Shocked, shocked!

September 17, 2007
     Alan Greenspan's memoirs are being flogged across the airwaves, bandwidths and printing presses, and the cohort of those who comment on public affairs in these media are shocked by the Maestro's confessions -- first, that a housing bubble emerged out of his leadership in the banking sector, and second that the Iraq war is about oil. As usual, they're getting it all wrong -- about as wrong as Al himself got it. But that is the way of things in this age of cultural dissipation and gross cognitive dissonance.

     Greenspan claims he had no idea that his cutting of interest rates to near zero would produce any irregularities in the US economy. Apparently he hadn't noticed that the Big Fund Boyz called him "Easy Al" for a reason. Or that when you introduce nearly free "money" (as in "available for lending") into a system of financial trade, the recognition of risk tends to evaporate. As the nation's chief bank regulator, Greenspan also apparently failed to notice the upsurge in dodgy lending practices previously only seen among mafia loan sharks, drug dealers, or twelve-year-olds playing Monopoly.

     But the really funny part of all this is that the media columnists are acting as though the American public got hoodwinked by Al. Which raises the question: just what the fuck was the public thinking when they bought half-million dollar houses on salaries under 60-K, taking out no-money-down, interest-optional balloon mortgages and other tricked-up contracts? The answer is: they walked into these arrangements with their eyes open because they thought they could get something for nothing. They thought the trend of steeply rising house prices would continue indefinitely and enable them to wiggle free of any hazard by flipping their houses to an endless supply of greater fools who would be there waiting to turn the very same trick. And the smoothies downstream in the mortgage and banking rackets were no less guided by avarice when they cooked up their formulas for bundling half-baked mortgages into tranches of tradeable securities. Easy Al may have failed to notice what was going on here, but then so did everybody else from The Wall Street Journal to the Securities and Exchange Commission.

     This, of course, represents an insidious psychology. It could only happen in a culture that has come off the rails mentally, so to speak, as ours has in the sense that nobody has any sense of consequence, neither the leaders nor those who affect to follow the leaders. The leading religion in America is not evangelical Christianity, it is the worship of unearned riches, and its golden rule is the belief that is is possible to get something for nothing. Its holy shrines are Las Vegas and Wall Street. (And, by the way, has anybody heard the evangelical Christians complain about Las Vegas? They complain about a lot of things, but are themselves among the greatest believers in unearned riches -- given their preference for prayer over earnest effort in the service of solving life's problems.)

     No, the American public, including the cheerleaders in the media, have only themselves to blame for the bitter harvest now underway in the asset and credit markets. And thus it would be a salutary thing for Baby Jeezus, or the forces of nature, or whatever powers guide the universe, to now kick the shit out of them, so to speak, financially, because that is exactly what the American public is full of, from top to bottom, from George W. Bush at his lonely desk on Pennsylvania Avenue to the pitiful, bankrupt householders of Orange County and Boca Raton.

     Now, as to the shock of Al's revelation that the Iraq war is about oil -- the media and the public have got this all wrong, too. The logic here seems to be that because the Iraq war is about oil it is therefore unnecessary, optional, a mistake, an indulgence, something we should not dirty our hands in. In fact, the Iraq war is not about oil, per se, so much as it is about America's behavior here at home, about the choices we make for how we live on this continent. None of those who complain most loudly about our military presence in Iraq have advanced any proposals for reforming how we live here -- and hence for our enslavement to oil, much of the world's remaining supply of which happens to be in the neighborhood of Iraq. When these complainers start complaining about the ubiquitous acceptance of suburban sprawl and abject car-dependency -- and this includes the environmental boy scouts out there who want to get merit badges for buying hybrid cars -- then they will deserve to be taken seriously. Until then, the American people have got exactly the grinding war that they deserve. Let them whine about it all the way to the Nascar tracks, and let them console themselves with giant plastic bottles of Pepsi Cola and buckets of chicken raised on corn grown with oil byproducts.

     On CBS's "60-Minutes" show last night, Greenspan, in his new role as a private sector economic consultant made predictions for the coming months in the US economy. He declared that the financial sector would get over the current credit squeeze as if it were a mild case of indigestion brought on by one too many fried won-tons at the all-you-can-eat buffet, a mere burp, allowing the public to move on to the crab Rangoon and a helping of General Tsao's chicken. This gets back to the previous point about the Iraq war and oil in particular. Al doesn't get it. CBS's sycophant reporters don't get it. Nobody gets it. We are entering the zone of the long emergency in which the primary resource needed to run the industrial economies will become scarce, expensive, and profoundly destabilizing to markets and to normal life, such as it is known in this country. And the current problem in the markets is a reflection of the resource bankruptcy we are facing. Our problems are not about credit, they are about permanent insolvency.

