Baby girl of family living on Natchez Trace Project, near Lexington, Tennessee
Ilargi: I threw away four times more today than I kept. There are times when the parade of dunces becomes a bit much. As you may recall, we’ve had David Axelrod, Joe Biden and Laura Tyson in the past two weeks, all talking for teh WHote House, and igniting the discussion on a second Obama stimulus. Today, the big shots are at bat. Larry Summers and Obama step up to the plate to douse the fire they themselves lit, while Geithner praises Bernanke in what will be the latter’s epitaph. Everything’s going according to careful script.
I was watching Missing today. So I’ll get you Engdahl's take on things, even if he's the loose barrel he is. Sometimes it's good to remind ourselves that the guys responsible for today's mess have been at it for a long time. There's nothing new except for the fact that this time it happens at home. It doesn't take much for a man to start seeing his fellow men as faceless pieces of meat that can be discarded at will and for a profit. From Southeast Asia through South America to Iraq, it’s a sordid history. And proclaiming ignorance and innocence won't help you much, not when you've enjoyed the spoils.
Full Spectrum Dominance
For the faction controlling the Pentagon, the military industry, and the oil industry, the Cold War never ended. They engineered an incredible plan to grab total control of the planet, of land, sea, air, space, outer space and cyberspace. Continuing ‘below the radar,’ they created a global network of military bases and conflicts to advance the long-term goal of Full Spectrum Dominance. Methods included control of propaganda, use of NGOs for regime change, Color Revolutions to advance NATO eastwards, and a vast array of psychological and economic warfare techniques.
They even used ’save the gorilla’ organizations in Africa to secretly run arms in to create wars for raw materials. It was all part of a Revolution in Military Affairs, as they termed it. The events of September 11, 2001 would allow an American President to declare a worldwide War on Terror, on an enemy who was everywhere, and nowhere. 9/11 justified the Patriot Act, the very act that destroyed Americans’ Constitutional freedoms in the name of security. This book gives a disturbing look at the strategy of Full Spectrum Dominance, at what is behind a strategy that could lead us into a horrific nuclear war in the very near future, and at the very least, to a world at continuous war.
Doomsville
Lest anyone was thinking of turning bullish after listing to the siren calls of Bond and Winder, we present the following counterpoint.
From an email doing the rounds in the City of London on Friday morning (The author is an MD at one of the big banks):US Housing
It lead us into this recession & it will likely lead us out. -This asset class is the collateral spine of household & bank B/S. It remains a sine qua non for the mkt. Unfortunately, foreclosure filings are +18% yoy (May), the mort delinquiency rate (9.12%) is a record, prime defaults have just doubled (yoy) to 2.9%, new and existing home sales are still barely off their Jan lows (you’d need to see a 50% increase from here to be consistent with flat gdp), unsold inventory is still at 10.2 mths (even without shadow inventory from banks & Securitised Mort Trusts), 30% of mort are in negative equity & rising, -18.1% hse prices is still ugly….
US Consumer
Too much debt, not enough credit. -Declines in the housing & equity mkts have removed c$14tr from his net worth (Fed) at a time when he’s 3x the leverage of 20 yrs ago & carrying $13.5tr of debt. That process of de-leveraging is just starting. Delinquencies on Home Loans just hit 3.5% (ABI), a number that will grow in tandem with unemployment & US Personal bankruptcies (ABI) were +35% last seen. Look at the recent & salutary examples of the banks and Japan’s lost decade to remind us just how painful & prolonged the de-leveraging process can be.
The savings rate just hit 6.9%. It has reverted to 10% in prev deep downturns. That cld be exacerbated by a baby boomer generation who in previous recessions cld get credit & had a higher propensity to spend (in their 30’s) but who now can’t get credit & have a greater propensity to save (as they’re now in their 50’s).
The latest non-farm number (-472,000) wasn’t just worse than expectations, but was worse than the very worst print seen in either of the ‘80-’82, ‘90-’01 or ‘01-’02 downturns. Initial Jobless yesterday were better, but Continuing claims were worse (& a record high). Unemployment (beware the lagging mantra) is relevant because this is a credit related crisis & unemployment’s continued rise to & thru 10% (The Congressional budget is based on 8.1% ‘09) will generate more delinquencies & foreclosures. Moreover, the “leading” indicator components of the non-farm report-Hours worked (still at a record low & with a 70% correlation to GDP) & Temporary Hires (-37/-) are still showing falling leaves rather than green shoots.
Credit cards (the lender of last resort) are seeing record charge offs (Moody’s:-10.6% vs 9.9% in Apr) & cc outstandings are falling at a 20% annualised rate with consumer credit contracting by over $50bn since Lehman hit the tape. Remember, the consumer is just starting, not just ending his de-leveraging process.
US Insiders
A vote of No confidence. -51% of CEO’s (Business Roundtable) expect lower capex (the inventory replenishment is now a given for the mkt) & 49% expect lower payrolls going fwd. -Directors sold $2.9bn of stock in June (Trimtabs). The Sell/Buy ratio is a monster 10x, so the green shoot callers might be selling it, but the Corp insiders aren’t buying it.
US Dividends
70% of US equity rtns since 1900 (LBS) have been generated by dividends. -In Q2 just 233 S&P names raised their divi (a record low) & 250 names actually cut (2nd worst ever reading).
US Valuation
Valuations are not at a level that discounts any ongoing negative news. -Mkt bottomed (666) on 11.7x. The ave of of the last 11 bear mkts (where over 70% have seen a lower bottom) has been 9.9x (Haver) & there’s nothing ave about this recession. -Going all the way back to 1929 (NDR) and we find that PE multiple expansion has averaged 10% in the first 3 mths & 22% in the first 6 mths of recovery. We just clocked up 40%! With the “P” already there we need the “e” to catch up real fast to validate this rally.
US Technicals & Volume
Better to wear out than rust up? -Dow has broken its 8300 Head & Shoulders neckline support & 200 day move ave (FTSE has broken its 4295 Triple Top neckline, 200 day & failed to breach its channel top). Dow theory (DJT has failed to validate the main index highs) is also firmly in the bear camp. S&P has been clinging on by its fingernails but the breach below its 200 @ 887 & a subsequent fall below major support @ 875 wld frighten lots of rabbits.
-Ave daily vol has contracted by 30% on the S&P & c 50% on the Dow over the last 3 mths (Trimtabs). -Bear mkt bottoms (19 going back to the war) have typically been associated with steady eddy rallies on good vol (Hussman). The 4 episodes that were the exception & saw rel light vol also only rallied modestly. We’ve just belted the biggest rally since the Depression on thin vol with just slightly less depressing news….which reminds me of the Sage of Omaha’s axiom that “you can’t make a baby in a day by making 9 women pregnant”.
Light trading vol (compounded by higher vol on recent down days vs lower vol on recent up days), and a diminished response to “positive” news imply that we don’t need to see strong selling pressure to roll us over some more. Just buyer’s fatigue. And we need to beat (a 62% beat rate in Q1) not just meet consensus eps forecasts for Q2.
US Issuance
Today’s problem or tomorrow’s promise? May clocked up $64bn & June was similar. The prev record issuance was $38bn. There have only been 12 mths since ‘98 that Corp issuance has exceeded $30bn & the ave rtn of the S&P over the nxt qtr was btwn -4% to -7% (Trimtabs)
US Quotes (recent)
Moody’s:-”US housing wont hit bottom until 2010″.
Hayashi (Jpn Economy Minister) “The US economy has yet to hit bottom”.
S&P:- “CMBS credit deterioration is just beginning” ($400bn of commercial property re-sets to y/e). I think this space is armed & dangerous.
IMF:-”The retrenching of the US consumer is a huge adjustment that the whole global economy is going to have to absorb”.
Buffett (who’s a bull remember) “I had a cataract op on my eye recently & I still can’t see any green shoots”.
Moody’s:-”US housing wont hit bottom until 2010″. Hayashi (Jpn Economy Minister) “The US economy has yet to hit bottom”. S&P:- “CMBS credit deterioration is just beginning” ($400bn of commercial property re-sets to y/e). I think this space is armed & dangerous. IMF:-”The retrenching of the US consumer is a huge adjustment that the whole global economy is going to have to absorb”. Buffett (who’s a bull remember) “I had a cataract op on my eye recently & I still can’t see any green shoots”.
US/China
Our knight in shining armour. But… -The US is 25% of global gdp & China is 8%. -6% Chinese gdp grth (which we’re all now excited about) is actually still consistent with an ongoing global recession. -For every 1% that the US consumer shrinks, the Chinese consumer needs to expand by 6%. -Jpn shipments to China dropped -29.7% in May (-25.9% in Apr). -1/3rd of China’s gdp are exports (47% for Asia)….& those mkts are still contracting. People are talking up de-coupling again, despite the fact that that particular chocolate teapot got melted before.
And finally:
California, Russian banks, CMBS, Sovereign risk (Baltic states), Swine Flu….
Still bullish?
Geithner: Stimulus Working, Derivatives Blindsided Government
Despite persistently high unemployment, Treasury Secretary Timothy Geithner said Friday the Obama administration's economic stimulus plan is on the "expected path." "There's been substantial improvements in arresting what was the worst recession globally we've seen in generations," Geithner told lawmakers Friday. Geithner's remarks came amid waning public support for President Barack Obama's economic policies. Republican critics say the rising unemployment rate is proof that the $787 billion stimulus has not helped reverse the effects of the recession.
"I was just wondering, where do you think your plan went wrong?" asked Rep. Bill Posey, R-Fla. About 2 million jobs have been lost since Congress passed Obama's stimulus package in February. Unemployment now stands at 9.5 percent, the highest in 26 years. Some Obama allies have been calling for Congress to pass a second stimulus package. Geithner said the rate of decline in the economy has slowed, consumer confidence has improved, the financial system is healing, and concern about a financial meltdown has receded.
"Those are critically important signs of initial progress," Geithner said. Geithner said joblessness is an inescapable element of a recession and that unemployment continues to rise even as an economy begins to improve. Without the stimulus, he said, more jobs would be lost. Rep. Michael Rogers, R-Ala., challenged Geithner's assertion that business and consumer confidence was improving. "People are scared to death," he said. Geithner countered that the recession was a long time in the making and that recovery will take time as well. "We do not yet have an economy that's growing again," he said, "and I think it is likely it will take a while to grow out of."
Geithner's defense, before a joint hearing of the House financial services and agriculture committees, came in the midst of his call for greater government control over the generally unregulated but complex derivatives market, which he said contributed to the financial crisis. "Establishing a comprehensive framework of oversight is crucial," Geithner said in his opening remarks to a joint hearing by the House agriculture and financial services committees.
Despite apprehension among Republicans, the effort to add government restrictions to these more freewheeling financial instruments has support within the Democratic-controlled Congress. Indeed, Financial Services Committee Chairman Barney Frank is planning derivatives provisions that that are even stricter than what the administration is proposing. Derivatives are financial instruments whose value derives from something else, such as a mortgage-backed security or a commodity like oil. The allure of the over-the-counter derivative, as opposed to those swapped on exchanges, is that it can be individually negotiated and tailored to meet the specific needs of the buyer.
Under the administration's plan, so-called standardized derivative contracts would be traded on regulated exchanges or trading platforms. Dealers would be regulated, and participants would have to meet capital requirements to prevent over-leveraging. Banks and other parties would still be allowed to enter into customized contracts outside regulated exchanges, under the Obama plan, but the transactions would have to meet more reporting requirements.
Frank, in an interview with MSNBC after the hearing, said he would further limit the ability of businesses to enter into individualized derivative contracts. "We will specifically be requiring that in almost every case derivatives go on an exchange ... or a clearinghouse, that there not be these individualized deals," he said. "And if people are going to make individualized deals, they're going to have to have a lot more capital behind it."
Frank also said he would call for a ban on so-called naked credit default swaps, a type of derivative where buyers have no risk of exposure. Some Democrats have called for fewer customized derivatives contracts and a few have urged that some derivatives, such as credit default swaps, be banned.
The administration's proposal, part of a broader overhaul package, has opposition from much of the financial industry, which says it would raise costs and squash innovation. The industry insists any legislation be flexible enough to permit businesses to tailor contracts to meet their specific needs and not standardize all derivative contracts. Lawmakers have also questioned Obama's proposal to give more power to the Federal Reserve. On Friday, 17 members of the House Financial Services Committee, including three Democrats, sent Obama a letter asking him not to expand the Fed's authority until it is known whether Fed Chairman Ben Bernanke pressured Bank of America Corp. to acquire Merrill Lynch.
Geithner warns on looser European regulation
US Treasury Secretary Tim Geithner on Friday expressed concern that any move by Europe to allow looser rules on derivatives trading could prompt a shift overseas by traders eager to evade a US clampdown. The Obama administration is proposing to force greater transparency in the often opaque world of derivatives trading by forcing more of the financial instruments to be traded via standardised contracts and through central clearing houses.
Standardised contracts would have to go through central clearing while counterparties of customised over-the-counter trades would have to hold more capital to mitigate increased risk. Mr Geithner told a hearing of rare joint hearing of the House financial services and agricultural committees on Friday that there was “much more convergence” internationally on derivatives reform than on previous issues. However, he added: “There is a tendency in Europe to try to come up with a European solution... That is one example where frankly I’m a little concerned.”
US officials are worried that looser regulations in Asia and Europe could prompt the derivatives industry to engage in regulatory arbitrage. Facing domestic opposition to increased transparency for derivatives from businesses and from parts of Congress, Mr Geithner is also looking to head off the risk of the market moving to another jurisdiction. Barney Frank, chairman of the House financial services committee, pledged draconian sanctions against any country that tries to take advantage of tighter US rules to grab market share.
He told a hearing on Friday that legislation on derivatives would include “strictest possible sanctions for any outlying country like that” to the point that it “loses access to the American banking system”. The proposals still face a threat from inside the US, with some companies and Republicans arguing that they could impose undue costs and some Democrats advocating the banning of some products, such as credit default swaps. Mr Geithner told the joint House financial services and agriculture committee hearing that he did not intend to ban so-called “naked” credit default swaps, which give purchasers the ability to speculate on the creditworthiness of a company without holding an underlying bond.
He agreed with a suggestion that banks had a vested interest in keeping derivatives contracts as opaque and complex as possible to maintain high fees. “You want to make sure you’re not listening just to New York and Chicago,” he said. However, some non-financial companies that make extensive use of derivatives to hedge against volatile moves in markets - such as airlines mitigating the risk of a higher oil price - are fighting against more costly trading rules.
A collection of business groups, including the US Chamber of Commerce, wrote to legislators on Friday to ask that they “prevent an anti-derivatives sentiment from translating into anti-business legislation”. In his testimony, Mr Geithner left open the door to a future merger between the Securities and Exchange Commission and the Commodity Futures Trading Commission, whose combination the administration shied away from recommending. “There are a lot of compelling reasons made by people in this room and many others over a long period of time for merging both those agencies,” he said.
Obama Dismisses Idea of Second Stimulus
President Barack Obama on Saturday dismissed the idea the nation might need a second stimulus to jolt the economy out of recession and urged Americans to be patient with his economic recovery plan. Faced with rising unemployment numbers and criticism from Republicans who have already labeled the $787 billion stimulus a failure, Mr. Obama used his weekly radio and Internet address to remind voters that reversing job losses takes time.
He criticized Republicans for opposing the stimulus but offering few alternatives to the worst recession since the Great Depression. And he rejected talk of a second stimulus, an idea that has been discussed by Democrats and even famed investor Warren Buffett. "We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity," Mr. Obama, who is visiting Ghana on Saturday, said in his recorded message.
The stimulus included $288 billion in tax cuts, dramatic increases in Medicaid spending, about $48 billion in highway and bridge construction and billions more to boost energy efficiency, shore up state budgets and improve schools. The plan "was not designed to work in four months," Mr. Obama said. "It was designed to work over two years." Since Mr. Obama signed the stimulus into law, the economy has lost more than 2 million jobs and the unemployment rate has climbed higher than the White House predicted it would have ever reached without the stimulus.
Some companies say stimulus money helped avoid layoffs. Independent government auditors found that stimulus aid to states helped keep teachers off unemployment lines. But overall job numbers continue to suffer. Republicans have seized on this opportunity to criticize the president, but they have struggled to find their collective voice. At a news conference Friday, Republican lawmakers criticized the White House for spending so much, while simultaneously saying the administration wasn't spending it fast enough.
With the Obama administration now pushing for a costly overhaul of the nation's health care system, Republicans are casting Democrats as liberals on a shopping spree. In the GOP's weekly address Saturday, Virginia Rep. Eric Cantor, the House Republican whip, accused the Democratic-controlled Congress of reckless spending and careless borrowing. Though the Republican stimulus proposal this January had its own deficit-pushing price tag of $478 billion, Cantor and Republicans are trying to make their case against President Obama as one of fiscal restraint.
"For the stimulus alone, Washington borrowed nearly $10,000 from every American household," Cantor said. "Let me ask you: Do you feel $10,000 richer today?" In his speech, Mr. Obama twice referred to "cleaning up the wreckage" of a recession that began on President George W. Bush's watch. But with Mr. Obama's poll numbers slipping on economic issues, Republicans want to lay the economy at the president's feet. "This is now President Obama's economy," Cantor said.
