thing crashes. the looming full on collapse of the barely functioning economy makes me feel like going to work, and taking risks to build/innovate my little business is a complete waste of effort.

i doubt it is possible for me to ignore the truths, or for me to not react to the lies, denial, deception and willful ignorance. but i must find a different way to react to the political/social/economic milieu. probably a lot of focus and discipline. regarding what i eat; my activity, particularly exercise; and my thinking, particularly reading more books and less internet blogs about how bad the economy is.

i'll work out the details of what and how i want to change. but a part will be venting and purging a bunch of frustrating thoughts. on the internet. right here.

and here come a big batch of rant.

the folks running the economy, the ben bernanck and crew, have really fucked themselves. too bad they fucked all of us at the same time. their only concern has been to preserve the current banks and wall street firms, and preserve the current system of guaranteed money for the elite class that runs and works at the top of the current system. they care not even a little bit for the masses of american people. they may realize the truth, or they may delude themselves otherwise, but they work to enrich the elite at the direct cost of the rest of us. via outsourcing manufacturing and now service jobs overseas. via inflation of the currency. via taxpayer guarantees of fannie freddie and a shitload of bad paper the fed has purchased. via tax evasion by the multinational corporations and banks.

but in the midst of the hollowing out of the manufacturing capacity of the usa, the destruction of the middle class by destroying jobs and blowing serial financial bubbles, they blew it. the ben bernanck has painted himself into a corner. he and his fiscal counterparts, larry summers and the rest, have thrown trillions of dollars at the failed system. printing, borrowing, keeping interest rates artificially low. these machinations have staved off complete collapse. but they were intended as temporary measures, until the economy got back on track.

it hasn't. because the prosperity of the prior decade was fake, built on prior fed machinations (low interest rates) and fraud. the economy has just puttered along, growing only as much as those in control printed and borrowed. not real growth; just borrowed growth.

and, if they withdraw the temporary support, the whole thing falls. and the temporary support cannot possibly become permanent.

first, the borrowing. at some point, the borrowing (and the deficit government spending) has to stop. the chinese, the oil countries, and japan are getting a bit concerned that they may not get paid back. their desire to lend is lessening. their capacity to lend is shrinking as well, as we buy less stuff from them. and at some point, the interest rate the us must pay to borrow will increase (the fed is not omnipotent in the setting of interest rates; they have a lot of influence but not unlimited influence.) and once the size of the debt times the interest rate reaches a certain level, payment becomes impossible. and starts to reinforce itself, with higher rates. see iceland, greece, and ireland for the proof of this arithmetic.

when this happens, that is hard to say. i thought it would've happened by now. i was dead wrong. i underestimated the power of being the reserve currency of the entire world. the power of having most of the millions of barrels of oil sold daily denominated in us dollars. i had discounted the twenty years that japan stretched things out before hitting their wall.

but it will happen. it has to happen. i just have to get used to waiting. (and i was told the waiting is the hardest part.)

second, the printing. if/when you print too much, the value of the currency being printed falls, approaching zero. also, the interest rate for borrowing that currency will tend to rise. which feeds into the above. again, being the reserve currency of the world allows you to print a lot more w/o consequences than if you are printing argentine reals or icelandic whatevers. but it is limited. personally, i do not believe the wealthy elite will allow the printing press to run long enough to cut into their accumulated wealth, to the point of hyperinflation and currency collapse. but i could be wrong, and ben could print until those chickens come home to roost, and a loaf of bread costs $100.

so, if the ben bernanck and the tim geithner continue to print and borrow, the lenders stop lending or charge so much to lend that borrowing stops. or the currency falls toward zero, and the lenders charge so much to lend that borrowing stops. the printing/borrowing has to end.

otoh, when the printing/borrowing stops, the stock market crashes, the little bit of GDP growth being paid for by government spending/borrowing ends, and the last veils of fake economic growth are removed.

keep printing/borrowing, and the system crashes. stop printing/borrowing, and the system crashes. there is no third thing.

how close are we? well, unemployment is high and getting worse, regardless of which set of government numbers you accept, the fake ones, or the really fake ones. no one i have heard can reasonably postulate where job growth is supposed to come from; how all the construction, real estate and consumer finance related jobs that went away are going to be replaced.