     In his old age, Alan Greenspan's face -- once darkly handsome in his youthful years as a jazz musician -- has taken on the strange appearance of a circus clown. Something about the way his lips have settled into a kind of thick fatuous smile, even when he is apparently not amused by anything. Is it one of God's clever little tricks to leave him looking like a clown in his valedictory years, or has his face just resolved into the perfect embodiment of leadership for a clown nation?

Comments

[XER]

They will start to leave the suburbs when they begin to resemble Sadr City.

[oneEyeOpen]

" OEO, respectfully, those living in the distant suburbs will have to relocate themselves closer to the public assistance centers."

So, well over 150 million people are going to have to relocate. Sure. Shouldn't be a problem. They'll move into all of those unoccupied inter-city penthouses. Cool.

[Laura Louzader]

JK, your post is great but, in regards to the housing and credit bust, only echos what is being said by others,

It was obvious in 2003 that the housing "bull" market was manufactured by easy credit, and I was offered a smorgasboard of "suicide" adjustable loans. I declined. Either the prices have to back off or I have to be better-employed. A friend and colleague in the mortgage business felt similarly-which did not stop him from offering whatever was available to whoever wanted it.

He only figured that, hey, these people are adults, and they can read a contract or have a lawyer read it and make the decision.

No one made anyone buy a place for 4, 5, 6X or worse, their income. No one made anyone lie on a mortgage application. No one made anyone get a $400K cash-out-refi on her house she bought in 1979 for $50K.

I knew the crap was overpriced, other people knew, and anyone could have figured it out simply by looking at the local fundamentals, such as median incomes and rents. The property should not sell for more that 160X the monthy rent, and that's maybe on the high side. No one should borrow more than 3X his income, and that's a little on the high side. Figure 2.5X your income if you are going little or no down.

Those of you out here who are disgusted with the feeding frenzy of 2001 through 2005, and want prices to drop to affordable levels in keeping with fundamentals, and who also don't want to have to pay the bill for other folk's self-indulgence and magical thinking while you are saving for a down payment and waiting for reasonable prices in your rental apt, go to http://petitiononline.com/bailout/ the petition being circulated by Taxpayers Against a Wall Street and Mortgage Bailout, and sign, if you haven't done so already.

As it is, we will all be paying very dearly in terms of economic distress nationwide for this binge. Let's not destroy our currency and remaining financial credibility by engineering a bailout for piggish, self indulgent buyers and greedy lenders.

[wombatmissile]

"let them console themselves with giant plastic bottles of Pepsi Cola"

http://www.theonion.com/content/radio_news/plenty_of_soda_still

[Ry1111]

Americans won't abandon their suburbs just because it is less economically or resource-reality sound to build more of them. Mostly, because they will have nowhere else to go. They won't abandon the suburbs. They will be spending a shitload more time in them, in order to save up for the daily commutes. You may be seeing extended families packing into certain types of suburbs, just to maximize the money.

The cost of the the housing bubble is typically stated as the depreciation and collapse of so many mortgages. but it is compounded by the general collapse of most old towns and real cities.

Lawyers and scholars grow up in these suburbs and come up with a shitload new amount of rules and laws and regulations and ways of following them, so we end up with ever more decay and ever more useless laws and rules for guiding our conduct in life.

As for what outsourcing has made possible---cheap merchandise and advertising: Everytime a few people get food poisoning they recall millions of pounds of meat or spinach. Yet the quality or sheer quantity of shitty entertainment we produce in this country generally makes 80 percent of its customers less intelligent, less healthy, or just plain less Good, than they otherwise would have been. Whether it is shitty mtv "reality" programming, celebrity infotainment, or Hip Hop. Even Country music is guilty..it just gets people more ostentatious and knaive and hungry.

[artiefacts]

"But one has to be curious, be proactive, has to activelly seek the truth. Truth is no longer delivered to your doorstep."

Good points, but even the curious and proactive disagree on the 'truth.' The Bush administration didn't just make a few accidental misstatements, they orchestrated (and continue to orchestrate) a masterful, ongoing deception of almost everyone in the US. Powerful media figures played along with the fraud, as do influential Christians and corporate leaders. How do you expect Joe Sixpack and Jane Mallwalker to be more curious and proactive than the digerati?

Enter Kunstler telling the little people that they have "the war they deserve" because some of them are driving their new Prius to the farmers' market, oblivious to how misguided and deluded they are.

We don't deserve this war - no one does. Cheney and the neocons get the blame for this one. We need to end it now and put our house in order.

[RJG]

"..believers in unearned riches -- given their preference for prayer over earnest effort in the service of solving life's problems."..

Great piece of writing Jim..
David Pogue was featured on CBS Sunday Morning yesterday doing a piece entitled "Could The Electric Car Save Us?"..