Lunch with Larry Summers
Larry Summers, director of the US president’s National Economic Council, usually eats at his White House desk or sitting around a nearby table with other members of the economic team. But today, for Lunch with the FT, Summers’ aides have persuaded him to walk down the stairs to the Ward Room, a windowless alcove near the White House mess. The dark-wood panelling and nautically themed paintings are meant to evoke a naval officer’s dining room but these grace notes are muted by the plastic cutlery, paper plates and drinks sipped straight from their plastic bottles.
As he flips open a plastic box of Caesar salad with grilled chicken and unscrews the cap of a bottle of Diet Coke, Summers makes small talk – his son’s killer swing on the golf course, his own weekend tennis plans. But Summers – whom I first met as an undergraduate 20 years ago when I dropped into his office at Harvard to ask about the economic advice he was giving to the leaders of what was then the Soviet Socialist Republic of Lithuania – is not known for his casual conversation.
Today, dressed in a navy suit, white shirt and blue and white tie, with dark circles under his blue eyes that are not entirely hidden by his tan, the 54-year-old seems particularly focused on work. President Barack Obama’s decision last year to appoint Summers to lead the NEC was a surprise. From 1999 to 2001, Summers had served as Bill Clinton’s Treasury secretary and he was thought to be up for that job – if he, as a former Clintonite, were to have any role at all in the new administration.
But, instead, the Treasury went to Tim Geithner, and ever since Wall Street and Washington have been abuzz about the relationship between Summers and his former protégé – and about the balance of power between the two men and other economic heavyweights in the administration. As the Obama team has coalesced, Summers, who leads a daily economic briefing for the president, has seemed to emerge as the strategic mastermind of the administration’s macroeconomic response to the biggest crisis since the Depression.
His post and his past give him a unique perspective on the similarities and differences between Obama and Clinton. Summers is (in)famous for his bluntness but even he knows better than to tackle that question head-on. Instead, he praises the current president for the no drama Obama temperament America first discovered in the heat of last year’s primary battle. One source of that “calm, measured” outlook, Summers says, is Obama’s determination to use his presidency to effect long-term change – no matter how pressing the immediate problems.
“The president made two things clear to us early on,” recalls Summers, who answers my questions in full, idea-packed paragraphs, rocking gently back and forth in his seat as he gets into the flow of an argument. “He would do what he had to to fix the banking system, to get the economy out of the rut in which he was inheriting it. But he had run for president to do long-run, fundamental things, like fixing healthcare, like having real energy policy, like reforming education. And we weren’t going to be distracted from those things.”
Obama’s most important political calculation has been this decision to press ahead on all these fronts at once – and the success or failure of his administration will rest largely on whether that was the right call. This combination of long-term reforms and an immediate crisis reminds me of the last global financial meltdown I watched Summers, then deputy secretary of the Treasury, help navigate. It was 1998, the year of Asian contagion and Russia’s default and devaluation. Emerging market veterans of that crash have taken a certain bitter pleasure in pointing out that this time their former rescuer and scold – the United States – is at the centre of the world’s crisis, and in observing that Americans seem markedly less keen on their own unpalatable medicine now that they are the patient.
“I don’t think I would quite accept the characterisation that we’re in the position that the Russians were in in 1998,” Summers says when I draw the comparison. “The crises that we addressed during the 1990s internationally, in almost every case, took the form of a foreign lack of confidence in a country that led to a mass withdrawal of funds and made reassuring foreigners the central priority. That’s why interest rates often had to be increased. The American problem this time has more in common, at least qualitatively, with the Japanese post-bubble problem, where the issue was not reassuring foreigners but maintaining sufficient domestic demand to push the economy forward.”
He does, however, concede that fire-fighting feels different when it is your own home that is alight: “There have been moments, certainly, when I understood better some of the reactions of officials in crisis countries now than one was able to from the outside at the time. It is easier to be for more radical solutions when one lives thousands of miles away than when it is one’s own country.”
Between that financial meltdown and the current one, Summers lived through a crisis different in scale and substance but perhaps even more personally challenging – his tumultuous leadership of Harvard University. That experience, I suggest, may be the first time in a golden career when something went wrong for Summers. The son of two economists and nephew of two Nobel laureates in economics, he went on to become an award-winning, tenured Harvard professor of economics when he was just 28, then moved to top jobs at the World Bank and the Treasury. From there, following George W Bush’s election, he glided into the nation’s most prestigious academic post, becoming in 2001 president of Harvard. That role came to a rocky end in 2006, when he resigned under pressure from faculty critics. I ask what the episode taught him.
With a slight grimace – the question has been asked many times before – Summers offers his standard, Kissinger-esque line: “Harvard and Washington are both political environments and I’m not sure that Washington is the more political of the environments.” Beyond that, he allows that the “negative” lesson he learnt at Harvard was the need to “maintain focus on your top priorities and avoid diversionary controversies that were apart from the agenda”, a possible reference to comments about women and science that helped to scupper his already-troubled tenure.
Summers is more forthcoming on how his thinking has been influenced by his recent, part-time stint as an adviser at the hedge fund DE Shaw – a job that created a brief political flurry this spring when financial records released by the White House showed that Summers was paid about $5.2m (£3.2m) in salary and other compensation in the last of his two years at the firm.
The chief intellectual casualty of the current crisis has been the “efficient markets” school – the theory, associated with such erstwhile laisser faire gurus as Alan Greenspan, that market participants are governed by rational expectations and markets are self-correcting. As an academic economist, Summers has studied the shortcomings of that approach but, working on Wall Street gave him, he says, a more visceral understanding of the “self-referential” character of markets: “Markets are concerned with the ultimate health of economies and the like but they’re equally or more concerned with what the likely judgments of other market participants in the short run are.”
Might this “more textured understanding” have caused Summers to reconsider some of his views from the 1990s – a time when he and former Treasury secretary Robert Rubin led a pro-market faction in the Clinton administration that some critics believe is partly to blame for the current crisis? (They cite, for example, Summers’ support for the 1999 repeal of the Depression-era Glass-Steagall Act, which had separated commercial and investment banking.)
Summers’ reply amounts to a qualified yes: “I think I always had the sense that our regulatory system was about the protection of individual institutions, and the important problems are often about the protection of the system. I was very worried in the 1990s about predatory lending, about systemic risk, about the stability of Fannie and Freddie. But the political constellation at that time didn’t offer a chance really to do more than report and warn about it. It’s a different world today. As Keynes famously said, ‘When the facts change, I change my mind.’”
Onward, then, to the toughest economic challenge Summers faces today: the recession. Here, Summers turns sombre: “I don’t think the worst is over ... It’s very likely that more jobs will be lost. It would not be surprising if GDP has not yet reached its low. What does appear to be true is that the sense of panic in the markets and freefall in the economy has subsided and one does not have the sense of a situation as out of control as a few months ago.”
As the panic has subsided, the trendy new economic issue has become “exit strategy” – as in, when and how do governments shift from costly and aggressive intervention to levels of spending and taxation that are sustainable over the long term? Summers rejects the premise of the question. “I actually think that the right measures for doing the right things about the long-run deficit will also increase confidence, hold down long-term interest rates and capital costs, make mortgages cheaper, make mortgage rates lower and so will contribute directly to recovery. So I don’t buy the notion that there is some conflict between the budget imperative for growth and some other budget imperatives.”
So far, so orthodox. What is different about the Obama team’s economic vision is their aspiration that once this crisis is over, the US economy will be in different, and better, shape than it was before the bust. This new American economy, Summers hopes, will be “more export-oriented” and “less consumption-oriented”; “more environmentally oriented” and “less energy-production-oriented”; “more bio- and software- and civil-engineering-oriented and less financial-engineering-oriented”; and, finally, “more middle-class-oriented” and “less oriented to income growth that is disproportionate towards a very small share of the population”. Unlike many other economists, Summers does not believe that lower growth is the inevitable price of this economic paradigm shift.
Summers admits that this rosy scenario depends on a lot more than the White House. Foreign policy watchers have tended to focus on the security issues this administration faces – the wars in Iraq and Afghanistan, the challenges of Iran and North Korea’s nuclear ambitions. But Obama’s most important international assignment may turn out to be coaxing the rest of the world into accommodating this reshaping of the US economy. As Summers puts it, “The global imbalances have to add up to zero and so, if the US is going to be less the consumer importer of last resort, then other countries are going to need to be in different positions as well.” On this possibility, Summers is bullish. “The very great enthusiasm for accumulating reserves that one saw globally is likely to be a smaller factor over the next decade than it has been in recent years,” he predicts.
Summers has managed to eat about half of his salad and is now munching on one of the blueberry macadamia nut cookies an assistant brought in midway through our meal. It seems like a good moment to ask him the question that has bedevilled White House-watchers since he was appointed to head the NEC: what exactly is his job? “My role is to make sure the president gets access to the best economic thinking he can on everything that touches the economy” he says loyally. “That means making sure that no arguments go unscrutinised ... and it means helping everyone on the president’s economic team make the best case for whatever policies they prefer.”
The notion of Summers as an intellectual handmaiden, “helping” others refine their arguments, is at odds with his reputation as a supremely self-confident intellectual bulldozer. Since he moved into the White House there have been a few, mostly anonymous, complaints about his unwillingness to brook dissent but the real story is that there hasn’t been any public falling out among the team of economic rivals Obama has assembled.
Summers is not easily seduced but he seems thrilled by the demands of his current job. “It is certainly incredible, as intellectually challenging as anything I’ve ever done ... What makes it so challenging and exciting, as well as exhausting, is the range of subjects.”
Even so, Washington rumour has it that the NEC isn’t big enough for Summers and that he regrets not leading the Treasury and yearns to run the Federal Reserve. Does he? “I am totally engaged by the breadth of issues that I am asked to think about to support the president.” I push one more time: “Even for you, that’s enough?” “That’s more than enough.”
Schwarzenegger plays it cool as he battles with California's budget crisis
Arnold Schwarzenegger faces the fight of his life. The "Governator", best known for slugging it out in Hollywood blockbusters as an indestructible cyborg, displays steely confidence as he battles California's worsening budget crisis. As some of America's biggest banks yesterday stopped accepting IOUs issued by the cash-strapped state in lieu of money, Mr Schwarzenegger defended his handling of the crisis and denied playing a high-stakes poker game with political opponents over California's finances.
"It's not about who blinks first," he told the Financial Times in a Bedouin-style smoking tent outside his office. "It's not a game of chicken." California, which would be the world's eighth-biggest economy were it a country, began its fiscal year last week without a budget because of political gridlock. Mr Schwarzenegger, its governor, is at loggerheads with Democrats in the state legislature who oppose making reform of the state's welfare and social services system part of a budget deal. He insisted the changes were vital to keep borrowing in check.
Bank of America, Wells Fargo and JPMorgan had set a time limit on accepting the IOUs, which California has been forced to print as it faces a $26bn (£16bn) deficit. That limit expired yesterday, raising questions over how much the IOUs are worth and how people will be able to cash them. California is reeling from the collapse of the housing market and the economic slump. Unemployment is running at more than 11 per cent, well above the national average.
Trouble for Treasuries Lurks as California Melts
It’s time for investors in U.S. Treasuries to toke up, or at least support offers by pot smokers to help narrow California’s budget gap by paying taxes on marijuana. Ludicrous as that legalization ploy may sound, California and its Governator aren’t in a position to dismiss any possible help. Neither are holders of U.S. government debt who would suffer if California’s slow-mo meltdown eventually ripples across the entire country.
So far, the prospect of a California collapse hasn’t worried investors outside municipal markets. U.S. debt holders piled into $19 billion of 10-year notes offered on Wednesday, pushing yields below 3.4 percent. And California isn’t going to fall apart in a matter of days. While the recent issuance of IOUs to cover some bills is unsettling, the state is able to meet most of its obligations. Governor Arnold Schwarzenegger and his dysfunctional legislators may even find a way out of the current imbroglio.
The possibility that banks such as Wells Fargo & Co. and Bank of America Corp. may stop accepting the IOUs as of today, for example, may spur legislative compromise. Even so, that’s not going to solve California’s long-term, structural issues. Today’s problems follow a similar budget mess, and a temporary resolution of a $42 billion deficit, in February. Unless California overhauls the way it is managed or the U.S. economy stages an incredible comeback, the state’s budgetary woes will only deepen.
While saying the state’s default risk “remains low,” Fitch Ratings downgraded California earlier this week. It said California’s governmental gridlock “could persist, further aggravating the state’s already severe economic, revenue and liquidity challenges.” Plus, the enduring recession makes it more likely that California’s $26.3 billion budget gap will worsen, especially since the state is at the epicenter of the housing crisis and has higher unemployment than much of the rest of the country.
So what would President Barack Obama do if given the choice between allowing a California default and taking on more debt on behalf of taxpayers? Do the math. It only involves one figure -- 55. That’s the number of Electoral College votes held by California, the most of any state. It would also be tough to let California go to the wall after saving Michigan and the United Auto Workers via General Motors Corp. and Chrysler Group LLC, not to mention keeping Manhattan afloat through the bailout of Wall Street.
Then there is the threat a California default poses to the entire U.S. municipal finance system. On its own, California’s almost $80 billion in outstanding debt is a small slice of the municipal securities market, which the Securities and Exchange Commission recently estimated at about $2.6 trillion. The problem: if California defaulted, already gun-shy investors would likely hustle out of municipal issues just to be on the safe side. The last thing shaky credit markets need is another run. That prospect would certainly stifle opposition on Capital Hill to any rescue.
Legislators are also mindful that mom-and-pop investors hold plenty of municipal debt. And a lot of them are senior citizens, the most-active voting block. Not that the administration would necessarily cast a rescue as a California bailout. A program to give all states a helping hand would be more politically palatable. Perhaps Stimulus Round II, already being floated in Washington, would be a possible vehicle. Or the federal government may choose to provide a backstop, rather than actual funds, for state and local debt.
That was what California State Treasurer Bill Lockyer proposed in May, when he asked U.S. Treasury Secretary Timothy Geithner for help. While a cash bailout would be the worst case for Treasury investors, even a substantial increase in government liabilities will cause angst. And, if California got such a backstop, plenty of other states and municipalities will want the same. “If the states’ debt burdens are piled onto the federal debt, it should further increase the cost of borrowing for the federal government,” says Axel Merk, president and portfolio manager of Merk Investments LLC, a Palo Alto, California-based currency fund manager. “I don’t think it will happen, but the risk of it happening is real.”
Even California’s efforts to buy time with IOUs hold risk. In 1932, Chicago was hit with “the largest and most important bank panic of the Great Depression” after the public lost faith in IOUs issued by that city, according to an article by Joseph Mason, a Louisiana State University banking professor. The acceptance by large banks of California’s IOUs, given their questionable value, is also “probably not prudent at this time,” Mason wrote. The flip side is that if California ever defaulted, and the federal government did nothing, Treasuries would probably rally on any market disruption. Investors who count heavily on that outcome, though, may already be smoking something.
Talks intensify over closing California's $26 billion deficit
Against a backdrop of IOUs and expanding government furloughs, Gov. Arnold Schwarzenegger and legislative leaders expressed optimism Saturday that they were moving toward a compromise that could end California's fiscal calamity. Negotiations to close the state's $26.3 billion deficit restarted after two weeks of inaction and partisan bickering. Top lawmakers from both parties said a budget-balancing deal was possible in the coming week.
"I would say we're getting very close to a general framework, but there are still outlying questions," said Assembly Minority Leader Sam Blakeslee, a San Luis Obispo Republican, after emerging from a closed-door meeting between lawmakers and Schwarzenegger. They negotiated about 2 1/2 hours Saturday before ending talks for the day. They were expected to return to the Capitol on Sunday. Negotiations centered on the extent of budget cuts — which are expected to range from $14 billion to $15 billion — and what other steps might be taken to close the deficit.
The shortfall, which is the difference between the amount of tax money coming into the state and its previously approved spending obligations, amounts to more than a quarter of California's general fund, its main account for paying operating expenses. Schwarzenegger and Republican lawmakers also want reforms to welfare, pension, health care and in-home supportive service programs. They say preventing waste and abuse will save the state money, which in turn can be used to prevent cuts elsewhere in the budget. The governor's office has estimated its reform proposals will save $1.7 billion this fiscal year alone.
Democrats have criticized the reform proposals as peripheral issues that do not have a direct effect on the immediate budget deficit. They also say Schwarzenegger has overstated the savings. "There's a general appreciation that many of these reforms will produce savings, but we want to make sure we approach them in a thoughtful manner," Blakeslee said. Despite the differences, both Democratic leaders appeared upbeat as they left Schwarzenegger's office after a second round of talks that began Friday night.
Assembly Speaker Karen Bass, who walked out of negotiations earlier in the week, said there did not appear to be any insurmountable obstacles to reaching a deal. She described the talks as complicated.
"I think what has happened over the last 48 hours has been the most productive in the last several weeks," the Los Angeles Democrat said. "We are just not finished." Besides the welfare and social service reforms, education funding is one of the key negotiating points. Lawmakers are trying to decide whether it can be cut and, if so, by how much. Funding for K-12 schools and community colleges accounts for roughly half of annual state spending.