the residential real estate market is bad and getting worse. there was a brief reprieve when the government was giving away $8,000 if you bought a house. but when that program ended, home sales went back down again. there are millions of empty houses on the market. millions more being held back from the market. and hundreds of thousands occupied by people who stopped paying their mortgages, or will soon.

several large states are broke. not just suffering from short-term difficulties; broke. and they cannot print money. same for hundreds of municipalities, large and small. the cost of their borrowing is increasing. they will have to cut jobs, and cut welfare payments. this will make the economy as a whole shrink. maybe the central government will provide some printed/borrowed bailout money. but that will not help, just delay.

oil costs $90/barrel. may be headed up to $100. this will hurt the economy.

the banking system has a huge problem with all the fraud at every level of the mortgage business. because of all those derivatives. all those mortgage backed securities (the trillions of dollars worth that were not dumped onto the fed) legally may not be backed by mortgages that were fraudulently conveyed. if this were a battle of banks vs mortgage holders staying in their houses w/o paying, the government would just slap down the people and let the banks win. but this is bank vs bank; wall street firm vs hedge fund. this huge problem is unlikely to go away quietly.

and that is just domestically. then there is continuing debt problems for every euro country, the inevitable breakup of the EU and the failure of the euro currency; the bursting of china's housing bubble; japan's day of reckoning ever closer; and likelihood of war in korea, pakistan or israel.

none of those issues will help american gdp, although some could temporarily boost the dollar and lower us interest rates. only temporarily.

shit. no wonder i'm depressed. but that is just the numbers side, and not even the worst of our troubles.

happy new year 2011, part two  

Posted by howard in nyc in , ,

the worst part is how passive, how tolerant, how accepting of so much bullshit the american people have become. while the vast majority wallows in the easy emotional bonding with one political party or the other, eschewing actual thought for the warm and fuzzy joy of 'red bad, blue good' (or vice versa). that majority includes the just as bad segment that unthinkingly shrugs facts and feels, 'well, blue may be bad, but they aren't nearly as bad as red, so i'm supporting blue. and in the process, tolerates, accepts and even embraces the web of lies that passes for news and political discussion today.

so many really severe outrages committed by those in power are just shrugged off. the tsa debacle is a recent example. ridiculously abusive bullying at airports, illogically justified as necessary to prevent lame attempts like the christmas bomber, are just joked about and accepted as part of the times instead of demanding that such abuse stop immediately.

the christmas bomber. who boarded a plane in a foreign city, where the tsa has no activity or jurisdiction. who boarded a plane without a passport. these two obvious facts are clear and in the open. just beneath the surface is the description of how the dude was shuffled past that foreign airport security by some well-dressed accomplice. and instead of a demand that these security breeches be investigated and corrected, the tsa introduces groping and intimidation as a response. and people by and large shrug and say, ok, that's fine.

and the new nude x-ray machines, introduced at a cost of about half a billion dollars, justified by 'the christmas bomber'. and one of the executives in the company that builds these devices is the last chief of homeland security, chertoff, that dude last seen fucking up the katrina response. he cashed in millions of dollars. and people just say, ok, that's fine.

illogic, corrupt profits, and infringement on personal privacy. ok, that's fine.

a quick list--a war entered into by lies from the president, prolonged and expanded by a putative anti-war president who was given the nobel fucking peace prize. the enrichment of a handful of financial firms by the national treasury, with the leaders of those banks giving themselves literal billions of dollars in bonuses, with nothing more than a few scolding words from president obama. a 'patriot act' that results in personal telephone conversations and emails being monitored by the government, and the secret surveillance operations of our government constantly growing larger and larger. the torture and imprisonment of dozens of innocent people at guantanamo and elsewhere, unpunished, and a promise by the antiwar president to stop such crimes, institute trials, and close the notorious prison, but the promise is broken.

ok, that's fine.

the reaction of so many people to the wikileaks story to me marked a disturbing and dangerous stage in the acceptance of tyranny by the american people. wikileaks revealed a ton of what would've been disturbing acts by our government--video of murder of civillians; orders to ignore torture and war crimes; state department employees instructed to spy on diplomats at the un; details of secret wars in yemen and pakistan; pressure on foreign governments to suppress investigations of torture.

