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LQD Clusterfuck nation

by melo Fri Mar 7th, 2008 at 04:24:04 AM EST

Here's one for the numerologists... oops, i meant economists...

BURNING DOWN THE HOUSE

     Behind all the blather and bullshit about the Federal Reserve's rescue gambits and the machinations of the ratings agencies, and the wiles of foreign sovereign wealth, and the incomprehensible mysteries of markets, and the various weather forecasts of a gathering "recession" is the simple fact that the USA is a way poorer nation than we imagined ourselves to be six months ago. The American economy has been running on the fumes of "creatively engineered" finance (i.e. new-and-improved swindling) for years, and now these swindles are unraveling. In their aftermath, they leave empty wallets, drained bank accounts, plundered retirements funds, boiled away capital reserves, worthless stocks, bankrupt companies, vandalized housing tracts, ruined families, and Wall Street executives who are still pulling down multimillion-dollar pay packages despite running their companies into the ground.

    More below the fold...


... We're burning down the house and kidding ourselves that there is a remedy for it. All the rate cuts and loans to big banks and bank-like corporate organisms, and "monoline" bond insurers, and mortgage mills amount to little more than a final desperate shell game to conceal the radioactive pea of aggregate loss. The losses are everywhere, and when you add up seven billion here and eleven billion there they probably amount to something like a trillion dollars in sheer capital evaporation -- not counting the abstract "positions" that the capital was leveraged onto by the playerz and boyz who mistook algorithms for productive activity.

     The shell game may run a few more weeks but personally I believe the timbers are burning. The losses are no longer "contained" or concealable. A consensus has now formed that we're in for a "recession." The idea is that, yes, this seems to be the low arc of the business cycle. Fewer Hamptons villas will be redecorated in the interim. We'll gird our loins and get through the bad weather and when the sun shines again, we'll be ready with new algorithms for new sport-with-capital.

     Uh-uh. Think again. This is not so much financial bad weather as financial climate change. Something is happenin' Mr Jones, and you don't know what it is, do ya? There has been too much misbehavior and it can no longer be mitigated. We're not heading into a recession but a major depression, worse than the fabled trauma of the 1930s. That one occurred against the background of a society that had plenty of everything except money. Back then, we had plenty of mineral resources, lots of trained-and-regimented manpower, millions of productive family farms, factories that were practically new, and more than 90 percent left of the greatest petroleum reserve anywhere in the world. It took a world war to get all that stuff humming cooperatively again, and once it did, we devoted its productive capacity to building an empire of happy motoring leisure. (Tragic choice there.)

       This new depression, which I call The Long Emergency, will play out against the background of a society that has pissed away its oil endowment, bulldozed its factories, arbitraged its productive labor, destroyed both family farms and the commercial infrastructure of main street, and trained its population to become overfed diabetic TV zombie "consumers" of other peoples' productivity, paid for by "money" they haven't earned.

        There is a theory (see Nouriel Roubini's blog) that a reform process will now ensue in the financial realm, new regulation and oversight of the same old familiar activities. This too, I'm afraid, will prove to be wishful thinking. The financial system will not be reformed until it lies in smoking wreckage, and when that "re-form" happens the armature of the re-organizing society will barely resemble the one that the previous burnt-down-house was designed to dwell in. Among other things, it will not support capital enterprise at anything like the scale that we became accustomed to lately. Globalism will be over.

Globalism as we know it, certainly. On the levels of ideas, language and information we may hopefully continue to see further progress towards a global awareness of local issues, and their micro/macro interconnectedness.

kunstler's new novel looks really good.

maybe someone stateside can read it and do a review...

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I live (t)here!

We're not heading into a recession but a major depression, worse than the fabled trauma of the 1930s.

Yup.

The financial system will not be reformed until it lies in smoking wreckage, and when that "re-form" happens the armature of the re-organizing society will barely resemble the one that the previous burnt-down-house was designed to dwell in. Among other things, it will not support capital enterprise at anything like the scale that we became accustomed to lately. Globalism will be over.

Dream on. I think the huge international corporations will come out stronger because of this.  Stronger than, at least, the U.S. government if the United States should survive intact. What the United States may see is the other side of globalization, where we are the dumping ground for Asia, where Americans are the cheap, educated labor source.