The possibility of a breakthrough in resolving California's mammoth budget shortfall comes a week after the state began issuing IOUs to thousands of vendors as a cash-saving move. State workers also have begun taking three days off a month without pay, cutting the salaries of more than 200,000 government employees by 14 percent. The state's fiscal picture has become progressively worse since Schwarzenegger and lawmakers passed the budget for the current fiscal year last February during an unusual midyear session.
Personal income taxes declined 34 percent during the first five months of the year, a slide that has accelerated as the recession continues to strangle California's economy. On Friday, the state controller's office reported the state had spent $10.4 billion more than it collected in the fiscal year that ended June 30. It is now without sufficient cash to cover all of its payment obligations. If the budget isn't balanced by late August, the state will have to defer payments to its pension funds and may issue IOUs instead of paychecks to state employees. The unprecedented drop in tax revenue is forcing Schwarzenegger and lawmakers to make difficult choices, with deep cuts proposed to education, health and social service programs.
At the same time, Schwarzenegger and Republican lawmakers are standing fast against additional tax increases, limiting lawmakers' options for closing the deficit. The two-year budget package approved in February increased sales, personal income and vehicle license taxes, and Republicans say the state's economy cannot absorb additional tax hikes. While the governor and lawmakers try to reach a compromise, some of the state contractors who are being issued IOUs will have to start scrambling to find banks that will cash the warrants. Bank of America Corp. and other major banks said Friday was the last day they would honor the IOUs, which cannot be redeemed until Oct. 2.
Housing and Banking Deception: 23,000 to 28,000 Foreclosed Homes kept off the MLS or Public View in California each Month
The math in California housing simply does not add up. Given the amount of sales and monthly foreclosures over the past few months, it would appear that banks are sitting back while a gigantic backlog of foreclosures grows. A few in the media are calling attention to this obvious fraud but not many. The California housing market is reeling from an epic mulit-decade long real estate bubble. For the past few months, foreclosures have been hitting at a record pace yet the official MLS inventory is falling lower and lower. I have pulled up data for the largest California counties with MLS data from March and compared it to July and what you will see is simply astonishing. I will compare this data with actual foreclosures and what you see is banks are taking homes back, failing to list them on the MLS, and basically sitting back probably hoping the government bails them out.Let us first look at the March and July snapshots of inventory:
*Source: MLS data
As many of you know, the spring and summer are usually the hottest selling seasons and this normally will see both a jump in sales but also inventory. What we see here instead is a massive drop in inventory of 26 percent in 4 months! This data here isn’t the big shocker however. When we start looking at sales and actual foreclosures, that is when we start realizing something is terribly amiss:
*Source: DataQuick
It is safe to assume that for June, taking an average from the past 3 months would give us a total of 38,000 to 40,000 additional homes sold in California for last month. So with that information, we can add the last 4 months to see that a total of approximately 151,000+ homes sold in California. Looking at our list of the largest California counties, we notice that the list on the MLS dropped by 44,439. But we know that over half of homes sold are foreclosure re-sales. This means in the last four months out of the 151,000 homes sold in California, some 75,000 to 80,000 homes that sold were distressed properties.
And here is where the major data discrepancies begin for the California housing market. Let us look at the distress inventory for this same timeframe:
In the same time that California was selling an average of 38,000 homes a month, an average 47,000 homes were being foreclosed on. So even looking at this basic data set for 4 months, we know that in March 20,787 homes that sold were foreclosure re-sales. But during March, we know that California had 48,927 actual foreclosures (we aren’t counting the 58,959 notice of defaults that will become foreclosures in 6 to 9 months). This pattern holds for April and May and I would assume June as well. So what is the bottom line? Some 23,000 to 28,000 homes per month that are foreclosed or now owned by the bank don’t make their way to the public MLS! That is why in this short time frame, we see the actual public data dwindle because organic sales from non-distressed properties are accounted for, but the building distress market is kept off the books and this is enormous. In fact, the MLS data is well accounted for:
Non-distress CA homes sold:
March: 15,428
April: 17,048
May: 19,096
June*: 17,191 (running average from previous 3 months)
Total: 68,763
And this would make sense since in our tiny subset, we accounted for 44,000+ homes that came off the MLS in this timeframe without including all California counties. Yet this is tremendously deceiving to the public. The pundits are spinning this data just like they spin the terrible unemployment numbers and are saying look at how quickly inventory is dropping. Well sure, this is the only data that we can see. But knowing the rest of the story we know that some 23,000 to 28,000 foreclosed properties are sitting somewhere either being sold off in bulk to investors or simply put, just sitting. We know that looking at closed escrow sales data that over half of the market is foreclosed properties so this is the market. I’m not the only one seeing this:
“(LA Times) The percentage of Los Angeles County mortgages delinquent by 90 days or more in May was nearly double the rate last year, First American CoreLogic reported today.
May’s 9.5% delinquency rate for L.A. County was up from 5% of mortgages late by 90 days or more in May 2008. First American bases its foreclosure analyses on public records.
While the default rate has nearly doubled, the number of homes actually being sold at auction — the final foreclosure stage — has shrunk. In May, the L.A. County repossession rate was down to 1% of mortgages, from 1.1% a year ago. This discrepancy is the “foreclosure backlog” now looming over the housing market. It’s caused by various government-mandated and voluntary foreclosure moratoriums, and possibly by lenders trying to manage the flow of repossessed homes entering the market.
Nationally, First American reported 6.5% of mortgages were in default in May, up from 4% in May 2008. The national repossession rate was 0.7% in May, up from 0.6% in May 2007.”
The amount of inventory being kept off the public view is simply enormous. This is going to end badly for a state with a massive fiscal budget problem. I have yet to see any deeper analysis trying to pinpoint the actual figure since it is hard to get any accurate figures from banks, but looking at data we know to be true, we know something is absolutely rotten in Denmark.
Morgan Stanley, Goldman Sachs Plan To Rebrand Failure As Success
I have wonderful news to report to everyone! Apparently I have woken up today in a parallel universe, where the sun is shining and the birds are singing and my coffee tastes like malted orgasm. There's something called a "Dylan Ratigan" on my teevee, asking shouty sports pundit Stephen A. Smith about auto bailouts, so it's not like EVERYTHING makes perfect sense, but here's the real good news! Apparently, the financial collapse in the derivatives market never happened! EVERYTHING OLD IS NEW AGAIN AND WILL SUCK AGAIN, YAY!
From this bizarro universe's Bloomberg:Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.
Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody's Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.
Ahh, apparently this parallel universe's version of Choire Sicha is just as critical of these geniuses as he is in the real one. This is blockquoted for maximum sarcasm:HOW COULD THIS IDEA FAIL? How could anyone not want to put their money in this? This is so dizzying, it's like it is 2003 outside, and everything is new and shiny again.
You know what is going to be neat? Seeing which ratings agency bites first at giving this turd sandwich a AAA rating! All of us in this parallel universe plan on running around the streets with our pants off that day, because there are no consequences for failure, ever, apparently.
UPDATE, from my exasperated father, who writes:
<It will be interesting to see who buys this shit but we may never know. Some people never learn. BUT! If you offer it at a price and a rate, somebody can be found to speculate on anything, and if you sell it to somebody connected or to someone who is "too big to fail"...well we have already proven that we can handle the "moral hazard" argument. Here we go again. Look at the names associated with all this. And the one you have to wonder about the most is the rating's agency, Moody's. They must feel like they are invisible and bullet-proof because they certainly have escaped real scrutiny in all of this that has just passed. And! They are paid by the issuers to give them a rating on this shit. Not much independence there!
Even the Employed Lose with Hour and Wage Cuts
Job losses tell only part of the story. Economists worry that falling work hours and pay will produce "the mother of all jobless recoveries"
In some respects, Kristi Pohly is lucky. The 33-year-old marketing manager still has her job at Pharmatech Oncology in Denver, having worked there for more than six years. But the recession has hit Pohly from another angle. At the beginning of June, she and her co-workers took a 25% pay cut and switched to a 32-hour workweek. Pohly had been earning $55,000 at Pharmatech; her pay is now $41,250, or about $400 per month less on a take-home basis. To keep up with the $1,100-per-month mortgage on her house, Pohly took in a roommate at the beginning of that month. The transition, she says, hasn't been easy. "We are working 20% less, but getting paid 25% less. Morale has pretty much hit the floor."
Pohly's plight reflects patterns emerging in the job market that go beyond the headline unemployment rate and job-loss numbers. In addition to the loss of 467,000 jobs in June, economists worry about the impact of stagnating or falling pay and reduced hours of workers. Buried in the June jobs report is this critical bit of information about the labor market: The average workweek for the month fell 0.1 hours, to 33 hours, the lowest ever recorded for data that go back to 1964. Average weekly earnings, meanwhile, actually fell to $611.49 in June, from $613.34 in May. Hourly earnings remained flat. Economists say the combination of reduced hours and pay, along with continued job losses, could significantly slow a recovery as even the employed lack the means to boost their spending.
"The amount of money taken home is not about the number of jobs but about hours worked," says Mike Englund, chief economist for Action Economics, an economic forecasting firm. "The contraction in underlying income [of those working] is pretty powerful. The job market is continuing to contract at a rapid clip." David Rosenberg, chief economist and strategist for Gluskin Sheff & Associates, a Toronto wealth-management firm, also draws gloomy conclusions: "The combination of job loss and decline in hours worked [in June] means there was effectively a decline of at least 800,000 jobs." He says if these trends continue, the economy will enter a downward spiral of lower consumer spending and falling prices, or deflation. What's worse, unemployment may not peak for another two years. In that case, Rosenberg says, we are destined for "the mother of all jobless recoveries."
Footing More of the Bill
Cuts in pay and hours are rippling throughout the economy in businesses large and small and industries from mining to retail. It is well known that such large employers as FedEx, Hewlett-Packard, and Best Buy have trimmed pay. But the trend is also playing out at countless small businesses and nonprofit organizations. With donations and grant awards reduced, the staff of SAVE, a suicide prevention nonprofit in Bloomington, Minn., is enduring a number of cuts. On top of a salary freeze that's been in place since May, staff will get salary reductions of 10% to 20% beginning July 22.
As of July 15, SAVE staff will see the elimination of such benefits as their 3% employer 401(k) match, and long- and short-term disability and life insurance. They'll also have to start footing the bill for 25% of their health-insurance premiums, which had been fully paid by the organization. Daniel Reidenberg, executive director of SAVE, says he's also considering reducing staff hours. But he is worried about potential consequences. "Rising anxiety and depression means the need for our services is greater than ever before," says Reidenberg. "It's the worst possible time for us to be cutting back."
"A Step Back"
For many workers, hours have already been cut. As of July 10, Matt Garville, 23, will no longer be working Fridays at his job as an account coordinator for a Manhattan public relations firm. That means a 20% salary cut, along with the loss of his health benefits. Having graduated from Fordham University in 2008 with a degree in economics and journalism, Garville started working at the firm just three months ago. "I really like it here, but I am worried," he says. "I thought their hiring me meant it is [a] relatively stable [job]. I guess not."
Garville says the pay cut means he won't be able to afford moving from his parents' home in Old Tappan, N.J., into New York City to live with friends. "It's a step back," he says of the pay cut. "No one wants to take a step back." He is trying to make the best of the situation by making use of his newly spare time. He says his order of business on days off will be running errands he previously didn't have time for, like getting his hair cut and his DVR player fixed. "Then I'll be networking," he says. "These days, no job is secure."
With the job market on such shaky ground, it can be hard for many workers to believe the economy is producing "green shoots" that point to better days. While Action Economics' Englund is still hoping for a return to positive economic growth in the third quarter of this year, he says troubles in the job market could jeopardize that timing. "If income isn't growing and if hours worked don't rise in the second half of the year, it's going to be hard for the consumer to recover," says Englund.
Barney Frank proposes home loan plan for jobless
Congressman Barney Frank wants to prevent unemployed homeowners from losing their houses by giving them government money to pay their mortgages. The Newton Democrat, chairman of the House Financial Services Committee, will hold a hearing in Washington today on his proposal to spend $2 billion to prevent foreclosures on borrowers who don’t qualify for other mortgage aid programs because they are unemployed. The funds would come in the form of loans, and borrowers would have to pledge their homes as security.
The catalyst for the proposal is a growing jobless rate that reached a 26-year high of 9.5 percent in June, Frank said. “It’s not a forgiveness program,’’ Frank said yesterday in an interview with The Boston Globe. “We do have serious unemployment.’’ The proposal is a revival of a 1975 program called the Emergency Housing Act, which was enacted during a recession. Frank would fund his program with the dividends the US government is getting from financial companies that received taxpayer funds from the $700 billion industry bailout.
Among those scheduled to testify at today’s hearing is Brian A. Hudson Sr., the chief executive of the Pennsylvania Housing Finance Agency, which since 1983 has been providing similar mortgage help to residents facing a short-term setback such as illness or unemployment. “There has to be a reasonable likelihood that the homeowner will be able to resume making the mortgage payment without state help,’’ Hudson said in prepared remarks released by Frank’s committee, because the “assistance is temporary.’’
So far, 42,700 Pennsylvania families have received help, with the average loan at $10,500, or “less than the $35,000 it costs to complete most foreclosure actions,’’ Hudson added. The hearing comes just days after the Federal Reserve Bank of Boston released a study that showed lenders are reluctant to modify mortgages of most delinquent borrowers because they either are likely to again have trouble making payments, or conversely, can fix their problems without the financial help.
Paul Willen, a Boston Fed senior economist and coauthor of the study, had called for nearly exactly what Frank is now proposing: directing government aid to borrowers. “This will work,’’ he said. “If you are assisting a borrower to pay their monthly payment, the lender can’t complain. That will prevent foreclosures.’’ Frank’s proposal would also spend $1 billion to build and preserve affordable housing, $1.5 billion to redevelop foreclosed and abandoned homes, and $2 billion to protect tenants in apartment buildings whose owners can’t pay the mortgage.
He calls the $6.5 billion package, “TARP for Main Street,’’ a reference to the government’s Troubled Assets Relief Program. To date, the Treasury has received about $6.7 billion in dividend payments from its TARP investments, according to the Government Accountability Office. Sheila Crowley, the president of the National Low Income Housing Coalition, said Frank’s proposal would help allay criticism the government bailout is helping bankers more than people suffering from the country’s financial crisis.
“For people who are truly suffering in the recession, TARP is most likely seen as a bail-out of the very people who are to blame for getting us into this mess,’’ she said in prepared remarks. But Mark Calabria, director of Financial Regulation Studies at the Cato Institute in Washington, said the TARP dividends should be used to offset losses the government may incur from the bailout program. “Diverting those dividends for purposes other than offsetting TARP losses will only leave the taxpayer with a larger hole to fill,’’ Calabria said in a written testimony submitted to Frank’s committee.
Recession Creates Legions of Newly Homeless
Louis Gill doesn't like to turn anyone away. The director of the Bakersfield Homeless Center in California has taken to laying out cots and mattresses between the shelter's 174 registered beds to cope with the rush of homeless families brought to his doors by the financial crisis. "Last year we saw a 34 percent increase in homeless families and a 24 percent increase in homeless children," he said. "Why do we go beyond capacity? Because in a just society, a child should not have to sleep outside or in a car."
Gill is a frontline witness to the change in the makeup of the country's homeless. The stereotype of a homeless person as a single man no longer applies. A resident of the Bakersfield center is far more likely to be a young mother with a "good, solid job and a mortgage that she just couldn't pay." "They're like folks you know and that you've worked with," Gill said. "Maybe the work's not there right now. Maybe they got behind on their payments. But the idea of a typical homeless person has changed. We're seeing individuals come in that have never had to access the safety net before."
Government figures support Gill's experience. The ravages of the recession, including a surge in foreclosures and unemployment approaching 10 percent, have driven thousands of families onto the streets. Although the number of homeless individuals remained relatively stable between 2007 and 2008, the number of homeless families rose 9 percent, and in rural and suburban areas the number jumped by 56 percent, according to a report released last week by the Department of Housing and Urban Development.
In real terms, homelessness is still concentrated in urban areas and among adult males; 20 percent of all homeless people live in three cities: Los Angeles, New York and Detroit. About 1.6 million people used an emergency shelter between October 1, 2007 and September 30, 2008, including 516,700 people in families. But administration officials acknowledge that the economic crisis is turning stereotypes about the homeless on their head.
"The typical homeless person has changed to become less focused on the chronically homeless or single-individual homeless to somebody who is part of a family, whether it be a mother or a father or a child in a homeless family," HUD Secretary Shaun Donovan said. "I think what that tells us is that the economic crisis is forcing more families who had previously been well-housed into homelessness."
Women comprise 81 percent of adults in homeless families, according to the report. And unlike homeless men, who are usually middle-age, homeless women tend to be young -- under 25 -- with children under 5. "The life of a homeless woman is particularly fraught with danger," said Suzanne Wenzel, a community psychologist and professor at the University of Southern California School of Social Work. "These young women are at much greater risk of being victimized when they have no stable home. It can be more difficult to obtain needed services. For anyone in this situation, it is destabilizing and extremely stressful. That's why these new figures are horrifying." The report did not address the causes of homelessness or why some groups are disproportionately affected.
