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.

     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. The great nations of the world will be scrambling desperately for the world's remaining oil supplies. It will not be a friendly contest, and anyone who thinks that current trade relations and capital flows will continue despite that is liable to be disappointed. (Are you reading this Tom Friedman?)

      Long before the mathematical projections of oil depletion play out, the oil markets themselves -- and all the complex operations that they comprise, such as drilling and exploration, and the movement of tankers around the planet -- will destabilize and seize up. We will no longer be any oil exporter's "favored customer." Many of the exporters will enjoy watching us suffer. Contrary to the political platitude-du-jour, the USA will never become "energy independent" in the way we currently imagine. Rather we'll become energy independent by being deprived of imported oil, and we'll be thrown back on our own dwindling supplies -- which means that we're not going to run our system of daily life the way it has been set up to run. When Americans can no longer run their cars on a whim, they will simply go apeshit and you can kiss normal politics goodbye.

     The financial system that emerges from this cataclysm, and the economy it serves (which is supposed to be the master of its capital deployment "arm," not its servant) will likely be modest to a degree that will shock and embarrass everyone currently connected with what we have lately called finance. If it even trades in paper, that paper will have to stand for something based in reality, either a productive activity or a genuine asset. It may take decades for this society to even regain the confidence necessary to operate such an elementary system -- or it may not come back at all, at least as far as the horizon lies before us. That's how bad the mischief and the damage has been.

      It's not hard to understand why the Bernankes, Paulsons, Lawrence Kudlows and other public representatives of capital keep pretending that everything is under control. On the other side of their pretenses lies disorder and hardship. One wonders, of course, what they really see in their private minds' eyes. Do they actually believe that the statistics issued by their serveling agencies amount to a plausible picture of reality? Are they so lost in their fantasies of "management" that they think they're controlling events?

     My guess is that their credibility is spent. In the weeks ahead, nobody will know who or what to believe. We may even run out of questions to ask as we just all collectively stand there in a thrall of wonder and nausea, watching the nation's financial house burn down.

Comments

[Gulland]

DerekK, I know what you mean about the vacant houses needing mowing this summer. I have a very good relationship with my bank, and I have considered becoming their 'yard man' as a side business in the summer, and the 'snow plow man' in the winter. The property owner (the bank) has an obligation to keep things tidy and safe.

I think I'll call my business 'Bonepicker Lawn Service'.

Gulland

[Johnny Rico]

Half Of UK Men Would Swap Sex For 50 Inch TV

REUTERS
February 8, 2008

LONDON - Nearly half of British men surveyed would give up sex for six months in return for a 50-inch plasma TV, a survey -- perhaps unsurprisingly carried out for a firm selling televisions -- said on Friday.

Electrical retailer Comet surveyed 2,000 Britons, asking them what they would give up for a large television, one of the latest consumer "must-haves."

The firm found 47 percent of men would give up sex for half a year, compared to just over a third of women.

"It seems that size really does matter more for men than women," the firm said.

A quarter of people said they would give up smoking, with roughly the same proportion willing to give up chocolate.

[oneEyeOpen]

Move on Asks:

"So I have been looking at Silver, not Gold, as a way to anchor my dollar somewhere. I read a goldbug site claiming that while gold has gone up 67% in the last couple, silver has gone up 147%."

Move,

Be cautious regarding metals. Why, you may ask? History. In 1980 I went to a jeweler to have a design made into two wedding bands. At the time, gold was selling for $840.00 per ounce. From that point on gold sank. Not returning to the 800 plus level until recently. (And this at a suspect level of nervous activity.)

Regarding silver. There was a period in which the Hunt brothers (of Texas oil fame) tried to corner the market on silver. Before it was all said and done they had driven the price of silver to over $50.00 per ounce. Then the regulators moved in, the Hunt's got spanked and the market collapsed.

If you were to begin buying either gold or silver today, you would be coming in at a very high price. True the price may go higher still but if you do a little homework on metals there is a history book full of names of individuals and companies that have gone bust trying to time the metals markets.

Don't get me wrong, I currently own two different gold stocks so it is not as if I have a total aversion to metal but I'm not willing to gamble everything on my timing and my level of committment to any one area of investment. Proceed with caution.

[LaughingAsRomeWasBurningDown]

Dr. D, another good Eagles ref for you:

you call someplace paradise, kiss it goodbye.

[Methane of Cawdor]

How about a Zappa reference:

It won't blow up and disappear. It'll just look ugly for a thousand years.

[Citizen Bob]

The Cure - Disintegration

Lyrics:

oh i miss the kiss of treachery the shameless
kiss of vanity the soft and the black and the
velvety up tight against the side of me and
mouth and eyes and heart all bleed and run in
thickening streams of greed as bit by bit it
starts the need to just let go my party piece

oh i miss the kiss of treachery the aching kiss
before i feed the stench of a love for a younger
meat and the sound that it makes when it cuts
in deep the holding up on bended knees the
addiction of duplicities as bit by bit it starts
the need to just let go my party piece

but i never said i would stay to the end so i
leave you with babies and hoping for frequency
screaming like this in the hope of the secrecy
screaming me over and over and over i leave
you with photographs pictures of trickery
stains on the carpet and stains on the scenery
songs about happiness murmured in dreams
when we both us knew how the ending would
be...