jeesus, in 1970 when evidence of a secret war in cambodia became known to the public, 300 college campuses were shut down by anti-war protesters. and people don't even remember kent state and jackson state, much less what sparked those protests that were quelled by the us army.

and the reaction today, by way too many informed and intelligent americans--'what wikileaks did was wrong. governments need secrecy in order to function.'

i was shocked at how many thoughtful adult citizens expressed this sentiment, just shrugging off the actual facts revealed by wikileaks.

and that is not even getting into the corporate acts to coerce and shut down wikileaks, by amazon, paypal, mastercard and visa. or the international police manhunt and imprisonment of assange for sexual assault. with not one single charge or indictment, much less a conviction in a court of law.

i never thought fascism was possible in the usa. i thought the breaking point of the populace would have been far short of the outrages accepted thus far in the 21st century. sadly i see not only are such government outrages against freedom and justice not only acceptable with an 'oh, that's ok'; many infringements of personal and economic freedom and justice are actively welcomed, even cheered, by far more citizens, left and right, than i ever imagined.

the worst part, every corruption of our leaders, the politicians and the financial/economic system, has been ushered in by a population of us citizens that fails to see the most simple and obvious facts in front of their eyes. lots of reasons--conditioning by schools, tv and media advertising to feel rather than to think critically; satisfaction by the rising material wealth of the past 30 years while believing it is consequence free and destined to last forever; fear of a big bad terrorist coming to rape our white women and blow us all up; growing comfort with growing dependence on the big benevolent government to fix all the problems from providing unlimited medical care to instantly removing 20 inches of snow after a blizzard.

the people of the usa have surrendered their politics and their economy to the few who are destroying and stealing the wealth of the nation. we have exactly what some of the wisest founding fathers feared (franklin, jefferson and adams in particular); we stopped paying attention, and gave away control of our nation, in return for a bunch of feel-good lies and deceptions. and we got exactly the leadership we deserve.

too bad, we are gonna get the rest of the consequences we deserve.

it's all over now, baby blue  

Posted by howard in nyc in , ,

recently i read a great post (of many great posts) over at theautomaticearth.blogspot.com

please read it:


this helped me recognize that i have been thinking about the wrong things. i have indulged in the details of economic activity lately, while neglecting the more important bigger picture. the big truth that can be lost in the day-by-day.

the economic system as we knew it is over.

this takes time. it is easy to forget that what happened in 2007-08 was not a discrete event, with a beginning and end. that was the beginning of the fall. the first recognition that the system is kaput.

the american capitalist system of the 20th century was built on a foundation of unending growth. as domestic manufacturing growth approached its natural limits financial growth and consumption of imported goods took over.

that financial growth was founded upon factors with their own natural limits. ever increasing housing prices and demand (demand based on employment), and ever decreasing overseas labor costs for consumer goods.

those factors are done. housing prices hit the wall and fell sharply. more importantly, they are not going back up. period.

housing demand is based on increasing employment. but, employment is going down steadily.

both these factors have failed to abate despite government efforts.

other vast areas of financial 'growth' are precariously balanced upon housing prices. all those mortgage backed securities. all those derivatives. the true value of these 'assets' have been hidden by much greater government efforts. printing money to buy tons of them. suspension of accounting rules to lie about the value of other tons of them. fannie and freddie guarantee of most new mortages, and guarantee of those two entities themselves. and artifically cheap money/manipulated low rates from the fed.

trillions of dollars of future taxpayer liabilities, thrown at this system of financial growth and innovation that was itself a ten-year long mirage.

and it has failed. while the mirage has been maintained a bit longer, the actual value of all those instruments, in the absence of government printing, buying and hiding, is not growing at the very least.

the efforts of the american politicians, european politicians, and central banks here, there and in japan, have all been directed at 1) protecting and saving the big banks; and 2) going back to the way things were, with rising housing prices (and other asset prices) and ever increasing consumption.