HUD's study measured changes in the number of homeless between 2007 and 2008, before the height of the economic crisis, and Donovan acknowledged that the data does not reflect "the great many more families who were living on the edge, doubling up with friends and family members, and struggling to stay out of the shelters and off the streets." Some case studies collected by the department's Homelessness Pulse Project suggest that rural and suburban areas were particularly ill-equipped to cope with the new wave of homelessness. And many of the states that experienced the largest increases in homelessness are predominately rural.
In Mississippi, the number of homeless increased 42 percent last year; in Wyoming, 40 percent; Montana and Missouri, 23 percent; and Iowa, 22 percent. "Starting about a month or a month and a half ago, our phones have not stopped ringing," said a Kentucky emergency shelter provider in one of the case studies. "We have had to turn away or refer families due to our full capacity shelter. The department has allocated $1.5 billion over the next three years to combat homelessness nationwide, and at the local level, there is interest in increasing resources to help women and children before they become homeless, officials said.
US homeless numbers include more families
The face of homelessness in the United States is changing to include more families and more people who live in the suburbs and rural communities. The number of homeless has remained steady since 2007, but within the overall count are trends that can tell officials where federal resources would do the most good, the Housing and Urban Development Department says in its annual report to Congress being released Thursday. About 1.6 million people used a homeless shelter or lived in transitional housing between Oct. 1, 2007, and Sept. 30, 2008 — about the same as the year before. But within that group, the number of families grew 9 percent, from about 473,000 to 517,000.
Officials said they also saw more demand for transitional housing in the suburbs and in rural areas of the country. Residents of suburban and rural communities made up about a third of those in need of housing, up from about 24 percent the year before. HUD also attempts to count the number of homeless at a single point in time. In January 2008, about 664,000 people were in homeless shelters or in the streets on a single night. That's a drop of about 7,500 from the year before, but officials point out that the count occurred just as the nation's economic woes were beginning and did not account for soaring unemployment and other economic problems that have kicked in during the subsequent months.
The time lag associated with the national survey has led HUD to try a scaled-down, regional approach in hopes of obtaining more timely information each quarter. The first installment of that effort will also be released Thursday as part of the congressional report. The report showed that the number of people entering homeless shelters in nine regions of the country grew from 60,371 in January to 61,280 in March. Four regions experienced an increase in shelter counts. Five saw a decrease.
Participants in the quarterly reporting include New York City and Washington, D.C., as well as smaller cities like Richmond, Va., and Shreveport, La., and more rural regions, such as 118 of Kentucky's 120 counties, excluding the state's two largest cities of Lexington and Louisville. HUD Secretary Shaun Donovan said the annual report to Congress sheds light on how today's housing crisis and job losses are playing out in shelters and the streets. With the quarterly reporting, "we will be able to better understand the impact of the current economic crisis on homelessness across the country," Donovan said.
The quarterly report includes anecdotal summaries. For example, the case manager at a Richmond shelter reported seeing a greater number of "individuals who have held professional, skilled-craft positions." An official in Kentucky said, "One day last month, we had to turn away three families due to full capacity." Officials in Shreveport reported a decrease in demand that they attributed to hurricane victims gradually moving back to New Orleans.
Americans swap homes for hotels as recession bites
Some Americans are swapping homes for motels as the ranks of the homeless swell during the recession, crowding out shelters and forcing cities and states across the country to find new types of housing. In Massachusetts, a record number of families are being put up in motels due to high unemployment and the rising number of homes going into foreclosure, costing taxpayers $2 million per month but providing a lifeline for desperate families.
"I feel like this has saved my life," said Tarya Seagraves-Quee, a 37-year-old former nurse. Seagraves-Quee has lived in a cramped one-bedroom suite in a hotel in Cambridge, Massachusetts, with three of her four children for nearly two months. "I'm managing the best way possible. I've learned to make things in the microwave oven." In Massachusetts, homeless shelters are at capacity. State law requires temporary accommodation for those without shelter, leading authorities to place 830 families, including 1,125 children, in 39 motels -- an unprecedented number.
"This truly is the highest we have ever seen it," said Nancy Paladino, director of the family team for the Boston Health Care for the Homeless. Other cities are noticing a similar trend. In Indianapolis, Indiana, overcrowded homeless shelters are turning families away, forcing growing numbers to seek vouchers for hotels provided by nonprofit groups such as United Way.
"Anecdotally, it's increased," said Michael Hurst, director of the Coalition for Homeless Intervention and Prevention Indianapolis.
The advocacy group started to compile statistics on the number of homeless families living in hotels this year after noticing signs of an increase. "The hotel owners will tell you it has increased. The homeless service providers and the school officials will say we know there are more people living in hotels and putting their kids in school because that is the address they are giving us."
In the Dallas-Fort Worth metropolitan area, the large Wilson family turned to a budget motel as a weeklong transition between a homeless shelter and an apartment. "Each step we're going it's just a stepping stone," said 42-year-old Frederick Wilson as he sat with his wife, Annette, in a one-bedroom suite they share with four of the six children in their care, including a grandchild.
Called by God, they said, to move from Minnesota to Texas, the family has rapidly made a shift from homeless status to paid employment. Annette has just landed a job as a bus driver, while Frederick said he will work in an office that offers clerical support to Medicaid patients. They spent two-and-a-half weeks in a homeless shelter in Dallas and were preparing to move into an apartment from the motel. The Urban League, an organization that helps struggling African Americans, is paying the $204 cost of their suite, which does not include sheets, pillows or toilet paper.
In Phoenix, demand for emergency accommodation is swamping available services as the recession and spiraling foreclosures turn even more families out of their homes. One nonprofit bought two former hotels -- a Days Inn and a Super 8 -- in a gritty downtown neighborhood to provide emergency accommodation for homeless and low income families. When the $23 million project is finished in September, it will be able to house 156 families, up from 112 now.
"We've seen a whole new subset of homeless families due to job loss and foreclosures, and our waiting list has doubled in the past year," said Nichole Barnes, chief fund development officer of the UMOM New Day Centers. "Some were previous homeowners. Due to the housing market out here, they'd got into a mortgage with a flexible interest rate. Some were working full time, but lost their jobs, went through their savings trying to save their home, and then found themselves without a home due to foreclosure," she said.
In many cities, foreclosures are a big part of a spike in homeless and rise in families living in hotels or motels. Nearly 80 percent of homeless services providers and advocacy agencies say at least some clients became homeless as a result of a foreclosure, according to a joint report by four of the largest U.S. homeless advocacy groups. Staying with family or friends and in emergency shelters were the most common post-foreclosure living conditions, followed by hotels or motels, according to the June report.
"In many areas shelters are now completely full, so the only option to keep their families together is to rent a motel room for $200 a week. That's pretty standard for many who lost their homes to foreclosure," said Michael Stoops, executive director of the National Coalition for the Homeless. Unlike Massachusetts, most states do not pick up the tab. "People are spending 80 percent of their total income on hotels," he said. "And food costs are higher because they can't cook."
In Cambridge, Massachusetts, Seagraves-Quee found refuge at a budget hotel after losing her job in Georgia more than a year ago and going without health care for 10 months. She suffers from multiple sclerosis, anemia and lupus, and was recently found to have two cancer spots on her breast. Two of her children, aged 16 and 6, are autistic. She spent $700 -- almost all her savings -- on plane tickets to Boston, where she had relatives. Soon the family was in a shelter.
Local authorities later moved her to the hotel and Seagraves-Quee was given medical treatment as part of a program carried out by Boston Health Care for the Homeless. "Right now, I am picking up from where I left off in Georgia 10 months ago. When I got here I was in really bad health," she said. "I've heard some people say 'Oh that is a ghetto shelter.' But to me it's a wonderful place."
Mortgage defaults spread as even 'safe' borrowers falter
The mortgage default crisis has an ominous new face. It's your neighbor with a traditional fixed-rate loan. No longer is the real estate bust simply the result of exotic, subprime loans that doubled payments and blew up in homeowners' faces. As the Sacramento economy buckles, even the safest mortgages have become part of a new wave of loan defaults, experts say. With capital-area job losses reaching 45,000 in the past year and unemployment at 11.1 percent, lenders, bankruptcy attorneys and debt counselors all say they're seeing rising delinquencies among prime borrowers with fixed-rate loans and good credit.
Many of those slipping into trouble are state workers, the mainstay of Sacramento's economy. "The tide has definitely shifted," said Pam Canada, executive director of the Neighborworks Homeownership Center of Sacramento, a nonprofit loan counseling firm. "We're seeing more people with a loss of income." Prime fixed-rate mortgages, with the most favorable interest rates and 15-, 20- or 30-year terms that guarantee the same monthly payment for the life of the loan, have long been the bulwark of American homeownership.
There are 3.3 million of them in California – 56 percent of all mortgages. But nearly 4 percent were delinquent in the first quarter, according to the Mortgage Bankers Association. That number was less than 1 percent two years ago, when the default crisis was dominated by subprime loans. The MBA says layoffs are now hitting more educated borrowers. "There tends to be a higher correlation there with having a fixed-rate mortgage," said Jay Brinkmann, chief economist of the lender trade group.
It's not just the layoffs creating trouble for traditionally safe loans. Many area workers have had to absorb wage cuts. Others who lost jobs have found new jobs that pay less. Or they have found only part-time work. Many workers who depend on overtime pay have also seen it disappear or dwindle. Finally, in a capital region defined by a massive state government work force, furloughs have grown to three days monthly, approximating a 14 percent salary cut. Gov. Arnold Schwarzenegger is proposing still more pay cuts for an educated population that's increasingly showing up at nonprofit mortgage counseling centers.
This upheaval has had a ripple effect on small-business owners like Michael and Winnie Kyalwazi, owners of Cafe Le Monde at McClellan Business Park. They've fallen behind on their fixed-rate house payments because business is down 25 to 30 percent, said Michael Kyalwazi. "This is a short setback, the way I look at it," he said. "We're viable. We just need some breathing room." It's a familiar sentiment.
"Most want to pay, but they can't because they're underemployed and have cuts in income and cuts in commissions," said Paul Rigdon, vice president for lending at Sacramento's SAFE Credit Union. "We're seeing all kinds of income-related problems." As the newest turn in a housing crisis that has seen 40,000 area foreclosures and heartbreak in thousands of other homes, trouble for prime borrowers is one more obstacle to a housing recovery any time soon.
Lending-industry officials say it's harder to restructure loans for jobless people who can barely afford any payment. Worse, economists say rising defaults and the foreclosures to come among these borrowers are likely to persist long after unemployment peaks sometime next year. "Foreclosures and delinquencies have a long tail, and we will see that continue for several quarters after a turnaround in unemployment," said the MBA's Brinkmann.
Forecasters at Stockton's University of the Pacific predict unemployment in the capital region will peak late next year at 12.3 percent – and remain in double digits through 2011. If so, problems with prime loans are likely to linger in a region having a hard time catching a break. Already in the foreclosure process is Ron McClure of Roseville. He bought a $600,000 house at Sun City Roseville in 2003, using a prime, fixed-rate loan that cost him $3,200 a month.
That worked until the housing market collapsed. McClure, partner in a small home-building business, saw his income collapse with it. Six months ago, he stopped making payments on the house. "Right now I'm just talking to attorneys about bankruptcy options," he said. "Hopefully, I'll find a job and be able to save it." McClure is working through a support organization, the Sacramento Professional Network, to find a job in his original line of work: information technology.
In Elk Grove, state employee Dwain Barefield believes he will soon miss his first fixed-rate mortgage payment. His finances were already complicated by $25,000 in legal bills he ran up from a divorce that took 10 years. But the bigger problem: refinancing in 2005 from a 30-year fixed-rate mortgage to a 15-year fixed-rate loan to pay it off faster. That decision, made as the economy soared, doubled monthly payments to $1,850 on a house he bought in 1987. Now come state furloughs.
A data processing manager at the Department of Motor Vehicles, Barefield said the first two furlough days starting in February cost him about $400 a month in take-home pay. A third, which began this week, will take another $200. "Two days was bad enough; three days is really going to make it bad. If I pay the mortgage, there is something (else) I won't be able to pay," he said. "Something's got to give." Elk Grove bankruptcy attorney Jonathan Stein said Barefield's tale is becoming a norm.
"The majority of the people calling me now who are losing their homes are state workers," he said. At SAFE Credit Union, Rigdon said most prime, fixed-rate borrowers can prevent foreclosure. He said SAFE has been extending the payoff terms of mortgages, cutting interest rates and even suspending payments temporarily to help borrowers cope.
"We're able to work with most people who want to work with us on that," he said. So far, the conventional fixed-rate loan problem is mostly showing up in delinquency statistics. At the Bay Area foreclosure-tracking firm, ForeclosureRadar.com, president Sean O'Toole said it's not showing yet in foreclosures. But it will. Said O'Toole: "The folks getting into trouble now are probably six months to a year from being reflected as foreclosure statistics."
UK can't afford another fiscal rescue, warns IMF
Britain is the world's only leading economy unable to budget for any kind of economic rescue package next year, the International Monetary Fund has warned. In calculations that will spark further criticism over the state of the public finances, an IMF paper presented to world's leaders has laid bare how the UK's indebtedness has left it unable to provide the vital stimulus the economy could need over the next 18 months.
Every other G20 country apart from the UK and Argentina has been able to budget for temporary spending increases or tax cuts next year to help drag their economies out of recession, according to the paper, presented to a recent G20 meeting in Basel. Even Germany, whose finance minister Peer Steinbruck has accused the UK of "crass Keynesianism", plans to spend a full 2pc of its economic output on such measures next year. The news underlines the fact that with Standard & Poor's having warned recently about the parlous state of the UK accounts, Britain has very little leeway to afford new emergency measures. However, sceptics will warn that it also makes it doubly likely that in the pre-Budget report this autumn the Chancellor will announce extra measures to keep Britain in line with its G20 counterparts.
The UK entered the recession with the worst structural budget deficit in the Western world, leaving it with little room to borrow in order to lessen the impact on profits and unemployment. Although the IMF last week said it now expects the British economy to return to growth next year, its calculations over the implications of the deficit underline the fact that any recovery will be tepid. A Treasury spokesman said: "As the Chancellor has repeatedly said, we are supporting the economy now while living within our means, including by halving the deficit over five years."
As Labour and the Conservatives prepare themselves for a likely general election next June, political debate has become dominated by their respective plans to cut spending over the coming years. However, the IMF figures underline the fact that even before the threat of spending cuts, Britain is facing a comparative squeeze next year because of its fiscal position. According to the IMF calculations, Britain is spending 1.5pc of gross domestic product on emergency measures this year, largely constituting the temporary VAT cut. This compares to 2pc in the US, 4.1pc in Russia and 2.7pc in Japan. The average stimulus within the G20 next year is 1.6pc, compared with Britain's zero percent contribution.
The IMF has already warned the Government that its plans to cut public debt do not go far enough. In its most recent assessment of the UK economy, the IMF said the Chancellor must start paying back debt significantly earlier than projected in April's Budget. The organisation favours sharper spending cuts and bringing the Budget back into balance over an electoral term. The Organisation for Economic Cooperation and Development has also made grim predictions about the state of Britain's public finances. It is forecasting the fiscal deficit next year will climb to 14pc of GDP, higher than Ireland or Iceland, and the worst in the industrialised world.
European Car Markets Stall
A daunting thought for the struggling European car makers: don’t expect a recovery in demand this or next year. The Chief Executive of French carmaker Renault, Carlos Ghosn, said he expects 2010 to be "as difficult as 2009" as the crisis in the worldwide auto industry continues. "I am not expecting an immediate recovery," he told Europe 1 radio. Demand for cars has been rapidly falling. According to investment bank Nomura, there is an overcapacity of 3 million cars of every year, in a market under normal conditions.
In 2007, 14.8 units were sold in Western Europe but demand has quickly dropped. And Nomura estimates sales to hit only 12.5 million units this year in the same region. “As we go into the second half of the year, European automakers are going to lobby their governments to get them to extend their respective scrapping incentives as underlying demand is still very weak,” said Michael Tyndall, Nomura International in London. “Ghosn’s message is one to governments that they need to continue supporting the industry.”
So-called "cash for clunkers" programs have been introduced across Europe. The incentive programs have slowed losses in countries like France and have boosted sales in Germany. A similar American program is gearing up and should boost hopes for Ford Motor, the Fiat-controlled Chrysler and General Motors, which will shortly emerge from bankruptcy. Tyndall said carmakers needed subsidies until demand picks up again. As long as unemployment continues to rise, demand for cars is likely to continue to fall, and in that scenario car manufacturers will need more support.” Tyndall said he expects Ghosn in his capacity of also head of the European Automobile Manufacturers Association to lobby strongly in favor of government schemes that offer cash for drivers to scrap old cars for new.
“As the scrapping schemes play themselves out essentially I take the view that auto market stagnation will be the order of the day,” said Howard Wheeldon, a senior strategist at BGC Partners. “For Renault and Peugeot I would forecast continuing unhappy times.” Goshn himself said on Friday that an end to such scrap schemes could be difficult for the industry. He said he was in favour of a gradual transition rather than a sudden end to such schemes would help prevent a brutal shock for markets.
