Fullblown Panic

      January 21, 2008

     Knees knocked last week from sea to shining sea as the shape-shifting monster of economic reality cut a swathe of destruction through the markets and financial ranks. The exact nature of this giant beast still remained largely concealed in a fog of accounting gambits, policy blusters, and reporting dodges, but a few intrepid scouts who glimpsed the behemoth up close said it looked like Godzilla with Herbert Hoover's face.

       George W. Bush, tried to appease the beast by offering each American adult the dollar equivalent of half a month's mortgage payment -- with the exhortation to drive forthwith to the nearest WalMart and blow it on salad shooters and plasma TV's -- but Hooverzilla just laughed at the offering and pounded the equity markets further into the dust of loss, while the "bank-like" guardians of wealth lay in the drainage ditches bleeding from their ears and eyes.

     My favorite moment was seeing Treasury Secretary Paulson and one of his fellow shaved-head deputies at a press conference rostrum frantically trying to calm the news media rabble like a couple of extraplanetary high priests from a Star Trek episode -- the batteries having run down in their laser wands, and their incantations ("liquidity! liquidity!) veering into mystifying glossolalia.

     I resort to such admitted extreme hyperbole because it may be the only language that an infotainment-drunk society can still process in the face of an epochal calamity that will transform the lush terms of everyday life as we've known it into something like a bleak surrealist landscape in the manner of Tanguy. That crashing sound out there is the armature of confidence needed to support an economy based on faith that borrowed money will be paid back. It's as simple as that. (Doesn't seem so exciting now, does it?)

     The United States is so broke, its people at every level from the Federal Reserve on down don't know whether to shit or go blind. The homeowners cringing in the media rooms of their 5000-square-foot personal family resorts don't know how long they can stay put microwaving pepperoni hot pockets with the default clock ticking. The mortgage "servicers" don't know how they will persuade interested parties like, say, the Illinois State Cafeteria Workers' Pension Fund (holder of X-amount of mortgage-backed securities underwritten by, say, Merrill Lynch or Deutsche Bank) to foreclose on properties scattered everywhere from Key West to Bainbridge Island -- or if there is actually any legal mechanism known to man that would make it possible to "work out" the sliced-and-diced collateral. The millions of maxed-out credit card holders and the issuers of their plastic are stuck together paddling a leaky tub in a sea of troubles every bit as wide, deep, and polluted as the one the mortgage junkies and their enablers are sinking in. The developers of malls, office parks, and power centers are weeping into their filing cabinets as the harsh daylight of insolvency stops the orgy of "consumption" and the retail tenants pack up their unsellable goodies for the liquidators, and the rent checks stop arriving in the mail, and the notes on this mall and that mall enter the eerie realm of "non-performance." And, of course, there are the genius wonder boyz and Wall Street playerz whose algorithms and turpitudes underwrote the script of this horror show -- for all I know they'll end up laughing into sugary skull drinks on a beach in the Cayman Islands, or doing Chinese fire drills in federal prison (or simply ass-fucked on the granite countertops of their Tribecca aeries by mobs of angry, repossessed, swindled former American dreamers pouring into Manhattan from the tract house dormitories of New Jersey and Long Island).

     There's a lot to be concerned about out there. I don't mean to be too cute about it. But, as the master once said, nothing is funnier than unhappiness.

     A whole closet full of "other shoes" is now waiting to be dropped. Surely the biggest clodhoppers in the closet belong to the hedge funds, representing trillions and trillions of dollar-denominated "positions" which, however hallucinatory, had previously yielded enough real "money" year-by-year to keep all the realtors and Humvee dealers in the Hamptons goose-stepping to Goldman Sachs's drumbeat. These "positions" can't help now from moving into counterparty crisis territory, especially as the bond insurers such as MBIA and Ambac go up in a vapor, and if that happens the damage could be so colossal globally that Stephen Hawking might have to be brought in to run the Federal Reserve.

     This is going to be a rough week. Fastening your seat belts may not be enough for this ride. Better superglue yourselves to the floorboards and pray for God's mercy.

Comments

[Matt Savinar]

Jim,

Great blog post as usual although nothing beats the line you had a while back about how "the Big Boyz at the hedge funds are going to end up as worm compost".

Is it possible that as a fellow Peak Oil Prophet 'O Doom I can get your new email address?