so it's all come back round to breaking apart
again breking apart like i'm made up of glass
again making it up behind my back again
holding my breath for the fear of sleep again
holding it up behind my head again cut in deep
to the heart of the bone again round and round
and round and it's coming apart again over and
over and over

now that i know that i'm breaking to pieces i'll
pull out my heart and i'll feed it to anyone
crying for sympathy crocodile cry for the love
of the crowd and the three cheers from
everyone dropping through sky through the
glass of the roof through the roof of your mouth
through the mouth of your eye through the eye
of the needle it's easier for me to get closer to
heaven than ever feel whole again

i never said i would stay to the end i knew i
would leave you with babies and everything
screaming like this in the hole of sincerity
screaming me over and over and over i leave
you with photographs pictues of trickery
stains on the carpet and stains on the memory
songs about
happiness murmured in dreams when we both
of us knew how the end always is...

how the end always is...

Listen:
http://www.youtube.com/watch?v=S5_CROC3Xh8

[UncleYarra]

JR,
You're reading the article all wrong, it means that British men would have "Swap sex" with a 50 inch glowing transvestite for 6 months.

[Holmes, I presume]

UY… got it all twisted up! The 47 remaining firm men in England would give up half-wit sex, if fiddy cent agrees to donate plasma to a transvestite of his choice! You got the transvestite part right, anyway.

http://www.worth1000.com/entries/137500/137875InPM_w.jpg

[OGH]

What was that?
LONDON - Nearly half of British men surveyed would give up sex for six months in return for a 50-inch plasma TV, and the other half would give up television for ever to have sex once.

[Holmes, I presume]

LOL, OGH... conflicting signals from London these days. ;-)

[Pollyanna]

Gee, I thought Tom Friedman and Kevin Pollack were the Champions of Inaccurate Prediction-land, but JHK really deserves that mantle more, as he has apparently been foretelling economic collapse of stellar proportions since the early 1990s. Where else but America can someone who is wrong 99.9% of the time keep being sought out for advice by seemingly intelligent people? USA - land of the free, and home of the unaccountable babblers.

[Holmes, I presume]

Effete assholes!!! Don’t they know that sony dlp totally outclasses plasma?

http://www.youtube.com/watch?v=xfGJ1TXWngw

[LaughingAsRomeWasBurningDown]

I went up to the mountain, Apocalypse dreams in my head
There was fire upon the horizon but it was just the sunrise turning red
Maybe it's time, maybe it's time . . .

Each night I walk to the edge of the city out to where the darkness begins
Made a promise out here a long time ago and I've been waiting ever since
Maybe it's time, maybe it's time . . .

My world has become an empty place
Of great, wide landscapes and weird painted skies
Strange patterns and islands of light
And people move as shadows never touching at all
I've never been afraid to die, maybe scared to live

I've been across every ocean just chasing after storms
My crew long dead or deserted now and the seas nothing but calm
Maybe it's time, maybe it's time - to turn the ship around

Apocalypse Dreams by Justin Sullivan

[Slater]

Blackberry outage: http://news.yahoo.com/s/ap/20080211/ap_on_hi_te/blackberry_outage

[Slater]

Basically everyone who has been predicting eminent financial collapse has been right. The signs have been there for some time. Predicting exactly when is the tricky elusive/fool hardy part. But the closer we get to it the more impending it seems.

[Nudge]

OEO, in your 15:47 post above you spoke of the 1980 high gold price of $840/oz. Umm, sorry to be the one to point this out, but that was $840 in 1980 dollars, which would be roughly $3,000 in today's dollars. Gold still has a long ways to climb. It'll probably be above $1,250 by the time our election rolls around here in the UPL.

Besides, like I keep trying to explain, gold is not for making money off temporary price changes, like flipping condos or flipping stocks. Gold is meant to be kept until such a time as one absolutely must spend it. It's not for making you rich, it's for keeping you from going broke. It's money that knows no national borders and is immune to inflation, rust, and compound interest.

[Dave]

fookin' brits yre lame.

i love thier somewhat overwieght bigtitted wenches though. but who dosen't? probably 1eye.

what's the matter, you don't like gold, or women? fucking pussy.

[Dave]

i fuck gold bars for supper, that's what i do. i don't eat. i just fuck gold bars. get it? cause i love gold and women. not like a little limp dick brit like you.

[UncleYarra]

Hey UPLers,
Can you guys buy minted coins in PM that are gauranteed by the US government? I've heard of liberty dolalrs, but they're not government backed are they?

[Dave]

if i could find a woman made of gold, i'd marry her, or it, whatever.

[Dave]

uncle y,

i've got some gold coins that i'll sell ya. thier purity is guaranteed by me personaly.

[Dave]

we can buy anything here. really, we can.

[Dave]

so yeah 1eye, why you brit dudes got limp dicks?

[UncleYarra]

How can they be pure after you've had your way with them for supper?

[Dave]

i mean i don't have no limp dick. holms got a stiffy. dc is like a fucking steel pipe, day and night. GB wants it. JR breaks bricks with his. doom mutherfucking just scairy and shit. and you hangin' like a fucking overcooked noodle. what's fucking wrong wit you. yuo needs some fucking viagra and shit. don't dey have that shit in england? you are fucked up.