Renault was granted a 3 billion euro ($4.2 billion) loan earlier this year along with rival PSA Peugeot Citroen which received the same amount. Ghosn said the company will start paying the money back when it was reasonable to do so, but that it was “in no particular hurry”. Shares of Renault fell 2.07% to 22.27 euros in Paris , becoming one of the most important declines on the CAC.
Crisis is unique opportunity for Europe, commissioner says
There are digital locks on the doors in the corridor where Neelie Kroes has her office. There is sensitive information here, about cartels suspected of price-fixing for instance. This week energy companies E.on and GDF Suez were fined 1.1 billion euros each. Microsoft, Heineken and Intel have suffered the same fate. On days like those, Kroes likes to greet visitors with the words: "I made some money for Europe today. You do realise this money will be refunded to the member states?"
For years, state aid had been a relic from the interventionist 1970s. Now, because of the crisis, more and more governments want to keep national companies afloat. While doing so, they're trying to bend the very rules they imposed themselves. Brussels has to weigh each request. Any disguised protectionism could lead to a new economic race between member states.
Kroes tries to be flexible, but when necessary she will go for a firm no. The German Commerzbank was forced to sell a large part of its activities. The Royal Bank of Scotland has to reorganise. Last year Kroes issued guidelines for governments to bail out the banks. Now she is drafting new guidelines for governments to get out of banking again in maximum five years.
These are crucial times for the European Union. When prime ministers and ministers fail to get past Kroes they tend to call her boss, Commission president José Manuel Barroso. That often leads to high drama. Kroes, however, can only talk about it in general terms. The European parliament is dragging its feet on giving Barroso a second term, and Kroes would like to stay in this job for another five years too. Better to be discreet.
Are we leaving the crisis behind us yet?
"We're not quite there yet. It's hard to say when we will be. The economy is all about emotions. There is no confidence yet in the banking and other sectors. People are cautious about investing. Credit is hard to get. People are not taking chances. They're on the fence. It's a vicious circle. If we're going to see a recovery, we first need a healthy banking sector. We're not there yet. The banks are often more concerned with themselves than with solving the real problem. They're just not that interested in the bigger picture."
Last week, while addressing bankers in London, you said that governments need to get out of banking because governments are not banks. The next day some newspapers wrote: Brussels Strangles The City.
"Facts and figures tell us that there is no money for a second round of bail-outs and that some banks are barely viable. You have to restructure them instead of putting them on life support."
So the crisis is not over?
"We're going to get more problems in many sectors. We've had the car industry and the German department stores. It's not over. But I'm optimistic by nature. What we need to do is to change our mindset."
Who does?
"Everybody. From the boardroom to the kitchen table. Unlike the US, Europe has a social safety net. That's a good thing. But it has meant that people are slower to realise what has happened. Look at Germany. They have an election coming up in September and they’re asking themselves: how many jobs can we afford to lose now?"
That puts you in a tough spot.
"It sure does. It was easy to explain why so much money needed to go to the banks: they are the lifeline of the economy. Even demonstrating Polish shipyard workers understood that. They angrily asked: if you're going to allow capital injections for banks why not allow them for our shipyards too? But now that if the car industry is getting state support aid too..."
That's impossible to explain?
"Those shipyards need to be made commercially viable. Just like the car factories. If we're just going to write cheques to keep overcapacity in place, we will miss the opportunity to make that industry healthy again, to give it a future. In that case the problem will get worse. It's different in the US where tough realism prevails, with big consequences."
Is that better?
"No."
Clearer?
"Yes."
In an interview with NRC Handelsblad on May 30, WTO boss Pascal Lamy warned against protectionism. The same week the Germans bailed out Opel.
"The Opel dossier has not passed for every country yet. Governments can't keep factories open just for the sake of it. There has to be a sound business plan as a basis. That's what I told Paris earlier, too."
You mean when president Sarkozy promised to help Peugeot and Renault on the condition that there would be no lay-offs in France?
"It's easy to fight protectionism in the general sense. Then everybody agrees with you: 'Of course we don't want to be protectionist. That's a bad thing.' But then the first case comes along, and suddenly it becomes very difficult."
Do you see a parallel with the 1930s: protectionism, polical populism?
"If we're not careful, yes. That's why we need to be right on the ball. We need to explain to people that things would have been much worse if it wasn't for the euro and the internal market."
Will there be more Europe or less Europe when the crisis is over?
"There is, I think, no way back. The crisis is a unique opportunity to make progress. The question is are we going to seize that opportunity? There is a changing of the guard at the commission. There is uncertainty about the Lisbon Treaty, meaning the future relationship between governments, the European parliament and the Commission. That slows things down."
What do you like about your job?
"To be part of this crucial phase in the history of Europe."
What don't you like about it?
"Having to compromise."
Compromise on state aid?
"No, not as far as my decisions are concerned. I mean as a member of the commission."
Didn't you water down the state aid rules?
"No! The principles are still standing strong. I've had to be more flexible about implementing them temporarily. The weather is bad out there, so you have to make the framework more flexible or everything goes down the drain."
What's going to happen next with the banks?
"This will be the moment of truth. Things don't always move as fast as I would wish them to. Some banks will have to be restructured. We don't want to have another crisis on our hands in a few years’ time. My nightmare scenario is my granddaughter asking me one day: 'Did you really do all you could?' and that I would have to answer: 'Just a little bit.'"
You've had some fierce clashes with The Hague.
"It's part of the job. No one gets preferential treatment. Ever. [Dutch finance minister] Wouter Bos has some tough issues to deal with but they will not be resolved by waiting."
Do you want to stay on as commissioner?
"That's up to the Dutch government to decide."
But do you want to?
"Only if it is this portfolio, not another one."
Your new director-general is from the Netherlands. Is it possible to have two Dutch people in charge of the competition directorate-general?
"Can you show me where there is a rule that says this is not possible? I can't find where it says that the director-general and the commissioner have to be from two different countries."
Perhaps it's an unwritten rule.
"Barroso wants to return to the same position. So why not me?
This $17 Trillion Divorce Won’t Be a Pretty One
Returning from China last month, U.S. Congressman Mark Kirk had a bearish take on a high-level visit by American officials. Treasury Secretary Timothy Geithner claimed the U.S.’s biggest creditor voiced great confidence in its debt. Kirk, an Illinois Republican, came back with the opposite impression. “China is beginning to cancel Congress’s credit card,” he told Fox News on June 10. It “doesn’t want to lend much more money to the United States and especially is worried about the Fed’s policy of printing money to buy new debt.”
A month later, there’s no doubt about whose assessment was more accurate. Chinese leaders are clearly very concerned about the dollar. How they will react is a key question hanging over markets, and it’s time to take the discussion to the next level. Everyone knows China wants to reduce its dollar holdings. Little is known about how that process may unfold and how much work and preparation needs to go into it. Lots, in fact.
Think of China and the U.S. in history’s most expensive divorce. The two economies total $17 trillion of output, and polls in China show little support for adding to almost $800 billion of U.S. Treasuries. This argument can be broadened to the rest of Asia. The idea that China or Japan -- with $686 billion of Treasuries -- can just start selling massive blocks of dollars is ridiculous. It would devastate markets the world over and the fallout would boomerang back on Asia. If you think markets are shaky now, just wait until word of a central-bank fire sale gets around.
Sure, Singapore (with $40 billion of Treasuries), India ($39 billion) or South Korea ($35 billion) could try to dump dollars on the stealth. Good luck in this highly connected, around-the-clock world. News that a key economy seeks a first- mover advantage over peers would inspire copycat selling. Expect investors and traders to respond with massive sell orders. Warren Buffett can discreetly trim Berkshire Hathaway Inc.’s interest in a company or a currency. How a central bank divests itself of tens or hundreds of billions of dollars on the sly is another matter.
Governments that may be concerned about getting stuck with their dollars for good have a point. And by curtailing investments in dollars today, Asia is ensuring that the U.S. currency will be worth less a year from now. Bernard Madoff can tell you a thing or two about how this process works. What may be necessary is a global framework or pact to end the dollar’s dominance. A “Plaza Accord” of sorts may be needed to dismantle the so-called Bretton Woods II system of tying currencies to the dollar that emerged after the global crises of 1997 and 1998. A Dollar Accord, anyone?
Just as stocks take a hit when additional shares are issued, Asia faces a debt-dilution dynamic for which it never bargained. The Federal Reserve’s zero-interest-rate policies don’t help. And Asia can’t do a lot on its own here. This process will require considerable cooperation, be it through the International Monetary Fund, the Group of 20, the Asia-Pacific Economic Cooperation forum, the Association of Southeast Asian Nations or a yet-to-be-created entity. Goals must be set, mechanics discussed and timing negotiated. If ever there were a time for a currency summit, it’s now.
Politics will be a stumbling block. It’s hard to envision the U.S. signing on to scrap the dollar as the reserve currency. Neither the euro nor the yen is ready to replace it. And China’s designs on currency domination are a decade away -- or longer. The amount of scrutiny the dollar’s successor would face makes you wonder who would want to print the reserve currency. That explains why the most credible argument making the rounds involves the IMF’s so-called Special Drawing Rights, or SDRs.
They are really an account of exchange, rather than legal tender, and are calculated according to a basket of currencies consisting of the dollar, euro, yen and pound. Chinese central bank Governor Zhou Xiaochuan wants the IMF to move toward creating a “super-sovereign reserve currency.” Or, here’s another suggestion: Brady bonds for less- troubled economies. The idea behind bonds created in the 1980s as part of Latin America’s debt restructuring was to let investors swap their claims on nations in turmoil for tradable instruments. A similar process may work with the dollar.
Rumors of the dollar’s demise are no longer exaggerated. What is being exaggerated, though, is how easy it will be for Asia to get out of the quandary it’s in. Cutting off the U.S. government’s credit card, for example, means American consumers can’t buy your goods. And any sudden divorce between the world’s two main economic powers won’t be pretty. Far from it. It’s time to figure out what the next step is, and policy makers need to get serious. Complaining about our dollar-based system won’t get us there. Some brainstorming about where to go from here would be far more constructive.
China Fails to Attract Enough Buyers in Bill Sales
China failed to attract enough bidders in a government debt sale for a second time this week on speculation record bank lending will spark inflation in the world’s third-largest economy. The Ministry of Finance sold 25.1 billion yuan ($3.7 billion) in bills of the 35 billion yuan it had sought, according to statements on the Web site of Chinabond, the nation’s biggest debt-clearing house. The government fell short of its target in a bond sale for the first time in almost six years on July 8.
The auction’s failure reflects concern that Premier Wen Jiabao’s 4 trillion yuan stimulus package will cause bubbles in stock and housing markets, forcing the central bank to tighten monetary policy. The People’s Bank of China this week pushed up money-market rates and drained cash from banks, the biggest investors in the nation’s $2.2 trillion debt market. “The central bank’s open-market operations suggest concerns that the rapid surge in new bank lending in the first half of this year could fuel inflation,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. “Some people speculate the central bank will raise interest rates this year but I don’t think they can as global growth slows.”
The Ministry sold 12.48 billion yuan of 91-day bills at 1.15 percent, compared with 0.84 percent at the last such auction on June 19. It issued 12.65 billion yuan of 273-day bills at 1.25 percent, up from 0.88 percent at a previous sale on June 5. The People’s Bank of China yesterday resumed one-year bill sales after an eight-month pause, signaling a shift from an “extremely loose” policy, Goldman Sachs Group Inc. said.
Chinese banks extended 1.53 trillion yuan of new loans in June, more than double the amount in May, the central bank said on July 8. Housing sales surged 45.3 percent in the first five months of this year, the National Development and Reform Commission said today.
The Shanghai Composite Index has jumped more than 80 percent from last year’s Nov. 4 low. Guilin Sanjin Pharmaceutical Co. and Zhejiang Wanma Cable Co., the first two companies allowed to go public in China since September, were suspended in Shenzhen trading after surging on their stock market debut today. “More initial public offerings will come, which will further tighten liquidity,” said Shi Lei, an analyst in Beijing at Bank of China Ltd., the nation’s third-largest lender. “Investors are quite bearish on short-term bonds.”
The yield on the 2.29 percent treasury note due April 2014 surged five basis points to 2.53 percent, and the price of the security dropped 0.20 per 100 yuan face amount to 98.95, according to the Interbank Bond Market. A basis point is 0.01 percentage point. “We doubt their aim was to cause distress in the government’s deficit financing effort,” Christian Carrillo, a bond strategist at Deutsche Bank AG in Singapore wrote in a research report today. “It appears the signaling aim of the PBOC has gone wrong especially given our understanding is that top level governors are very uncertain about the economic recovery.”
China’s bond market swelled in size by 16 percent in the year-ended March 31, paced by corporate bond sales, according to the Asian Development Bank. Demand has been waning in recent weeks. Before this week’s failed one-year auction, a sale of five-year government securities on July 3 drew bids for 1.42 times the debt on offer, compared with a 1.65 bid-to-cover ratio in a sale of 10-year notes on June 17. Investments by China will help developing economies regain their growth momentum in the second half of this year, pulling the global economy out of the worst recession in six decades, the International Monetary Fund said on July 8. The IMF forecasts China’s expansion will accelerate to 8.5 percent next year from 7.5 percent in 2009.
Policy makers will probably refrain from raising interest rates as the government aims for 8 percent economic growth this year to create jobs and maintain social stability, according to a Bloomberg survey of economists. China’s consumer prices dropped 1.4 percent in May from a year earlier, after falling 1.5 percent in April, according to the statistics bureau. The benchmark one-year lending rate will stay at 5.31 percent and the deposit rate at 2.25 percent this year, according to the median estimate of 15 economists surveyed by Bloomberg News.
China’s exports fell for an eighth month, dropping 21.4 percent in June from a year earlier, the state-run Xinhua News Agency reported today, citing customs data. “Despite the lack of success in selling the intended amount of bills, it is unlikely that the government would switch its tactics to hiking interest rates,” said Sherman Chan, an economist with Moody’s Economy.com in Sydney. “They are trying to mop up excess liquidity without raising rates.”
Ilargi: Not a finance topic, but I'm sure a must read for many of you.
China’s Ethnic Fault Lines
The myth of a monolithic China was shattered this past week. Running barely beneath the surface of what the government has sought to portray as a “harmonious” society, the fracture created by the Urumqi and Lhasa riots threatens to shake the country.
Foreigners and the Chinese themselves typically picture China’s population as a vast Han majority with a sprinkling of exotic minorities living along the country’s borders. This understates China’s tremendous cultural, geographic, and linguistic diversity—in particular the important cultural differences within the Han population. Across the country, China is experiencing a resurgence of local ethnicity and culture, most notably among southerners such as the Cantonese and Hakka, who are now classified as Han.
Cultural and linguistic cleavages could worsen in a China weakened by internal strife, an economic downturn, uneven growth, or a struggle over future political succession. The initial brawl between workers in a Guangdong toy factory, which left at least two Uighur dead on June 25, prompted the mass unrest in Xinjiang on July 5 that ended with 156 dead, thousands injured and 1,500 arrested, with ongoing violence spreading throughout the region.
China is also concerned about the “Kosovo effect,” accusing its Muslim and other ethnic minorities of seeking outside international (read Western) support for separatist goals. But ethnic problems in President Hu Jintao’s China go far deeper than the “official” minorities. Sichuanese, Cantonese, Shanghainese, and Hunanese are avidly advocating increased cultural nationalism and resistance to Beijing central control. Ethnic strife did not dismantle the former Soviet Union, but it did come apart along boundaries defined in large part by ethnic and national difference.
The unprecedented early departure of President Hu from the G-8 meetings in Italy to attend to the ethnic problems in Xinjiang is an indication of the seriousness with which China regards this issue. The National Day celebrations scheduled for October 2009 seek to highlight 60 years of the “harmonious” leadership of the Communist Party in China, and like the 2008 Olympics, its enormous success. The rioting threatens to derail these celebrations.
Officially, China is made up of 56 nationalities: one majority nationality, the Han, and 55 minority groups. The 2000 census revealed a total official minority population of nearly 104 million, or approximately 9% of the total population. The peoples identified as Han comprise 91% of the population, from Beijing in the north to Canton in the south, and include the Hakka, Fujianese, Cantonese and others. These Han are thought to be united by a common history, culture and written language; differences in language, dress, diet and customs are regarded as minor. An active, state-sponsored program assists the official minority cultures and promotes their economic development (with mixed results).
Sun Yat-Sen, leader of the republican movement that toppled the last imperial dynasty of China (the Qing) in 1911, promoted the idea that there were “Five Peoples of China”—the majority Han being one and the others being the Manchus, Mongolian, Tibetan and Hui (a term that included all Muslims in China, now divided into Uighurs, Kazakhs, Hui etc.). Sun was a Cantonese, educated in Hawaii, who wanted both to unite the Han and to mobilize them and all other non-Manchu groups in China (including Mongols, Tibetans and Muslims) into a modern, multi-ethnic nationalist movement against the Manchu Qing state and foreign imperialists. This expanded policy with the recognition of a total 55 official minority nationalities, also helped the Communists’ long-term goal of forging a united Chinese nation.