Best,

Matt

[Matt Savinar]

I foroot, here is my email address: matt@lifeaftertheoilcrash.net

[seancb]

"The homeowners cringing in the media rooms of their 5000-square-foot personal family resorts don't know how long they can stay put microwaving pepperoni hot pockets with the default clock ticking. "

As I sit here at work (in a post secondary school building), freezing my ass off because the boiler is broken, I wonder how the suburbanites will be able to afford heating their two and a half storey tall foyers? And what about the new Wal Marts and Canadian Tire stores, and even the Shoppers Drug Marts? They all appear to be about the size of 3 zeppelin hangars apiece. Most of us are under 7 feet tall, is there a reason these places need 30-foot ceilings?

The dollar goes down, fuel prices go up -- and there are not a lot of trees around to burn for heat. Not to mention the smoke from this many people burning logs would choke us all to death.

Little did we know when we were learning about longhouses in grade school that the communal-building-with-central-fire would be the only thing keeping us alive in our later years? If things continue along this path, it's coming. We can't afford to each live in our own protected bubble much longer.

Get to know your neighbours... now!

[Dave]

Dear JHK

The image of the Big Boys getting ass fucked on their granite topped kitchen counters had me damn near holding my sides I laughed so hard. Hell is hard and the only thing we bring there is our capacity to laugh. So in the spirit of we who are to enter those realms keep on making us at least have chuckle or two on our journey. This is D reporting from the Last Barrel Saloon where Old Dr. Karma mutters into his drink "Payback is a bitch !"

[Perfectscotty]

Excellent post James ! This last week, when the dow plunged 307 points in the last hour of trading I thought things over and decided that it was time. I moved all of my previously money making funds within my 401(k) into a stable income (3.5%) fund in it - what else can you do besides cash the whole thing in and lose half of it ? Guess that's my first hard choice so far in this mess and others are doing the same - "running for the hills" as it's termed here on CFN. Next week and next month will in fact be very interesting, the wheels will fall off slowly and steadily.

As for heating I live in southeastern Minnesota where it was a high of -2 F on saturday ! You think heating will be a priority for me in the future ? Send ball warmers fast !

[Flamsey]

C'mon people... get out of my way. My Lincoln Aviator is not designed to go this slow! The "administration" will pull us through this little bump in the road and we'll all be fine by the time the Super Bowl rolls around. PMA .. postive mental attitude. We can do it. We can all pretend it is all good and it will be. Now click you heels three times and get out of my way. I have gas to burn and the Disney Store is having a sale on sippy cups.

[Danimal]

I talk to my friends about this stuff and get looks similar to the one you must've received from yours - it's completely unfuckingfathomable to me how clueless people are. If you just read the goddamn newspaper ever day you'll actually be relatively informed of the basis for your eschatology.

What's interesting is that, in my mind, this shows not so much that the msm is dropping the ball (as they have oh so many times in the past) but rather how fucking glued to the "magic" of the NFL playoffs, Jericho (eschatology! Ha!), survivor and other reality-but-not shows, the masses flee their credit card bills into unadulterated escapism, brought to them in HD.

Next idea: Cloverfield as metaphor for the long emergency. Discuss.

[seancb]

The Secret!

All you need to do is want something and you can have it. Sounds familiar!

[scott]

"My favorite moment was seeing Treasury Secretary Paulson and one of his fellow shaved-head deputies at a press conference rostrum frantically trying to calm the news media rabble like a couple of extraplanetary high priests from a Star Trek episode -- the batteries having run down in their laser wands, and their incantations ("liquidity! liquidity!) veering into mystifying glossolalia."

You are right, it isn't a liquidity problem - it's a problem of solvency. We are attempting to grow beyond our means - and what I mean by means is energy. Energy production and distribution has leveled off and perhaps declined some over the past several years yet our expectations for growth has not.

We have a delusional government that thinks it can create wealth and energy out of thin air because we want it that way. We ignore and continue to ignore fundamental principals such as banks needing to profit from risk and home prices needing to be commensurate with median incomes. Our government is lowering interest rates despite an inflationary environment and directing greater lattitude for government sponsored entities Fannie and Freddie to spite banks requirement of profit from risk and homebuyers need to purchase a home they can afford.

The same idiocy exists regarding energy, we think we can divert vast acreage of food production for transportation fuel without losing anything.

Crude oil's abundance, energy density, transportability and versatility has given us a false sense of security to the point that we collectively believe that we can get something for nothing.

[jp]

All Hail Brave New HooverZilla-by-the-Sea-to-Shining-Sea!

Choice enormous breeder warren subdivisions still (and always will be) available. Your choice of granite counter tops with optional hedge fund manager receptacle(s) AND BONUS rusting Trail Blazers while supplies still last. (and they will) No Need to hurry! Sale won't end anytime soon! Come Early! Come Late! Won't Matter!