But this wounded, dying America is a danger to the world. The one big difference between now and the 1930s that Kunstler omitted was the United States is now armed to the teeth. The mood in America could get very ugly if some of my fellow Americans see rich Asia and happy Europe not suffering during the "Long Emergency". Should the right demagogue come along, America will take a fascist, expansionist path. The system has been built and it's just waiting for someone to turn the key.

by Magnifico on Fri Mar 7th, 2008 at 01:49:29 PM EST
hi magnifico.

yes, i fear the rest of the world will have to be pincushion for the usa hedgehog, absorb its poison, then gentle it back to sanity.

only difference, it'll be more overt.

but it always was, to those in the crosshairs. america's fortune, just like every empire before it, depends on the gruntwork of others.

the decency of the american people will be put to the test, and there is much to be hopeful for, because many americans would like their country to be what it claims to be, and cease to be the most feared.

americans want to be friends to the world, your government has been hijacked, if the MSM continues to lose respect and credibility, then people's desire for understanding the changing context in which they live will lead them to a deeper well, with purer water, than what they've been sold.

our job is to give them content, i reckon, tell the story, so the younger readers can connect the dots themselves.

it's probably easier to feel confident from this side of the pond, though i don't think it's going to be a picnic for anyone.

the alternative is too depressing to contemplate.

i admire kunstler's writing on this, he reminds me of a slightly more polished joe bageant, capable of staring down the devils and naming them, with great style to boot.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Mar 7th, 2008 at 02:57:49 PM EST
[ Parent ]
I really dislike Kunstler. His all consuming hatred of the modern world negates any value he brings to the table. He'll interpret any data he sees as evidence that the apocalypse is near. No thanks.

you are the media you consume.

by MillMan (millguy at gmail) on Fri Mar 7th, 2008 at 02:46:18 PM EST
i don't detect a gloating tone to his writing... a bit of a weary 'i told you so' perhaps, but i find the thrust good-hearted, or i wouldn't have posted the diary.

good to have some contrasting opinions!

i happen to agree with him that most of what most people understand as the modern world is not to the species' general benefit, and it looks like mother nature is coming to a similar conclusion.

it's not the modernity per se that's the problem... and yes, there is much to admire and love in the progress we have made over the ages.

the sooner we concentrate on that, and quit screwing things up on such a massively idiotic scale, the less doomsday predictions will fascinate us, whether through attraction or repulsion.

the book looks a lot more positive, from reading the reviews at amazon, course...it is fiction...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Mar 7th, 2008 at 03:06:59 PM EST
[ Parent ]
I don't think his views are that far off. Our views are all partially defined by our inner emotional life, but with him, it's close to all consuming, similar to the proverbial doomer on theoildrum.com. Every paragraph he writes is suffused with his inner chaos, shame, and American arrogance (Americans know it's up to us to save the planet). There are authors out there saying similar things with far greater intellectual discipline.

As with many people into this topic, he underestimates how long the elites can string this arrangement on. He, like most doomers, has an intense emotional desire and need to see immediate change (of whatever kind he desires), or at least substantive change in his lifetime, when the most likely outcome is, IMO, a many decades long march into misery before nuclear annihilation or a multi-millennium length sustainable civilization comes out the other end.

you are the media you consume.

by MillMan (millguy at gmail) on Fri Mar 7th, 2008 at 05:07:39 PM EST
[ Parent ]
good points all...thanks for clarifying. you could be right about the outcome.

he is melodramatic, and we are right to cultivate suspicion about hype.

i think the situation merits a melodramatic response, trimmed with  snark for sure.

he does well on both, imo.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Mar 7th, 2008 at 05:28:48 PM EST
[ Parent ]
. . . but events of more recent days only tend to confirm Kunstler's view.  The news that "the recession" is not "coming, maybe" but here now has finally reached the MSM in the US, for example, ABC News this evening (Friday, March 7).  The Dow lost another 400 points in the last two days, and plunged through January's lows.  The MSM aren't using the D-word, yet, but give it time.
by keikekaze on Fri Mar 7th, 2008 at 10:38:49 PM EST
exactly...

i think it's so scary that most people don't want to use their imaginations about this, and that depletes our ability to be as creative as we need to be.

kunstler has the stones to go there, and use his skills to dream a future that doesn't flinch from seeing (and being) the writing on the wall, yet goes beyond to try and prepare us for the aftermath.

damage limitation before the greatest damage is done.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Mar 8th, 2008 at 03:11:55 AM EST
[ Parent ]
It gives me the shivers because I see no way for any part of the world to make this a ´smooth transition´.

Nice wake-up call for people who don´t know what´s going on.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Wed Mar 12th, 2008 at 05:09:11 PM EST
yup, it's like dreaming you're in a barrel and heading over niagara, i find. you hang on best you can, and let go of any expectation other than you will 'move into the moment' as never before.

when i think of the possible sadness and tragedy in the probable offing, and get depressed about it, i remind myself that it's no picnic for most humans now, so now is tragic too, mostly because so much of our culture and civilisation has gone off the rails, and thrown away so much of our hard-won heritage in exchange for a gaudily wrapped mess.

thanks for dropping by, metavision, i thought this diary was dead and buried! i know you've been really busy with the elections there...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Mar 14th, 2008 at 06:51:36 PM EST
[ Parent ]


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