Cultural diversity within the Han has not been officially recognized because of a deep (and well-founded) fear of the country breaking up into feuding kingdoms, as happened in the 1910s and 1920s. China has historically been divided along north-south lines, into Five Kingdoms, Warring States or local satrapies, as often as it has been united. Indeed, China as it currently exists, including large pieces of territory occupied by Mongols, Turkic peoples, Tibetans, etc., is three times as large as it was under the last Chinese dynasty, the Ming, which fell in 1644. A strong, centralizing government (whether of foreign or internal origin) has often tried to impose ritualistic, linguistic, economic and political uniformity throughout its borders.
The supposedly homogenous Han speak eight mutually unintelligible languages (Mandarin, Wu, Yue, Xiang, Hakka, Gan, Southern Min and Northern Min). Even these subgroups show marked linguistic and cultural diversity. In the Yue language family, for example, Cantonese speakers are barely intelligible to Taishan speakers, and the Southern Min dialects of Quanzhou, Changzhou and Xiamen are equally difficult to communicate across. The Chinese linguist Y. R. Chao has shown that the mutual unintelligibility of, say, Cantonese and Mandarin is as great as that of Dutch and English or French and Italian.
Mandarin was imposed as the national language early in the 20th century and has become the lingua franca, but, like Swahili in Africa, it must often be learned in school and is rarely used in everyday life across much of China. The country’s policy toward minorities involves official recognition, limited autonomy and unofficial efforts at control. Although totaling only 9% of the population, they are concentrated in resource-rich areas spanning nearly 60% of the country’s landmass and exceed 90% of the population in counties and villages along many border areas of Xinjiang, Tibet, Inner Mongolia and Yunnan. Xinjiang occupies one-sixth of China’s landmass, with Tibet the second-largest province.
Surprisingly, it has now become popular, especially in Beijing, for people to “come out” as Manchus or other ethnic groups. While the Han population grew 10% from 1982 to 1990, the minority population grew 35% overall—from 67 million to 91 million. The Manchus, long thought to have been assimilated into the Han majority, added three autonomous districts and increased their population by 128% from 4.3 million to 9.8 million. The population of the Gelao people in Guizhou shot up an incredible 714% in just eight years. These rates reflect more than a high birthrate; they indicate “category-shifting,” as people redefine their nationality from Han to minority or from one minority to another. In inter-ethnic marriages, parents can decide the nationality of their children, and the children themselves can choose their nationality at age 18.
Why is it still popular to be “officially” ethnic in today’s China? This is an interesting question given the riots in Xinjiang recently and in Tibet last year, not to mention the generally negative reporting in the Western press about minority discrimination in China. By the mid-1980s, it had become clear that those groups identified as official minorities were beginning to receive real benefits from the implementation of several affirmative action programs. The most significant privileges included permission to have more children (except in urban areas, minorities are generally not bound by the one-child policy), pay fewer taxes, obtain better (albeit Mandarin Chinese) education for their children, have greater access to public office, speak and learn their native languages, worship and practice their religion (often including practices such as shamanism that are still banned among the Han) and express their cultural differences through the arts and popular culture.
Indeed, one might even say it has become popular to be ‘ethnic’ in today’s China. Mongolian hot pot, Muslim noodle and Korean barbecue restaurants proliferate in every city, while minority clothing, artistic motifs and cultural styles adorn Chinese private homes. In Beijing, one of the most popular restaurants is the Tibetan chain Makye-ame. There, the nouveau riche of Beijing eat exotic foods such as yak kabobs served by beautiful waitresses in Tibetan clothing during Tibetan music and dance performances. With the dramatic economic explosion in South China, southerners and others have begun to assert cultural and political differences.
Whereas comedians used to make fun of southern ways and accents, southerners (especially Shanghainese) now scorn northerners for their lack of sophistication and business acumen. As any Mandarin-speaking Beijing resident will tell you, bargaining for vegetables or cellular telephones in Guangzhou or Shanghai markets is becoming more difficult for them due to growing pride in the local languages: Non-native speakers always pay a higher price. Rising self-awareness among the Cantonese is paralleled by the reassertion of identity among the Hakka, the southern Fujianese Min, the Swatow and other peoples now empowered by economic success and embittered by age-old restraints from the north.
Interestingly, most of these southern groups traditionally regarded themselves not as Han but as Tang, descendants of the great Tang dynasty (618-907 A.D.) and its southern bases. Most Chinatowns in North America, Europe and Southeast Asia are inhabited by descendants of Chinese immigrants from the mainly Tang areas of southern China. The next decade may see the resurgence of Tang nationalism in southern China in opposition to northern Han nationalism, especially as economic wealth in the south eclipses that of the north.
Some have postulated that the heavy coverage by the state-sponsored media of the riots in Xinjiang, as opposed to the news blackout in Tibet, was a deliberate effort to stimulate Han Chinese nationalism and antiminority ethnic sentiment, in an effort to bring the majority population together during a period of economic and social instability. China’s very economic vitality has the potential to fuel ethnic and linguistic division, rather than further integrating the country. As southern and coastal areas get richer, much of central, northern and northwestern China hasn’t kept up, increasing competition and contributing to age-old resentments across ethnic, linguistic and cultural lines. Uneven distribution of wealth has fueled deep resentment in the poorer, often ethnic regions of China.
The result of all these changes is that China is becoming increasingly de-centered. This is a fearsome prospect for those holding the reins in Beijing and perhaps was a factor in the decisions to crack down on the June 1989 demonstrations in Tiananmen Square, keep a tight rein on the Olympics and respond swiftly and harshly to riots in Tibet and Xinjiang. Last year the government admitted to more than 100,000 “mass incidents” of civil unrest.
A China weakened by internal strife, inflation, uneven economic growth or the struggle for political succession could become further divided along cultural and linguistic lines. China’s threats will most likely come from civil unrest, and perhaps internal ethnic unrest from within the so-called Han majority. We should recall that it was a southerner, born and educated abroad, who led the revolution that ended China’s last dynasty. When that empire fell, competing warlords—often supported by foreign powers—fought for turf.
145 comments:
Working in China some years ago, I had a Chinese partner who was fluent in 3 languages, Mandarin, Cantonese, and his native rural Hubei. Eventually we got far enough out into the countryside that he needed a translator to talk to the local folks. Then we got further out. And his translator needed a translator.
For all that- they do have a sense of national identity, when looking at the entire world; and plenty of pride in their achievements, old and new.
It won't be boring to watch them.
Ilargi said:
"There's nothing new except for the fact that this time it happens at home. It doesn't take much for a man to start seeing his fellow men as faceless pieces of meat that can be discarded at will and for a profit. From Southeast Asia through South America to Iraq, it’s a sordid history. And proclaiming ignorance and innocence won't help you much, not when you've enjoyed the spoils."
Thank you for having the courage to say it. This is why I read TAE every day!
Engdahl is right on!!! He has also done great work on the evils of genetically modified seeds and Monsanto.
http://www.engdahl.oilgeopolitics.net/
Greenpa,
"It won't be boring to watch them."
This week's unrest made that crystal clear. It will be very hard to keep 100 million or so of these fierce people down once they get mad.
I would not want the difficulties, even in good times, to try to govern China.
Summers said …
“My role is to make sure the president gets access to the best economic thinking he can on everything that touches the economy” he says loyally. “That means making sure that no arguments go unscrutinised ...”
------
I would then say that he is aware of the opinions expressed at TAE and other blogs.
With all the homeless families, it would seem like the right time to get a “rent-to-own” kind of plan into operation.
jal
China has been going as a culture for five millennium.
The current Western industrial cultures have been going for barely five centuries. Some haven't even been officially countries much longer than a century, Italy and Germany.
Who has a longer track record on the ins and outs of 'governance'?
The arrogance of the West as regards to Asia is something that will shortly get rammed down their collective throats.
Paris in the 9th century was nothing more than a provincial backwater in the Chinese lexicon.
The Chinese made several big mistakes on the road to modernity (destroying their fleet in the 16th century)
They have corrected for this and are ready to move forward, while the West, and the US in particular, go into retrograde and decay due to unchecked, privatized, pseudo crony capitalist greed.
Poor puppies, the West didn't have the Discipline to live within their Means.
Let's see if the East has learned anything.
Did various members of this blog, including Ilargi, spend the last two weeks debunking the myth of a culturally ingrained American bent toward militarism, only to extol "these fierce people” of a Chinese national identity?
Yes, indeed, it’s definitely a parade going on.
Unlike the United States, Canada still publishes its M3 Money Supply figures. I got the following from two releases which Statistics Canada put out on July 10, 2009.
In the 4 years from 2004 to 2008 Canada's M3 Money Supply increased by an average of approximately 11% per year.
http://www40.statcan.gc.ca/l01/cst01/econ07-eng.htm
Over the last year Canada's M3 Money Supply increased by 3.5%
During May 2009 Canada's M3 Money Supply DECREASED by 0.5%
http://www40.statcan.gc.ca/l01/cst01/indi02a-eng.htm
How can I PDF TAE each day? I'd enjoy reading it away from my computer. Thoughts? DR
The best is www.url2pdf.com
Try it with the "portrait" option on theautomaticearth.blogspot.com and it will even remove the redundant rightmost column with the links!
In between the Dubya's . . .
Want in a time of scarcity - Antifa
¨Debt is a virus, you see, and it kills its host.¨
http://agonist.org/don/20090709/want_in_a_time_of_scarcity#comment
Don´s diary is compelling reading as well.
A small suggestion - when intros are posted to Dkos, add an ¨Economy¨ tag. I think you´ll reach a wider audience.
The best way I know to create a pdf of a web page is to use the "pdf creator" software from sourceforge - website below:
Homepage: http://www.pdfforge.org
http://sourceforge.net/projects/pdfcreator
if you use Firefox - Mozilla the pdf creator comes with a toolbar which can be installed and it creates an icon which when clicked automatically creates the pdf.
Long time since I installed it - if I remember needs a bit of set up but well explained, but I use it often.
I have not used it in IE so I don't know if it works- prefer Firefox.
As an aside if you ever looking for really good open licence software look in Sourceforge it is a developers site which has some really good "stuff".
HappySurfer.
Some hope in the doom 'n gloom -
"Nine of Humanities Greatest Environmental Successes"
http://discovermagazine.com/photos/09-of-humanitys-greatest-environmental-successes
"Artificial Trees for CO2"
http://www.gishealthportal.ca:8080/drupal_hub/?q=node/5768
The road ahead may be tough but there are many possible solutions. Let's also focus on some of the more hopeful ones even as we plan for a future that mat be less so.
"The Chinese made several big mistakes on the road to modernity (destroying their fleet in the 16th century)"
Perhaps, or maybe it was their saving grace.
I rather wish we had "destroyed our fleet" after the civil war and minded our own business.
At any rate the Chinese are a very diverse and remarkable people. I see little use in east/west bickerings at this point. Better put all our efforts into simpler and elegant solutions.
Anyone know of a free pdf creator for the Mac which will allow you to select a part of a page. The print>save as pdf only allows one to save the whole page.
"How can I PDF TAE each day? I'd enjoy reading it away from my computer. Thoughts? DR"
Just curious, what device do you wish to read it on?
Dr J
@ Stoneleigh - I think you meant north of the Arctic circle in Norway. I toured that region a few years ago and was told many harrowing stories of the hardships of that winter as the Wehrmacht executed their scorched earth policy while in retreat.
I have been many times in Norway, speak Norwegian, and I also have a Norwegian boy who lives in Trondheim.
A lot of Norwegian stories about WW2 are just stories. Lots of obvious facts are ignored.
Firstly, while the Wehrmacht had a huge army in Norway awaiting an invasion, this invasion never came and the German army never retreated from Norway. In fact, it was largely cut off from Germany and capitulated at the very end like other German forces.
Secondly, if you check out the vast coastal defences put up by the Germans to prevent an Allied landing, you will find that all the forced labour was provided by Russian prisoners - they died in their hundreds of thousands on similar projects. This is totally unknown to almost all Norwegians alive today as they were given an alternative version of reality that you seem to have had a glimpse of. For example, there is not a single monument of any size anywhere that mentions this fact. However, all the way from the Arctic Circle down to the border with the Swedish province of Skåna, there are massive gun emplacements built by someone. Who do you think it was?
Thirdly, the Norwegian ruling class was very similar in its way of thinking to their German cousins. They feared communism much more than fascism. They cooperated thoroughly with the Germans during the occupation. For example, the Waffen SS had thousands of Norwegian volunteers.
Fourthly, the resistance was extremely limited and those that took part were largely fishermen and suchlike - not those with military or police training.
Fifthly, unlike the Dutch, the Norwegians were never starved. The Netherlands also had an occupation that continued to the very end, but they were starved by the Germans.
Sixthly, the Norwegians were never bombed by the RAF.
I could on. However, the point I am trying to make is that it is very easy for the victors to rewrite history. In the case of Norway, it was in everyone's interest to have a few symbolic executions at the end (e.g. Vidkun Quisling) and to pretend that these were "bad apples". Much the same happened in Germany and lots of Nazis were brought to the USA to continue their fight against communism.
Please don't think that this is a criticism of Norway or Norwegians. It simply illustrates the power of propoganda and misinformation in the modern world. I mean, if guys like T. Boone Pickens think that the Iraqis should give their oil to the US as the US "sacrificed" so many soldiers in Iraq, anything goes.
I would appreciate it if the 'macho maniac' stuff about racial/ethnic/national differences were given a rest.
It's embarrassing.
It's also the sort of hormonal bullshit that you see whipped into a frenzy when one person/group/nation or another wants to crank it up and get physical.
Yeah, yeah, yeah. Your dick is bigger than my dick. Heard it all before. When anyone does it the only thing you know for sure is that they're a dick.
When I want to listen to the kind of crap I'll tune in "Animal Planet" and watch two chimps posturing for top dibs on the harem.
@ Nassim - my knowledge of Norwegian wartime history is not as extensive as yours and I am familiar with the phenomenon of victors writing the history and the revisionist tendencies of an occupied population embarrassed by their behaviour during occupation. Vichy France comes to mind.
However, when I was in Kikenes, for instance, the local people told vivid stories of how the population had been herded into an abandoned mine while the entire town was razed. I heard similar stories from smaller towns south and west of there. Are you saying these things didn't happen? That the entire story of scorched earth in that area is a myth?
Ilargi,
I "discovered" Engdahl before I discovered TAE and read his second book, The Seeds of Destruction. The name Rockefeller will never sound the same. He was the one who first alerted me to the severity of the economic collapse we have just commenced. I have listened to many radio interviews with him and read most of his analyses on his web site. I didn't read his first book because it was simply too expensive for some reason.
So I find it interesting that you refer to him as a "loose barrel." He is certainly meticulous in footnoting and documenting his opinions and allegations. So if you ever have a little free time, how about letting us know where you two part company and why you designate him with such a pejorative epithet.
DBS
I agree with your request and wish in this manner wholeheartedly, with the exception that chimps don't compete for females. The male reproductive strategy is too grow an enormous set of testicles and out gush each other. Gorillas OTOH are fiercely sexually dominant, and perhaps consequently, have remarkably small sexual apparatuses as is also found among the most belligerent in Usaco bars.
Here is a quick and easy way to create PDF files
goto
http://www.cutepdf.com /
download CutePDF Writer (Freeware)
run the wizard to install
From the readme text
Using CutePDF Writer to create PDF document:
DO NOT look for any application to run. Just print your document using CutePDF Writer (the printer) to get PDF output.
1. Open your original document and select Print command in File menu of your application to bring up Print dialog box.
2. Then select CutePDF Writer as the Printer to print (DO NOT select "Print to file" option).
3. You will get a Save As dialog box prompted for saving created PDF file.
Select a folder to Save in and enter a File name, then click on Save.
4. Go to that folder to find your PDF file.
I&S: Could you please provide a link to the comments section at the beginning of your blog postings?
I don't have always the time to read all quoted sources, however, I always read the comments. Unfortunately, scrolling down x pages is very inconvenient on the iPhone … I would therefore be happy if you could add a link to the comments section.
Martin, no need to scroll X pages. Just go to the Blog Archive on the right hand side and click the day's title. The comments will be at the bottom.
I'm confused. Why would some of the administration start speaking about a 2nd stimulus package to get all the talking heads to discuss the 2nd stimulus, and then Obama comes outs to reject it. Why? This is going according to the script?
Bluebird,
The 2nd stimulus is a very difficult topic for Obama vis à vis Congress, with much of 1.0 not even committed, let alone spent, and many voices against additional spending.
That means it has to be talked about now, and at the same time sort of denied. Axelrod and Biden have said it's premature to talk about it, Tyson has said it IS time, some Congressmen have vented "opinions". That clears the stage for Obama to deny it.
He could not even have mentioned it out of the blue without the others having brought it up. The overall picture now is one of confusion, while the topic IS out there, which makes it much more palatable to return to it later. They don't want 2.0 right now, but they do want it down the road, so it needs to be part of the public conscience and vocabulary, but not as an immediate issue.
Hence, when the "worse than expected" numbers start coming in, likely as soon as next month, it'll be much easier for Obama and Geithner to start discussing the plan for real.