[Mike]

Jim,

Once again, you've managed to take a bleak situation and with your colorful language make me chuckle like someone who ought to be in a sanitarium. I'm looking forward to your new book.

[georgedunbar]

http://anthropik.com/2008/01/noble-or-savage-both-part-1/

[judetennessee]

Yeah, global melt down is a scary thing. I took my earning from precious metals and mining and all my money market and put into boring T-notes. I did that right before the high tech meltdown and it was a good move. These are scary times, what's a girl to do!! Keep up the good work Jim although it scares the bejesus out of me.

[Farmgal]

I do have to admit though, that if the feds want to send me a check to spend-I will happily do just that. I definitely have a list of stuff I wouldn't mind obtaining- don't have the ready cash for them and won't go into debt either- I missed out the last time they did this in the early part of the decade-2002?- didn't owe any taxes so got nothing when they sent out all those nice checks......

Am a bit concerned as to what impact this would have on the national debt- but it may be irrelevant at this point as we are so deep in doodoo.....

[Uncle Al]

http://www.mazepath.com/uncleal/bushgo.htm
Bush the Lesser outgoing
http://www.mazepath.com/uncleal/state.htm
Bush the lesser incoming

"I pledge to lessen employment until unemployment has nowhere to hide. I pledge to plague the helpcareless, help bury the old, and shorten the weak. I pledge to make poverty every worker's concern. I pledge to strengthen mortgage crises, raise interest rates for credit card debts, and inflatuate our dollar until a whole continental of Europeons cannot count high enough to make change for one of their coins. This work is already well begun."

[Nicholas Paredes]

A couple of articles this weekend match the discussions this morning. Will people chopping down their neighbors trees for hardwood, evolve into armed removal for heating fuel? The trees can probably heat that 30 foot foyer for a couple of hours!

Secondly, the solvency of Ambac was briefly discussed at the Economist. I love the brevity of the Economist. They assume one actually knows what is happening.

As these weeks keep extending to months and years, it seems more like Karma has come for us. As the “good word” states, the worst is saved for those who attempt to offer prophesies! Ouch. But, how can one not see the fear on the faces of those running the show? That shot of Bush, Cheney, and some monkey was a classic.

[Nicholas Paredes]

Ooops!

Don’t miss the plunging of world exchanges. Down nearly between 5% and 10% currently.

Tuesday will not be pretty.

[organicdairyman]

Please pardon my shameless self-promotion, but, here goes: As I've said before, If you think we need to build local food systems, invest in them.

New Business Promotes Regionally Produced Organic Food

All but unnoticed, a revolution is sweeping the American countryside. Agriculture is changing rapidly and profoundly, bringing costs and opportunities alike to rural areas like eastern Wayne County. The costs such as increased reliance on fossil fuels for long distance transport and the heavy use of antibiotics and pharmaceuticals in huge centralized livestock production are well known. But the recent rapid rise of interest in humanely produced and distinctive regional foods promoted by groups like Finger Lakes Culinary Bounty presented Rick Fessenden of Teri's Dairy in Savannah with an opportunity that he hopes to cultivate into a new business on his farm in 2008.

Fessenden and others incorporated Wayne County Organics in January to bring together a number of growers of fruit, vegetables and dairy products in a co-operative marketing venture. "We will initially be delivering organic produce, dairy products and frozen meats directly to customers in the Rochester and Syracuse area through Organic Home Delivery." Fessenden explains that Wayne County Organics will also work with local full and part time growers to increase production in Wayne County of organic products. To that end he hopes to begin production of organic yogurt on his farm this spring.

Fessenden and his wife operate Teri's Dairy a certified organic dairy located in Savannah NY. The Fessendens milk a herd of Shorthorns, a sturdy heirloom breed said to be one of the oldest recognized types of dairy cows. Shorthorns are noted for both high quality milk and beef production. Teri's Dairy currently sells fluid milk to an organic dairy co-op and also sells lean grass fed certified organic beef that is processed in a family owned Wayne County butcher shop.

Funding from Wayne County Organics will initially expand the farm's existing Organic Home Delivery business. Eventually Fessenden hopes to bring new producers on line. He notes there is a strong demand for nonfat organic yogurt, and for antibiotic free pasture raised meat animals both regionally and nationally and that demand now outstrips supply."I can't get enough free range chicken and people ask me for it all the time."