#1 worked for a while; but all those banks are still insolvent by any objective measure. #2 is flat out impossible.

the actual path toward the inevitable endpoint makes little difference. the duration of that path is also not real important, if you believe as i do that they will not be able to stretch it out past my lifetime. five years maybe, ten years absolute tops, but more likely numbered in months.

and i have been hung up on the path, not the endpoint.

part of the reason is greed. i figure if i can discern the path accurately, i can snag some big bucks. and if i am clever, convert those big bucks into a lasting store of wealth (property, foreign currency, metals and gems). forgetting that, as long as i maintain my physical and mental health, i am lucky and blessed to be assurred of wealth and prosperity after the fall. i am honest, i am a good friend, and i have essential medical and healing skills that today are deeply discounted, but will be rewarded plenty in time.

part of the reason is entertainment. i love sports. because you don't know how things are going to turn out. not only the path to the finale, but the outcome itself is in doubt.

well, no matter how much i scramble, i have tremdous tools for security in the next phase future. and no matter how much i delve into the details, there is little drama and no doubt of how this economic story finishes.

the system reached the natural endpoint. it is over. they cannot put it back together.

some more stupid economics  

Posted by howard in nyc in ,

this foreclosure mess gives me some encouragement. because internal parts of the system are placed in conflict with one another.

as much as the media will try to paint this as freeloading defaulted mortgage holders vs the legal owners of those debts, or more simply portray the whole thing as some paperwork errors and shortcuts, the truth is otherwise.

this is bank vs judge. perjury vs members of the legal system who take their work seriously. mbs servicer vs mortgage originator. pension fund investor vs mbs packager.

the fraud and crimes are not just the big boys vs the people. it is fraud by some big boys perpetrated on other big boys. and if the lackey government favors one group over another, those unfavored will squawk and scream, and won't take it lying down.

not that it matters too much exactly how and when the house of cards comes down, this could be the trigger.

meanwhile, as the unavoidable process of debt deflation proceeds, the powers that be realize that everything they tried over the past two years to trigger inflation has miserably failed. so, rather than marshall resources to take care of the people, and to build a new, sustainable economic structure, what do they do?

more of the same. if it failed before, only because they did too little.

more monetary bullshit (dropping rates and devaluing the currency); more keynesian bullshit (government must spend more, more, more, be it from tax, print, borrow or all of the above).

yet, debt creation is not growing. debt destruction continues. wages fall, unemployment increases.

and weakening the currency, so the price of oil, wheat and rice rises, is mistaken for inflation. or, if you define deflation differently than do i, a weak dollar somehow counteracts the contraction of credit/debt.

our economic system is based on growing credit and debt. credit and debt is not increasing. the system ain't working no more.

destruction of the purchasing power of the dollar is not the same as counteracting debt deflation. and increasing government debt has very very limited positive effects on total credit expansion.

even if the folks in charge recognized this, they are intent on saving the banks and wall street first and foremost; the people take the hindmost.

while a few, trying to sound enlightened, speak of the evils of supersized government debt and deficit. and those clowns never even mention the wars, the waste of the military industrialist class. much less the promises of the most expenive health care on earth for everybody w/o limits (titanium hips and knees for every 80yo! half a million dollar cancer chemotherapy for two months of horrific quality of life!), and promises of lifelong government pensions and social security that cannot possibly all be kept.

deficits are dangerous. but don't talk about the only possible ways to cut them.

i stand in awe at how long things have held together. easy for me to say, i am not unemployed, or underemployed, working enough to not qualify for food and medical money from the government.

maybe they can hold it together another couple of years. i won't bet against it (well, i won't bet much), but i sure won't count on it.

a rant on the specialty of economics  

Posted by howard in nyc in ,

reprinted from a spontaneous rant on the sports frog.

a point about the discipline of economics. as i progressed into my intensive reading program, i focused on the great depression of the 1930s. i read a lot of the descriptions and analyses of this period.

i have read a lot of history. for about a decade i was fixated on the civil war, and i read lots of civil war books. and even 150 years later, there is plenty of informed disagreement over root causes, motives of individuals and large segments of the population, and so forth. you can get a spirited debate among legit lincoln scholars about his true feelings about race and black people, what he really meant to achieve with the emancipation proclamation.

despite these differences of opinion, disagreement over the 'whys' and somethimes the 'hows', historians are readily able to agree on the 'whats'. that lee brought an army of 38,000 to antietam creek on september 17th, 1862, and faced a union force led by mcclelland of 75,000. it may take a few years or decades for the 'whats' of history to be established, but the bare facts are easily discoverable and agreed upon by the experts.

not economics, though.