They'll say: when Tyson and Biden brought it up in June/July, it was too early to talk about it, but in view of the new numbers, which nobody did or could foresee, we now need to spend another $1 trillion.
I'm sure it will keep on coming up in talk shows with various Washington figures, as well as a Krugman or two, as we go along, in order to keep it out there in the public mind. Don't let people forget it, but keep denying till the pivotal moment of your own choosing, i.e. as a reaction to new, "unforeseen" and terrible numbers
Ilargi - Thanks, appreciate the longer explanation. Some days it takes awhile to grasp what's going on.
@Ilargi: Unfortunately, I have to scroll x pages to get to the comments. It's no problem to access a single article such as this one, however, the only way to get down to the comments is scrolling. On my Mac, scrolling is easy, on my iPhone, however, is takes forever and I link to the comments section would therefore be most appreciated.
Re comment link and scrolling:
I tried Ilargi's suggestion but it does nothing to solve Martin's iPhone problem. I will be getting my iPod touch in the mail any day, and would have the same problem as both the iPhone and iPod touch have the same OS. I suspect there is some semi-secret command to go to the bottom of a web page. I subscribe to Mac guru help groups, as until recently, I was the only one capable on this small island of repairing Macs, and will report back if a good solution is offered.
@ El G
"So I find it interesting that you refer to him as a "loose barrel." He is certainly meticulous in footnoting and documenting his opinions and allegations."
He is quite literally a loose barrel, as he believes in the abiotic theory of oil. That the earth simply keeps making more oil in the ground and he backs this up using some Russian scientists paper on the abiotic theory. Otherwise he seems to be a sharp cookie but this abiotic theory leaves me in doubt as to how much he can be believed in.
"I suspect there is some semi-secret command to go to the bottom of a web page."
I don't have an iPhone, but that would certainly be there.
@ El Gallinazo 9:34 am
Hi Big Bird,
Ahh, so! That datum about chimps and gorillas is priceless. Not only do you sum it up in a couple of easy sentences, but the underlying facts of the matter are just great.
In future people won't say that something separates the men from the boys; they'll say it separates the chimps from the gorillas.
I have the same problem with my blackberry as Martin does with his iphone. When I'm away and have to read TAE on the blackberry, it can be an exercise in frustration. A link to the comments section near the top would solve the problem.
An alternative to using PDF to print: just highlight the middle column, select file->print->selection->ok
@ el g - you unclog drains AND repair Macs! You are a true renaissance man.
And I would second Martin's request for a comments links somehwere near the top of the page, for usability sake. I, too, use a portable device (iPod Touch) to read TAE most days, and it is a pain to scroll to the bottom.
Wait--maybe this is Apple's problem to fix...
I'd love to hear your take on David Korten's "Agenda For A New Economy: from Phantom Wealth to Real Wealth."
He puts in words many things I have been expressing to friends for decades.
Nassim,
Like Dr J, my Norwegian experience is much less extensive than yours. I never lived there but I did spend time in the far north a long time ago, and everywhere I went it was the same story. Everything was relatively new because the people explained that the old buildings had been burned.
I don't speak Norwegian myself, but one of my traveling companions at the time was a Filipino fellow who had worked in the off-shore oil industry there and was fluent in the language. Norwegians would speak amongst themselves quite freely while we were around, not realizing that my friend could translate for us. It was quite an interesting window on their world.
Well, I got an almost instant answer from a very knowledgeable guru re instant scrolling of an iPhone or iPod:
> Is there some sort of command to bring an iPhone/Ipod in browser mode
> to the bottom of a page instantly?
Not that I have been able to discover.
There is, however, a shortcut to bring it to the top of the page: tap
the bar at the top of the screen (the bar that contains the date, the
name of the carrier, etc.). This works in most, if not all,
applications that scroll vertically.
Dr J
Well, they are somewhat connected as in Garbage In / Garbage Out.
VK
Yeah, I had forgotten about his subscription to the Russian theory of abiotic oil. I could see how this could really turn off peak oil people.
As a person who has more tin foil hats than Emelda Marcos had shoes, I am not one to accept standard lore simply because most scientists believe it. Today's facts are tomorrow's laughingstock, assuming there is a tomorrow. Also, my academic background was organic chemistry, so when I saw Engdahl was into abiotic oil, I started a search which sort of petered out, but led me down several interesting paths such as the cause of the Permian extinction. I guess I am still agnostic but leaning strongly to biotic oil, but I didn't find any smoking guns on either side of the issue.
At the very bottom of the main page, http://theautomaticearth.blogspot.com, you find the option:
Subscribe to: Posts (Atom)
At the bottom of each post, you find:
Subscribe to: Post Comments (Atom)
Clicking this will take you to a page, in this case:
feed://theautomaticearth.blogspot.com/feeds/6685823798978342583/comments/default.
that offers, under Actions->Subscribe in Mail, the option to send comment sections to your Apple Mail program in its separate RSS section. These will be automatically updated.
This might be a way to go?! I'm digging as I go along, and I don't have an iPhone or Blackberry, nor a Windows machine, so let me know how that fares and if it solves some of the issues. The problem with the links you ask for is that this stuff is automatically generated as is.
I enjoyed the puff piece about Summers...munching away intentendly on a cesar salad and a cookie, too busy for nutrition I suppose....
The bit about Obama's impatience with the economy was telling. Viewing the crisis as a "rut" in an otherwise long and smooth road to paradise. On the other hand, politically manufactured policy initiatives like "health care reform" and a new "energy policy" as seen as the *great initiatives of our time.*
These guys are on autopilot. They are not actively thinking about the world they try to command at all ... thinking quite literally that things will always improve in the long run, never mind the occasional ruts.
Instead, not surprisingly, they are keen to continue in imperial mode as place holders for the next adminstration.
I have never constructed a web page. I did start studying DreamWeaver many years ago, and then became distracted. But from those distant and faded memories it strikes me that there is almost nothing simpler than putting a redundant link on the same page as the primary link.
El G,
Thought this latest incisive piece by Engdahl might be of interest:
"Washington is Playing a Deeper Game with China."
http://www.globalresearch.ca/index.php?context=va&aid=14327
I don't know if this works on an iPhone, but in a normal browser, if you click on the post's title, you will get the URL
http:///theautomaticearth.blogspot.com/2009/07/july-11-2009-full-spectrum-ignorance.html
Now add '#comments' to the end of that, giving
http:/theautomaticearth.blogspot.com/2009/07/july-11-2009-full-spectrum-ignorance.html#comments
and that will take you to the start of the comments.
I have to hand it to Karl Denninger of late. While some blogs and critics of the current administration are engaging in the intellectual equivalent of a national penis envy, Denninger is rolling up his sleeves and delving down deep into some very critical issues that viscerally effect real Americans each and every day.
For instance, why is the bankruptcy bill-- legislation the Democratic party promised to rewrite and reject once they were at the helm-- that Bush and the GOP championed still standing?
Aeshete
@Ilargi: RSS is a great way to subscribe to blog entries and comments, however, it's not helpful when browsing on a mobile device.
It's quite easy to add a 'comments' link to the top of each blog entry, I've just created a blogspot.com blog to test it:
http://testretaecomments.blogspot.com/
Source code:
http://snipt.org/kps
...no government actually believes they will in fact pay off
their debt for that would be a contraction of the money supply unprecedented to date.
Martin Armstrong
http://economicedge.blogspot.com/2009/07/martin-armstrong-irrational-free.html
Engdahl's better moments:
Global warming hoax exposed by record global cold
Confessions of an "ex" Peak Oil Believer
The bond market can't take another stimulus. Or perhaps it can't take one well. The bond market might be on the verge of breaking this backup in rates that started the day Ben announced the QE and the rumor of more supply would kill any chance of that. It's all same old same old I suppose. Dilemma after dilemma, bad options on either side so they march straight ahead and hope.
I keep hearing these reports reporting that the big big boys have a trading range of 7500 to 8500 locked in. Not great but the message is everything is under control.
The faith in control is our controlling faith. The lust for controlling daddies seems universal among the media in particular. Doubling down again and again on the bet that daddy will make it all right in the end.
Stoneleigh: "Norwegians would speak amongst themselves quite freely while we were around, not realizing that my friend could translate for us. It was quite an interesting window on their world."
I've had the same experience; once on a train in France, sharing a compartment with a gaggle of French teenagers. I was wearing Austrian hiking clothes and boots- so it did not occur to them that I might also speak French. Eventually, I couldn't stand it any more- and let them know. That was fun.
Also in hiring Amish workers here- they speak their own dialect freely, never thinking a German speaker can understand most of it.
Camouflage is easy, bolstered by the old rubric: "If a person who speaks two languages is bilingual; and a person who speaks three is trilingual, what do you call a person who speaks one language?" The answer, of course, is, an American (strictly in the Usaco sense!)
el gallinazo asks "Anyone know of a free pdf creator for the Mac which will allow you to select a part of a page. The print>save as pdf only allows one to save the whole page."
This is somewhat clumsy, but as a work-around you can copy the desired text and paste it into Textedit. Then create a pdf from there. A sample I tried correctly pasted the html elements, so it looked OK. Might fail on a more complicated web page.
(I was very surprised when I highlighted some Safari text, created the pdf and ended up with 50 pages. That doesn't seem like the Mac way to me!)
On a regular Mac, command + down arrow jumps to the bottom of the page. Cmd+Up arrow to the top. I would think an iphone would have something similar, but I don't use one.
I have a Palm Centro, it falls over if I try to load a large web page, such as TAE.
(sell your truck yet? I wish the idiot car companies would sell something frugal like that in the states!)
Picking up a thread from yesterday -- it's true that Ilargi has a visceral dislike of the USA, but that's common among European intellectuals. It's also not curable through discussion. Partly it flows from American misdeeds of the last half century and the total lack of remorse or even understanding shown by most of the population. No one likes a bully, even if the bully can play the piano or invent the internet.
But the psychology of America-hating runs deeper, because of the particular relationship of the USA and Europe: the former being a dissident offshoot of the latter. Among intellectuals, the people who stayed despised the people who left from the very beginning. You can see it in Ilargi's astonishing statement:
The vast majority among them were the poorest and the most desolate in the European countries they came from, not the smartest or strongest, not the alpha males and females in their societies. Apart from the occasional exception, they were the ones that had failed.
This statement is astonishing on two grounds:
1) It is close restatement of the reasoning of the early 20th-century eugenics movement, who sought to limit or end immigration. That Ilargi, the man on the high horse, more correct than thou and will let you know it, would say such a thing points to a major blind spot in his own thinking and self-knowledge.
2) It is factually nonsense. American immigrants included a bit of everything, including a small minority of scum and losers. But to say the vast majority of them were failed people is false as well as offensive.
Irony is – many immigrants were simply people with foresight, the intellectual forbears of the TAE crowd. They looked at Europe and saw the prospect of unending poverty, war, persecution, and misery, and decided they and their descendents would have a better life in the USA. Stoneleigh says Americans are weak, diminished, contemptible because they have not suffered the way Europeans have. Imagine all those immigrants rolling their eyes. That was no mistake, friend. That was the purpose. And it worked. Irony upon irony, Stoneleigh says she left Europe for Canada for the same reasons – she sees a dim future for Europe. Is Stoneleigh a failed person? If the “vast majority” of immigrants to America are failed people, she must be too.
[end of part 1 due to 4096 limit]
Aside from simple foresight, American immigrants were: people whose loserhood consisted of being the third or fourth son, who couldn't inherit the family farm or business. People in temporary localized ecological disasters such as the Irish potato famine; or in chronically hungry places like Norway; and the people in those places who survived long enough to get out and had the resources and psychological fortitude to get out were not the weakest segment. People who were ethnic minorities in some corner of Europe – Germans outside Germany, Hungarians outside Hungary etc.; who saw their prospects permanently limited by Europe’s permanent ethnic tensions or decided not to wait for the next round of ethnic cleansing. People who were on the wrong (not state-backed) side of a religions conflict – Jews fleeing pogroms in Russia; French protestants; Mennonites et al. from central Europe; who fled to avoid extermination. (Those are failed people, Ilargi???) Political dissidents who left Europe because they liked the founding principles of America. Once long ago there were Locke, Voltaire, Montaigne, Montesquieu, Thomas Paine – DWMs unknown today but once they mattered. The USA was founded on their principles, and some people positively liked that and crossed the ocean because they wanted to live under those principles. Talented people of humble birth who did not want to see their talents stuffed by the stultifying class hierarchies of old Europe. Entrepreneurs who saw opportunities in the natural resources or development process of a new continent. People simply unwilling to suffer any more serfdom. People with the inner strength to face the devil they didn’t know instead of the one they did. These were not failed people.
Ask any American who can trace their ancestry back far enough, and they would probably say generations 0 and 1 were the best generations, and we have been getting softer ever since.
rapier said...
The bond market can't take another stimulus.
What will happen? Rates go up, bond prices (and mutual fund NAVs) down? What bonds, treasuries, corp, MUNIs?
Dr J and Stoneleigh
Like Dr J, my Norwegian experience is much less extensive than yours. I never lived there but I did spend time in the far north a long time ago, and everywhere I went it was the same story. Everything was relatively new because the people explained that the old buildings had been burned.
I agree entirely that some Norwegian communities suffered enormously during WW2. However, quantitatively and qualitatively it was on an entirely different scale from other areas under German occupation - especially in Eastern Europe and Russia. These fishing communities may have suffered for resistance or because the Germans needed to move them out for military reasons but that was very much the exception. If I understand you both correctly, these people had their property destroyed while their lives were spared. That is not such a terrible thing compared to what happened elsewhere. I think something similar seems to be happening right now in some parts of the USA.
There were few civilian casualties in the more populous regions of Norway - much further south. I would say that they came out of it all very lightly indeed - especially when the fate of the Russian prisoners who moved among them is taken into account. I am sure you have read books that recount how the inhabitants of the town of Dachau (a suburb of Munich) claimed not to have noticed what was going on in their neighbourhood when asked later on as to whether they had witnessed the daily procession of, mostly German, concentration camp inmates along their streets. Much the same thing happened all over Norway and there is no attempt to even note down this discrepancy. Norwegian school kids are never told about the probable 500,000 Russians who died there - in a country of 4 million. It is simply not mentioned anywhere.
The Norwegian civil service cooperated 100% with the Germans and so there was no need for German administrators. The same went for utilities, factories, courts, coastal shipping etc.
Lots of Norwegian women married German soldiers with everyone's approval at that time. Later, after the war, the children who were the result of such relationships were ostracised by the society. Personally, I once knew a Norwegian girl who was apologetic to her own girl friends because her own mother was a result of such a relationship. I have never seen anything like it before or since.
The level of hypocrisy is on par with anything that Ibsen could have written. I am sorry if I am a little sensitive about this subject but I always think it is a bit ridiculous when Norwegians go on about what the Germans did or did not do to them while ignoring the real slaughter that was going on in their midst.
Orlov's website below, has a link to a video where he gave a speech in Dublin last month. The video is in QuickTime format, but in the comments, someone has posted a link in mp3 format.
http://tinyurl.com/nqlegd
Mugabe et al
I have ever seen as much nonsense here as the past few days. The things people manage to get out of their fingers is astonishing. I can't cure the distorted views Americans have of themselves and their country. And the fact that many of their countrymen agree with me will not make the slightest dent in those views either. Such are the tribulations or religion.
So in one general comment: I'm not going to bother reacting to all the braindead blubber thrown out here. You'll have to face your own god, and his own country, and find your satisfaction on your own too.
And if that takes throwing out terms like eugenics, don't bother if your one last active neuron doth protest. The dead ones must be right, there's after all so many of them.
Ilargi --
I agree that you should not respond to brain-dead idiots like me. You only ever respond with insults, and usually the same insults, so the incremental value is small.
I don't post for the purpose of arguing with you (which is unproductive.) I post to address the rest of the TAE audience. Let my comments stand or fall on their merits. Others can judge; don't worry.
@ Mugabe
What was the main point that you were you trying to get across? That Ilargi is a European elitist and TAE is essentially Anti-American?
No wonder really then that they have spent 4 years trying to warn Americans, Yes, Americans and help them prepare for the shitstorm up ahead, those dang pesky Europeans without charging a cent for their services they provide unlike Schiff, Mish, Celente, Ritholtz, Denninger, Reggie Middleton who provide extra investment services on the side and their blog work is to try and attract clientele.
Then you go on and write,
"Stoneleigh says Americans are weak, diminished, contemptible because they have not suffered the way Europeans have."
And go on to dismiss that, while you end your comments with this gem,
"Ask any American who can trace their ancestry back far enough, and they would probably say generations 0 and 1 were the best generations, and we have been getting softer ever since."
So essentially you agree with what Stoneleigh says that recent American generations have not experienced the hardships that have occurred in the rest of the world and that leaves them ill prepared.
Ilargi...
"Global warming hoax exposed by record global cold
Confessions of an "ex" Peak Oil Believer"
Now there are a couple of examples of "brain dead" that likely did not originate in Peoria or Topeka!
Appreciate your irony.
Poor Arnold was painfully naive yesterday to ask TAE to think positive and posit solutions. Obviously a newbie. It's silly to ask the horse to retrieve ducks or the dog to pull the plow. Things are what they are, even useful things. TAE cannot be what Arnold wants; and to suggest it is just to ask for scorn.