Eastern Wayne County, like other areas of upstate NY has experienced a slow decline of economic vitality in the so called "hollowing out" of rural America that has left family owned diners, hardware stores, and other small town business with a dwindling number of customers across the country. To date, few rural upstate NY towns have managed to find new businesses to fill the void left by a thirty year consolidation of food production.

Between 2005 and 2006 the U.S. Lost 8900 farms, about one farm per hour according to statistics posted at www.sustainabletable.org website. Even as the recognition of the importance of "food security" gains strength, our industrialized food production continues to consolidate. We now have less diversity and variety and more dependence on fossil fuel and extensive transportation systems than ever before. A recent survey of supermarket supplies of fruits posted at The Sustainable Table's website found that over 40 % came from abroad, and that 90% of American produced vegetables were coming from a single region of the country in California. Nearly all our supermarket meats also travel hundreds of miles from a handful of sprawling meat packing plants supplied by vast feedlot operations.

Awareness of recent increases in diseases such as diabetes, obesity, cancer, autism, fibromyalgia and others associated with modern diets and industrialized food production is also on the rise.

Many experts in both the culinary arts and human ecology believe a shift in consciousness will continue as people make connections between their health and their diets. Demand for food locally produced by holistic humane means will then grow, bringing more opportunity for local natural and organic food production.

While many Americans still remain ignorant of the consequences of industrialized food production, the founders of Wayne County Organics hope the growing sustainable food movement that builds communities through food will prove to also be good business for Wayne County family owned farms. Wayne County Organics is actively seeking investors with cash or with equipment, services and skills. Interested parties can contact Rick Fessenden at 607-240-1991 or at the home farm at 315-594-8119. The business has set up a website at
http://www.terisdairy.com

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[Philski]

I saw Cloverfield over the weekend. Make sure you see it because it's a terrific metaphor for what's happening in downtown Manhattan these days...

[David Mathews]

Uh ... should we expect a 4000 DOW tomorrow?

Tomorrow's going to be an exciting day. It shall be fun watching the talking heads on CNBC sweat and panic.

I've actually learned to enjoy watching CNBC since the meltdown in August. How far down does the stock market have to collapse before Jim Cramer's head explodes?

[David Mathews]

Thanks to a visit to Matt Savinar's website, I see that Jim Cramer's head is only days away from exploding:

http://www.cnbc.com/id/22728371

You know what ... instead of a check for $800 to $1600, the American government should send every American family a black American Express card with no limit.

"Shop 'til you drop!"

Our civilization is going to die with a bang. It is going to get extremely ugly in the United States of America once all of these families realize that all of their dreams are destroyed and they can only expect the bleakness of perpetual poverty and scarcity in their future.

Good think that Patriots are 18-0. Americans will need a distraction over the next several weeks as our future evaporates away.

[Holmes, I presume]

georgedunbar, that was an interesting article. It reminded me of Brandon’s comment about being a hunter in world of farmers. Anyhoo… I hope that you’re staying warm.

[bud4wiser]

Shucks, I thought this group was about PO - now I find out its some kind of "economic" news letter.

JK, repost this article in Feb, 2009, more people will "get it" then.

Thanks to Saint Bif, Nudge, Scott and others, some of the weekend content was most excellent. And in a disturbing way, it seems the more we post, the more often you're likely to read something you would have written yourself.

JK, there's no panic, please get hold of yourself. While I hardly claim to know the future, I can assure you its unlikely any brokers will be lynched this week.

And as I've said, you have to wait until the next ass plays dictator (Feb 2009) to find out how the public takes the news.

The last 8 years of kool-aid drinking will certainly make reality a bitter to swallow next year. Who knows? Some Washitonians may even mention things like gas taxes and mass transit development.

[greenbeans]

I'm going to not think about the state of affairs today as I sit on my pail in the middle of a frozen lake. Hey seancb, "the communal-building-with-central-fire" -good comment. Time to go fish.

[Nudge]

Bud4, glad you enjoyed the weekend show. Sheesh, this place is like a peer-reviewed study group sometimes. I'd like to thank everyone for the fine education thus far.

After seeing those numbers that GB posted recently on transportation efficiencies, I'm going to go out on a limb here and say that while light passenger rail is great for moving vast numbers of people quickly within a very dense metro area, it's almost certainly not the endpoint solution for those of us who live and/or work out in suburban or rural areas. With that in mind, I'm going to try to do a little more work on that small, lightweight 1-seater 3-wheeled hybrid vehicle that can be made fairly simply.

In the meantime, there's a bit of a meltdown out there happening! Thankfully it's someplace else besides the lake where GB is!

Jim, great post again. :)