80 years later, economists don't agree on the whys and hows, they don't even agree on the whats. as a simple example, the standard history i learned and most americans believe is that president hoover was governed by a philosophy of 'laizze faire', and steadfastly avoided government intervention in the capital and labour markets. this 'fact' is repeated in major economic textbooks and by serious, accomplished, even prize winning economists.

and it is absolutely false.

the first time i read an accurate account of hoover's interventions (in his vain attempts to stem the slide into economic depression), i thought it must be bs propaganda. just a few minutes of internet search, even on the wiki, led to primary documentation of the blatantly interventionist (and even keynesian) actions of hoover.

mostly in newspapers.

many ideas, theories, principles, whatever of economics don't even rest upon a foundation of basic historic facts. major schools of economics do not even agree on the simplist events of the past.

economics, as practiced and promoted in recent decades, is incredibly lacking in both scientific and even factual or logical rigor. not only is modern economics far from a hard science, (just cause they use a lot of fancy math, don't be fooled), the field is far behind the social sciences of history, politics, psychology and even sociology.

clausewitz famously described warfare as the continuation of politics by other means. the same can be said for economics; and the cleveing of economics and political philosopy sometime in the 20th century was a disservice to attempting to understand economic behavior of individual humans and large societies and nations.

i prefer a different description. to paraphrase judge roy bean, in this day and age, economics is nothing more than the (soiled, disreputable) handmaiden of politics.

slolz, i'm with you. i really fucking hate this field too. but i am too stubborn to quit trying to understand it. and when i dig deep enough, there is plenty that i don't hate.


eta: like karl marx. i don't think much of his solution, but the dude sure understood capitalism, specially the downsides. his work is brilliant and wonderful. and woefully misunderstood, mangled, and misused.

just a matter of when  

Posted by howard in nyc in ,

i have laid off the frequency of my econ rants. partly for my own mental health, partly to avoid reader burnout (the three people who read this mess; but a few more folks over at the sportsfrog.com/swamp indulge my ravings by reading them then taunting and making fun of me).

make no mistake. things remain dire, in my estimation. nothing at all has been learned by the leaders, actual and nominal leaders both. nothing at all has been done to define and fix the severe flaws in the economy that lead to the events of 2008-09. absolutely nothing.

the lehman 'revelations' released last week were simple confirmation of significant crimes that were well known on the inside, well suspected by outsiders. while i am slightly surprised at how much response to the black and white exposure of the frauds committed by dick fuld, erin callan, and most significantly tim geithner, i expect not much will result. either the rumpus will die down and the crimes ignored; or fuld will be sacrificed to temporarily sate the crowd with a criminal indictment, and timmy will be forced to resign. big fucking whoop. then the rumpus will die down.

i remain humbled at how long the charade can continue; how many months and years the insolvent banks can be kept alive with accounting and political lies (and a couple trillion of public money, wasted). but i have zero doubt the time frame they can keep it going is considerably shorter than 'forever'. and i remind myself that months and years are pretty damn short increments. compared to 1929-1940, or to the collapse of the french monarchy, and subsequent republic, or to the collapse of the russian empire of the 19th century. or their 20th century empire. berlin wall fell in 1989; the russian default was nine years later.

timing is a bitch. but once prepared, psychologically and fiscally, the waiting doesn't have to be the hardest part.

take away the stock market indices, and the treasury bond prices that refuse to die, every other factor remains dismal. unemployment. foreclosures and real estate prices, residential and commercial. tax collection figures. state and municipal finances, being literally choked to death by public employee unions demands and pensions, and stupid politicians who cannot count or see reality in front of their faces. and federal finances aren't so bright either. the tightrope being walked between printing and not printing has thinned to a thread. impossible to predict if a loss of balance, a snapping of the thread, or continued thinning to the point of nonexistence will be the mode of the failure. but easy to predict the subesquent gravitaional effect. (i think i stretched that metaphor just as thinly.)

we remain completely and absolutely destined for a fucking. yet nearly everyone is so calm and happy. weird.