It's a curious symptom of the consensus trance zombifying the American public and its auditors in the media that something like a "recovery" is now deemed to be underway. And, as events compel me to repeat in this space, it begs the question: recovery to what? To Wall Street booking stupendous profits by laundering "risk" out of bad loans with new issues of tranche-o-matic securitized paper? This I doubt, since there isn't a pension fund left from San Jose to Bratislava that would touch this stuff with a stick, even if it could be turned out in collector's editions of boxed sets. Does it mean that American "consumers" (so-called) are awaited momentarily in the flat-screen TV sales parlors with their credit cards fanned-out like poker hands, ready for "action?" Not too likely with massive non-performance out in cardholder-land, and half the nation's electronics inventory wending its way onto Craig's List. Are we expecting more asteroid belts of new suburbs carved in the loamy outlands of Dallas and Minneapolis, complete with new highway strips of Big Box shopping and Chuck E. Cheeses? Go to banking's intensive care unit and inquire (if you can) among the flat-lining production homebuilders and the real estate investment trusts on life support when they expect to rev up the heavy equipment.
The idea that we're about to resume the insane behavior that induced the current epochal malaise of economy is so absurd it will only be heard in the faculty dining halls of the Ivy League. And if America is not picking up where it left off eighteen months ago ― the orgy of spending future claims on wealth unlikely to accrue ― then what is our destiny? Based on what's out there in the organs of public thinking, it seems that we don't want to think about it.
So many forces are arrayed against a return to the previous "normal" that we will be lucky, in another eighteen months, to still find ourselves speaking English and celebrating Christmas. What's "out there" is a panorama of mutually reinforcing critical problems pertaining to how we live on this continent. Like the obesity, heart disease, and diabetes that plague the public, these problems are disorders of lifestyle habits and the only possible "cure" is a comprehensive revision of lifestyle. With the onset of spring weather and the cheez doodles and monster truck rallies and NASCAR tailgate barbeques and the drive-in beer emporiums all beckoning, can the public public shift its attention from these infantile preoccupations to saving its own ass?
So far, the most striking piece of the economic fiasco is the absence of any galvanizing spirit among the millions getting crushed in the tragic unwind of our relations with money. It will be interesting to see, for instance, if there is any uproar over the evolving story of Goldman Sachs's latest raid on the US Treasury, after booking billions in taxpayer-funded payouts funneled through AIG, based on double-hedged credit default swaps. Such magic tricks are understandably hard to follow, but a dozen-or-so federal attorneys with a middling background in differential calculus might suss out the trail that leads from Ben Bernanke's work station to Lloyd Blankfein's cappuccino machine.
Something similar may be said in regard to revelations last week of White House economic advisor Larry Summers' connection with a number of hedge funds shoveling millions into his deep pockets for showing up once a week to cheerlead their "innovations" ― not to mention his shadowy visits to the Goldman Sachs gravy train even after he signed onto the Obama campaign. As long as the stock markets seem to rally ― no matter what else is really going on in America ― nobody will pay much attention to these disgusting irregularities.
Since it is that time of year, and I am haunting the gardening shop, one can't fail to notice the many styles of pitchforks for sale. My guess is that the current mood of public paralysis will dissolve in a blur of blood and spittle sometime between Memorial Day and July Fourth, even with NASCAR in full swing, and the mushrooming ranks of the unemployed lost in raptures of engine noise and fried cornmeal. It doesn't take too many determined, pissed-off people to create a lot of mischief in a complex society.
On the agenda in the second quarter of '09 are ominous rumblings in the oil and food sectors. Half a year of cratered oil prices have decimated the oil industry and we're driving at 100-miles-an-hour straight off a cliff into a new kind of supply crisis ― even if industrial production and global exports remain moribund. So many drilling rigs are being decommissioned that the oil industry itself looks like it's preparing for its own death, investment in exploration and discovery has withered with the credit markets, and the world may never recover from the year long hiccup in oil industry activity ― translation: peak oil is biting back now with a vengeance. Its peakness will look peakier and the yawning arc of depletion beyond will look steeper and pose a threat to every globalized and continental-scale enterprise in the known world.
So many dire elements are ranging around our food production system (i.e. farming), from widespread drought and water table depletion to "input" shortages (especially fertilizers) to sickness in credit availability, that we're all one bad harvest away from something that will make Pieter Bruegel the Elder's "Triumph of Death" look like Vanity Fair's annual Oscar Party in comparison.
Barack Obama, charming as he is, had better drop his pretensions about kick-starting the old consumer economy, fire the Wall Street clowns and parasites who are running that futile exercise, and start preparing a US Lifeboat Economy aimed at reducing the scale and scope of our outlays so we can survive the coming siege of austerity. Meanwhile, I'm glad that he finally got a dog for the White House, because the President knows full well where to turn in Washington if you want some genuine love and affection.
Let the whining commence…
I think your history is off about FDR. He was the primary mover behind Social Security, CCA and WPA legislation and other legislation that pulled the US out of the Great Depression. Hoover was a boy doing the bidding of big finance ― like Bush, he and unregulated markets got us into the financial messes then and now.
FDR is my favorite president.
Not interested in your newsletter. Have already cancelled.
Hoozah! Saves me the trouble. Honestly, if FDR is your favorite president, you should never have received this newsletter.
Trust us, we have our FDR history straight. That you tout social security as a noble accomplishment says plenty.
Gary,
Your newsletter is as clear and fair evaluation of our plight as anything could be.
However, I suspect there are many things which could be done to improve the outcome, some of which come quickly to mind.
First, immediately decrease those activities which are costly and ineffectual. Start with our foreign billeting of military troops, our expansion of military activities of any kind. Stop all transfer payments to agricultural entities. Decrease taxes. Force all insolvent banks through the FDIC process, letting those which have a viable business be resold to new private investors after having stripped off the old shareholders, bondholders and managements. Stop all TARP expenditures. Absolutely stop any transfer payments to any investment banks, hedge funds or other non-bank investors.
Second, announce generally the intended contraction of government, so that those on the public dole would see that it was going away over some reasonably short period.
Third, adopt a gold-backed currency. In the years to come people will need to save and invest (the expression "the economy runs on credit" used to be "the economy runs on savings and investment"). We need to get back to that, and a gold backed currency would be necessary to protect those savings from an incompetent government. A probable concurrent event should be the extinction of the Federal Reserve Banking system, but that may be more politics than it's worth.
Fourth, if you have to invest in infrastructure, reinvest in railroad transportation systems for both freight and passengers. It may not be as convenient, but its costs are a fraction of the current highway and subsidized fuel systems, and transport is essential to the survival of the society.
Fifth, create a public dialog about the stewardship required in public office. Public corruption in the coming crisis will represent the greatest threat to democratic institutions. The current level of public corruption is fatal, whether in the example of Fannie and Freddie's demise, or that of Goldman being on the receiving end of taxpayer largess.
I'm sure that in an hour every one of your readers could come up with ten others. I am terribly unhappy with the current circumstance, but not prepared to starve to death in the dark. If our society is broken, let's "fix" it, but let's do it from our side, the producers, workers and savers, not from those on the dole and those who pander to them. We do have to cut back on consumption. We do have to "lower our living standards." But that's not a complete analysis. The question is, what will we preserve?
Preserve? Ultimately nothing. Every life, every civilization, every species comes to an end.
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