"http://www.cbsnews.com/stories/2007/09/06/sunday/main3239838.shtml

More giddy self-congratulations that "great minds" have come up with new (old) ways to keep the cars running at all costs!..
Yippee..

It's astounding (I'm repeating myself for the millionth time; my friends are sick of listening to me here) that the "great minds" of our time.. cannot seem to (seems pretty simple and straight-forward to me) THINK... BEYOND... THE... CAR...
It's like it can't be done..
They can't do it..
There must be a missing gene or something..
These people today on this planet..
cannot envision a life (even to save themselves) that's not centered around the car..
They can't do it..

It's like a Twilight Zone episode..
Rod Serling, if alive today, would be writing the greatest shit ever..

[can you see it?]

I do agree with Jim that the American Boy Scouts who drive hybrid cars (actually - I drive a Prius...) want our troops home but have no idea the true cost. That is, the end of the “American way of life.”

I’ve gone to environmental rallies and peace rallies - on my bike. All I see is a field of cars and a lot of self-centered activists chanting the chants. Don’t they see what would happen if we leave Iraq? Aren’t they willing to change?

I have to wonder...

[sirbikes]

I agree RJG, as I demonstrated that fact a week ago with a link to a blog discussing local development in my area. One guy called building a new road "out-of-the-box thinking". Merely suggesting alternative transportation will get you ridiculed around here. If you ride a bike they will honk and buzz you and ask when you got your DUI. North Carolina, Nascar headquarters and redneck capital of the world. The level of ignorance here never ceases to floor me.

Nobody is going to give up their Hemi's around here. They'd rather riot or just lay down on the ground and die rather than change their ways.

Yesterday I rode 45 miles on my bike. Nearly got killed on a two lane road with no shoulder when a jerk in an SUV decided he wanted to pass at least five cars and pulled into my lane despite knowing I was there and kept coming right at me. Didn't give a shit. Anyway, I'm still alive and had a great ride and today I'm riding again.

But I can't see any of these people riding bikes. It's hopeless. They're gonna be marooned in the suburbs with only their belly fat to live on.

In cycling they say to drink before you are thirsty. That also can be applied to the world today: dig the well before you are thirsty.

We reap what we sow.

[Movenonup]

Sirbikes and other cyclists here,

Do you think we will be able to manufacture our own bike parts and tubes and brakes and stuff? Will the roads be passable if they are not maintained? I know we can't see into the future. I am a cyclist and I was trying to think "what should I buy for my bike now while my dollar can get me what it can, today?"

[Holmes, I presume]

MOU, I'm not an avid cyclist, but these seem like something to consider for your list.

http://www.airfreetires.com/

A gun rack (or its functional equivalent) probably wouldn't be a bad idea either.

[wombatmissile]

sirbikes, it's everywhere--it doesn't have to be rednecks. Whether it is a motorist with an annual income of only a few 10Ks or a motorist who is a millionaire... Whether it is NYC, North Carolina or anywhere. People in cars feel they and their Chitty Chitty Bang Bangs have absolute rights to the road. You're just in their way. Who rides bikes anymore when you can get a Prius?! Get with it. Bikes belong off the roads--they are not tools of transportation. They are merely fun play toys for exercise, and to make use of while you're vacationing...

The pro-cancerous car growth people have been around since the good old days of Robert Moses. It's no individual, it is the borg collective of human idiocy, and it marches onwards. It is everyone and no one. (Just like Iraq "may" be about oil.) They tore down the old beautiful Penn Station and put up a rat cage office building and sports/concert venue in its place (I think we just found our location for the Yergin head lopping sacrifices!) Motorists won't hesitate for a second in asserting their "rights", after all, they are the ones with their foot on the pedal, directing a few tons of moving steel. You're just measily using your weak legs in a futile attempt to project you forward... The cliche: might makes right. Make way for the commuters and the suburbs, they're what drive the economy, after all. Mass transit and biking is a joke. Soon enough we will have Expeditions that can run on Vivoleum. Do your part and volunteer yourself up to be made into food for the good of the road, and those with the rights to it.

[Holmes, I presume]

Vivoleum -- “Put a Primate in Your Tank” ™

[Andy in San Diego]

oneEyeOpen: "So, well over 150 million people are going to have to relocate. Sure. Shouldn't be a problem. They'll move into all of those unoccupied inter-city penthouses. Cool."

I think the point is it _will_ be a problem.

As for cars, here in San Diego many people are quite considerate of bikers. And in my area, where there's lots of (poor?) college students, there are lots of people getting around on bikes, especially beach cruisers. Maybe there's hope. (A little.)

But in the interested of fair and balanced reporting, this past weekend we (Mission Bay) hosted the thunder boat races. So when I say a little, I mean a leeeeetle.

[artiefacts]

"Don’t they see what would happen if we leave Iraq? Aren’t they willing to change?"

Why don't you ask them if they see what would happen if we leave Iraq? I'll bet you most of them have more of a clue than the average citizen.

And I'll bet they're more will to change than average too.

Do you talk to people at these rallies, or just stand around thinking about what hypocrites we all must be for exhaling CO2?

[thal]

DanaJ,

Sounds like time to sell. If you're married you have up to $500K worth of appreciation to gather tax-free.

[thal]

If anyone here is willing to produce a You Tube question directed at the "candidates' debate" it might be:

'As President, what are the first three things you would do if there were a supply interruption of oil shipments through the Straights of Hormuz, be it embargo or war?'...the follow on question might be 'If that's a realistic possibility, why not institute those three things as policies right now?'

Why not outlaw NASCAR now, immediately adopt gasoline rationing now, start rebuilding our passenger and freight infrastructure now? Enforced powerdown?

I'll tell you why. Because our entire system (aka: arrangements/derangements are legal, political, social) is unimodular - reactionary. Sad part of the whole deal is that reactions only go so far. They invariably fall at the onset of revolutionary discontinuities. It's the only way they reform themselves, in spite of themselves.

[Nudge]

Lovely post, Jim, and many of the following comments here are right on the money.

MOU, I too was wondering that about bikes. Specifically I'm trying to figure out what kind to buy based on what the roads might be like a few more years into the decline. (As far as I can tell, the decline has already begun, since there wasn't any springtime or summertime refilling of last winter's potholes around here.)

Oh well, to the CFNers who still watch television news, all I can recommend is that you appreciate it for its humor content. It's not good for much else.

[thal]

OEO,

I feel safe to say, it is not "the silliest thing" you've ever heard.

[thal]

wombat,

On foot, I never challenge things bigger than myself, despite my pedestrian 'right of way'. Consider the 19 year old UC student surrounded by a two ton SUV whilst she laughs on her cellphone, putting on her makeup, and careening down Clifton Avenue, oblivious to me...doesn't matter if the 'Walk' sign is lit in my favor. Flattened is flattened even if, "in our rights"

[sirbikes]

wombatmissle that was hilarious. I guess we're truly screwed. Even the Chinese are trading in their bikes for cars. The car that ate the world.

You can keep a bike running indefinitely. And you don't need roads for bikes.

[thal]

What is Vivoleum? Good word, you make that up?

[Holmes, I presume]

thal, you’re right that “reactions only go so far”. For real systemic change to happen, many reactions have to happen over time, and build upon each other. As for the system being “unimodular”, mathematically, doesn’t that have something to do with transforms that map one kind of matrix onto the same kind of matrix??? Sounds like wombat bait to me. : )

The following commentary about the Roman Revolution rings strangely familiar:

“Failure of the Republic”
http://www.the-orb.net/textbooks/westciv/romanrevolution.html

“Why had this happened? The causes are myriad and complex, and I shall not try here to sort the all out, but I'll list at least the more important factors.

One was the failure of the Senate. The Republic was, in its essence, the Senate, and in the crisis of the late Republic, the Senate proved itself unworthy. In the face of need for radical reform, it proved too conservative and unwilling to change. The example of citizenship for the Italian allies illustrates this.

Moreover, the Senate proved unable to provide great leaders when they were needed. The great figures of the late Republic were men who went outside the Senate for their careers. To set against them, one can find only Cicero, and he came much too late.

Also, the Senate failed to follow a consistent course. Opportunism and self-interest dominated, and as a body the Senate proved unable or unwilling to place the interests of the Republic foremost.

The crisis that put the Senate to the test, however, was not of the Senate's making. There were flaws in the Roman state, flaws that, once exposed, could neither be repaired nor hidden again.

Most notably, Rome was not protected against military dictatorship. Once the army got involved with politics, as an instrument for political ends, no one was able to get it out again. In the end, the army alone dicated the course of Roman politics, and that spelled the Republic's doom.

Connected with this was the use of political violence. Roman law and politics was unable to deal with the political gangs, the assassinations, the terrorism, the proscriptions. Starting with Tiberius Gracchus, the story of the Roman Revolution is in part the narration of the increasing reliance on force to achieve political ends. The end of that narrative covers a quarter century of almost unbroken civil war. Few political structures could survive that.”

[thal]

Movenonup,

A human powered land transport device is only as good as the surface on which it rides. Nudge is, I think, trying to develop a vehicle consisting of nothing much more than recycled aluminum cans, that rides on abandoned railways. She might also incorporate shortwave radio two-way communications as part of the package.

[thal]

Holmes, as usual, you have the hot hand perspective. I mean that. A fount. I think, relative to the Roman Empire, the obviousness of it's seeds of destruction was when a horse was made a member of the Roman Senate. Damn, when was that, Caligula? Please illuminate, because I am unsure.