That said, he is fundamentally correct, I think. I live most of the year in Asia, where per-capita GDP and oil consumption are one-tenth of the USA, and population density is higher. Yet society functions; social order and solidarity are actually stronger than in the USA; crime is lower; people live long lives and food is abundant; there are lots of children and dentists. Stoneleigh's basic premise, that a substantial reduction in prosperity and oil consumption must destroy society, is clearly not correct.
Of course, society can fall apart under stress, depending on the character of the people, the policies of government, etc. Given the right policies and the right spirit, American can survive the future without starvation, misery, and genocide. Recent performance of the government is grounds for pessimism, but Arnold is correct to say we shouldn't give up. We should fight to influence policies and the spirit of the people. The next leg down, as predicted by I&S, is a crucial time, since the keystone of the political order has been the promise of eternal growth. If that crumbles, loses credibility, then everything is up for grabs and we should be in the fray.
But TAE is not the place for that.
Halfway OT, but re., navigating TAE on mobile devices, sr said, "Now add '#comments' to the end of that...
At first, this appeared to be a great suggestion, but unfortunately only seems to work if you are not already on the full blog post page. When I added "#comments" to the URL on that page (on my Touch), I was instead taken to a "...does not exist" page, rather than down to the comments. When I completed the URL with the "#comments" on that page, however, I was taken to the correct place!
In other words, you either have to key in the entire URL, e.g., "http://theautomaticearth.blogspot.com/2009/07/july-11-2009-full-spectrum-ignorance.html" and then add the "#comments" onto it, or add it to the URL of the full blog post page, be directed to a "...does not exist" page, and then add it to the URL.
And as you can see from me just trying to describe it, this is a clumsy way to navigate, albeit a bit easier than my current furious fingertip "scrolling" method...
For those who want to skip to the comments, I have inspected the source for this page and find the following tag:
<a name="comments"></a>
So, you should be able to skip to comments by appending the name to the permalink for this entry:
<http://theautomaticearth.blogspot.com/2009/07/july-11-2009-full-spectrum-ignorance.html#comments>
VK --
My point was twofold:
1) I don't argue ad-hominem. Ilargi is permanently anti-American like most Euro-intellectuals, but that does not affect the validity of his other arguments. Just accept Ilargi for what he is, and accept the value that he provides, and stop complaining about that point.
2) I wish to engage in discussion with (and frankly to rally and encourage) the segment of the audience who read TAE but don't share the fatalism of the authors. Perhaps that pushes the boundary of what is permitted here, but it's not wrong in principle.
Mugabe,
Yes, allow me to judge you briefly. Your comments are very articulate for sure, but they are also empty of substance and full of the myths and propaganda that keep most US Empire dwellers ("Americans") so narcissistic, jingoistic, materialistic, and tolerant of the horrific crimes committed by the US Empire worldwide in our names.
@ Mugabe
"Yet society functions; social order and solidarity are actually stronger than in the USA; crime is lower; people live long lives and food is abundant; there are lots of children and dentists"
See I get this, I live in a third world country but that doesn't mean we don't have roads, hospitals, malls and universities. Yes we have all these things and it's a nice life and on average we consume about 3% of the energy that an American Citizen consumes and our GDP per capita is 3% of a US citizens.
BUT, BUT, BUT I am largely pessimistic or actualistic as from personal experience I have seen how fast a country can unravel. Last year my country after experiencing decades of peace nearly erupted into an orgy of civil war in 7 days. Society can erupt much faster then you think. What happened then was twofold - shortages and fear. Food prices shot up, mobile networks started going down, businesses closed down and the fear of losing everything was real.
The thing about peak credit is that, the US is the CENTER of the world economy and if affects everyone in every way. Credit permeates our life in ways we can not imagine. Just to get a simple spare part for your car requires a vast industrial and financial complex, to get your dentists the equipment they need requires a vast industrial and financial complex that requires credit. Credit and energy are a MUST for the global economy to function.
Without credit, even Asia starts breaking down as does the world as complexity collapse occurs. There is no credit to keep the factories open, to purchase cars, to buy spare parts or hospital equipment. This leads to collapse in tax revenus as people get fired, asset prices fall etc.
The whole process of everyday life which we take for granted is entirely dependent on credit and energy plus ofcourse political stability, take those key inputs away and you have the recipe for chaos that can erupt fast and leave a deadly trail.
Mugabe...
"Of course, society can fall apart under stress, depending on the character of the people, the policies of government, etc. Given the right policies and the right spirit, American can survive the future without starvation, misery, and genocide."
Agreed... transition without violent tragedy is possible, but much, much less likely when the political and economic system is corrupt, the debt is enormous, and the populous mostly TV mesmerized and so obviously manipulated.
I hope you are right about some of those optimistic projections, but as I live and breathe here in Indiana I am trying qite hard to be realistic and prepared for the worst that might... or should I say, is likely... to happen.
I think this blog is serving us well in identifying some potential and necessary painful contractions, (due to prevelant corruption) especially in the area of finance and economics.
I am an American who moved to Europe to live a higher quality, saner life (which I am certainly living).
Frankly I am embarrassed to be an American and usually find myself apologising for the fact when people ask. I am ashamed and embarrassed for a multitude of reasons - all of which should be obvious for anyone with a thinking brain. The problem is that most Americans live in a self delusional bubble. They are completely and utterly out of touch with reality, with themselves, and with the greater world at large.
Denial is not a river in Egypt.
cd
Mugabe,
You've made some good points, IMO, although many were way OT with this blog. And yet, sometimes, with a mere word, much is revealed...
If you believe the invaluable service I&S offers here is primarily, or even secondarily, fatalism, then you are badly mistaken, or I would suggest to you, in using the term, that "I do not think it means what you think it means."
Re: Character of nations
And here I would posit that only the actions (or nonactions) of a nation can truly reveal its character, assuming that there is such a thing. In other words, we can tell ourselves all day long that we stand for truth, freedom, and the American Way (whatver those are), but our actions speak much louder. Pointing this out presumably does not open one up to charges of anti-Americanism, or does it?
Mugabe says, I wish to engage in discussion with (and frankly to rally and encourage) the segment of the audience who read TAE but don't share the fatalism of the authors. Perhaps that pushes the boundary of what is permitted here, but it's not wrong in principle.
Why? What are your personal motivations? I'm curious.
Who are the segment of the audience who read TAE and don't share the fatalism of the authors? Have you identified this segment of the audience? Or is your purpose to offer the entire audience some other vision of reality? And if that is your purpose, why? Why come to a site where the bloggers share a world view that is not your own, and try to encourage their audience to stop crediting the world view that brought them to the blog in the first place?
Logically, I just see this as someone with an ulterior motive. Trying to think of potential motives, I'm thinking:
1) You don't like or agree with the authors for personal or professional reasons and want to try to convince some of their audience that they shouldn't like or agree with the authors. If that is it, who are you and why? What is your personal or professional beef.
2) You think the authors world view is so convincing, that perhaps potentially dangerous. Like an infective viral idea. That if many people are tuned to this message it might bode poorly for this society's present way of functioning--or, perhaps you agree that change is a coming--but believe that the authors ideas are bad for the post-change world, and your more optimistic views are better. If these are your reasons--why so? What is your dog in this fight? Are you just a citizen so concerned about this blog that you need to convince a segment of the audience that your alternative is the right way?
Perhaps it is me. I concede this point in advance. But you seem like some kind of agent provacateur or something of the sort. What is your true motivation? Who are you, for instance? Why spend time on an obscure blog trying to turn back a portion of a small audience?
I know the site host doesn't really need or want a defender. I just find it funny to see the critics of late. I would seriously take it as a sign of someone telling somewhat dangerous truths.
Ahimsa...
The Ahimsa Ghandi practiced I much admire, just as, similarly, the elegant simplicity of Woolman (somewhat without the religious taint). As a young man I carried a copy of Thoreau's journal in my vehicle, etc. etc.
Much of their work involved a deep self examination and a very acute sense of personal responsibility.
I think I sense in your comments the same deep regret that I have, that we, as US citizens, do not, have not, engaged in the critical self examination of our motives and actions that is required of upright human beings.
Sure, other folks around the globe may or may not either, but that's not the point.
We should have been doing so much better at adhering to Socrate's admonition... "know thyself."
That said, I rather think the same is true of Brazilians, and French, the Nigerians, and Canadians. We're all just struggling Homo Sapiens after all.
We European Intellectuals we hate the Americans and invent silly names for them, like usacos or yumas, because they come over here and specially if they are 2,20 meters tall, black, basketball players, go to the disco and get the best girls who look at the size of their feet and the chicks think, "if everything is in proportion I am going to have the time of my life", and one is not Sartre, more is the pity, to pull the girls just with a nod at them, what.
So we have to go to the café du coin and drink black coffee no sugar, with bitter Seville orange jam toast, and sulk.
Boston Joe --
I am nobody. Perhaps that sounds disingenuous, but if you knew the truth, you would agree. My profession is unrelated, and I am connected to no one who has any power in the world.
My premise seems obvious to me, and I am surprised that you are puzzled, but then it's hard to anticipate how others will react. My point has always been: something can be useful without being everything. The dog can't pull the plow, nor can the horse retrieve ducks. TAE is useful (I read faithfully) but it's not everything. For some of the audience, perhaps it is everything, and they never agree with me, and that's ok. But there seem to be members of the audience who see it the way I do.
I make comments here partly because I am too lazy to search the entire world of blogs to find a more hospitable one; and partly because others like Mish and Denninger have too many tin hats and wingnuts (TAE is rare in being almost tin-hat-free); and partly because audience seems to be good people, open minded on most issues; and partly because I share the spirit of the audience to some degree (having skipped the real estate bubble and been debt free for years; and having moved overseas to escape the lunacy of this economy.) That's all, the whole story. Nothing hidden.
Armando- LOL!!! Bless you. Finally, something useful today, if only humor.
Count me as a Mugabe fan.
I am just a poor, dumb American.
GreenPa,
What would you consider useful in this comment section?
Thanks.
A very well written illustration of usaco reality: Welfare Newbies
Anon; "What would you consider useful in this comment section?"
Anything other than "You're full of crap!" "Am not!" "Are so!" Am not!"
Most of us here REALLY are capable of a maturity level somewhere above 8 years old.
@mugabe:
Yeah, Ilargi can't get into an argument where actual thinking is required without getting his head handed back to him on a silver platter.
That's why he has to resort to insults and censorship. It's the only way he can defend himself.
Stick to the postings, Ilargi. Leave the thinking to Stoneleigh. You two remind me of Pinky and The Brain.
It's hilarious when even she has had to bitchslap him when he gets too embarrassing to ignore. That usually shuts him up for a while.
Armondo...
:-) ) I'm still chuckling!
I regret to inform you that this assumption...
"and get the best girls who look at the size of their feet and the chicks think, "if everything is in proportion I am going to have the time of my life..."
Is not applicable. At least with this quite "average" usaco.
Still... I manage.
:-)
Perhaps it should go in the primers?
Ilargi is volcanic. Stoneleigh is oceanic.
Both are awesome; in the original sense.
I van do this differently and just delete what I don't care to read. After all, most of the recent spate of blubber posters don't acre to read at all.
Until recently, though, the comments forum here was polite and had something to say. And now it's mud bath after mud bath and I don't find it a good idea that a forum in which I actively participate is full of "I don't do ad hominem" followed by one ad hominem after the other directed at me, and about which I should then remain silent.
There is simply too much nonsense. So perhaps I'll just wipe out comments by those who obviously can't or won't read and get a more constructive discussion going.
Mugabe,
Stoneleigh says Americans are weak, diminished, contemptible because they have not suffered the way Europeans have. Imagine all those immigrants rolling their eyes. That was no mistake, friend. That was the purpose. And it worked. Irony upon irony, Stoneleigh says she left Europe for Canada for the same reasons – she sees a dim future for Europe. Is Stoneleigh a failed person? If the “vast majority” of immigrants to America are failed people, she must be too.
I have never said any such thing about Americans or anyone else. I was merely pointing out that people who have no experience of physical risk on a personal level are unlikely to find adjusting to it an easy process. The poster I was speaking to had suggested that Americans might be uniquely qualified to make-do and find solutions because of their can-do attitude and ability to endure hardship. I was pointing out that most modern Americans had in fact no experience of hardship, whereas people in many other parts of world did have such experience.
I think societies which have been profoundly divorced from reality for a very long time (which includes Canada every bit as much as the US) are likely to have the hardest time dealing with reality when it finally comes calling. The analogy is of falling from a tenth floor window versus falling from the ground floor.
I don't see what is coming as something that will unite society. Instead I think it will highly divisive.
Illargi - Does a constructive conversation consist of discussing only positions that you are in agreement with? I do find that you are among the largest hurlers of ad hominem attacks. At least towards me. I am sorry that I do not share you fatalistic view of the world, re: America. I do believe that we are going to be in serious trouble. However, since I live here and am still proud to be an American I will constantly strive to try and make small improvements that can have tangible impacts on peoples lives. Heading to the hills and waiting for the apocalypse IS fatalism folks. Plain and simple. I think this board is good for the perspective provided and for the news presented. I thank you Ilargi and Stoneleigh for this.
BTW - If the above is the definition of constructive conversation then that is really called an echo-chamber. It is one of the reasons why I do not comment on Denninger's blog. That, and as another has noted, and the absence of tin-foilers (for the most part).
Arnold,
You haven't contributed anything but fantasies. Everybody has fantasies, Arnold, get in line. And while you're there, try to bring something constructive to the table
And I haven't hurled anything at you until you accused my entire readership of being a bunch of daily whiners.
"You haven't contributed anything but fantasies. Everybody has fantasies, Arnold, get in line. And while you're there, try to bring something constructive to the table"
Ad hominem. Ilargi it just keeps piling up.
Even our temperamental host and his laudable tolerance, along with most of the posters have surely felt the occasional regret of a mercurial pen run amok with flourishes of ill-considered haste and emotion. It’s like waking up the morning after only to see the send button lying naked with a big diabolical grin.
This blog is all about handing out condoms as one enters the dangerous darkness of the coming one-night economic stand --however long it lasts. Which is why strangers passing in the dark are not really holding any feet to the fire in terms of personal disclosure.
One day perhaps ( a huge if) economic daylight may once again break out across the land. When that day comes, people will want to know who they have been sleeping with so to speak.
Which is why I will remain perpetually skeptical; Illargi and Stoneleigh perpetually anonymous; and El G, the perpetual hatchet man wielding the high TAE hocley stick.
Aesthete
Anyone who think Ilargi and Stoneliegh are doomers or fatalistic don't get it. Everything in this universe operates in exact ways. There are laws that govern all that happens. Nothing happens by chance. Because of this fact the die is cast for mankind simply because of the choices we have made. The authors of this site are simply pointing this out.
The tendency for destructive behavior from human beings when things disintegrate has a proven track record. There is nothing that can be done to stop what is unfolding. There is however a great deal one can do relative to ones own attitude toward what is unfolding. That is something for which we have always had responsibility and which will be of paramount importance from here on. The spirit we live by is our choice.
Notes to Arnold:
1) There is such a thing as enough for one day.
2) Make your point and move on. If another poster (other than the author) addresses you personally, respond by all means. But it's not productive to keep having the same argument when it's going nowhere.
Why should I desist Mug? Everyone here says to think for yourself. Don't be sheep and then you add this?
"But it's not productive to keep having the same argument when it's going nowhere."
Ah- but it IS- if you're being paid to keep it going nowhere... over, and over, and over.
Listen guys. Short of being banned or censored, if a person makes a comment direct at me. I WILL RESPOND TO IT.
@ Ilargi 3:18
"I can do this differently and just delete what I don't care to read."
Hi Ilargi,
It would be a great loss to all serious readers if it came to that, but it is your blog and a persistent troll can, indeed, be both annoying and distracting from the business at hand.
Personally, the preferred method of dealing with trolls is surgically precise vivisection of their specious arguments. Don't just hand them back their head, tag and label every piece of it.
A couple of public vivsectionings of that nature should be enough to dissuade an "honest" troll. Any one coming back for more than that is probably an actual agent provocateur with slimey friends and a nasty agenda. For those birds, yeah, cancel their ticket.
Ok Arnold,
Could you please tell me what positive outcomes you see for America and possibly the world at large out of the coming economic implosion?
How are you hedging your bets and protecting your family?
Investing in land, gold, t-bills? Preparing to learn about agriculture, building a local community? learning skills to help yourself and those around you?
Because those are the positive aspects of this crisis, the breaking of the shackles of illusion and going back to the land and your community. People will need each other more then ever.
Arnold,
Please by all means give us a list of WHY you are proud to be an American!
What exactly is there to be proud about? AND have you ever been out of the US?
Blind patriotism is usually a sign of a person with a very small IQ -soldier mentality. Put out the American flag and throw some burgers on the grill and open up a bud.
America is a country of lost souls - HOWEVER -
The majority of Americans who contribute to this site are in the minority - they think.
Patriotism and intelligence seldom (if ever) go together.
cd
Investing in land, gold, t-bills? Preparing to learn about agriculture, building a local community? learning skills to help yourself and those around you?
Because those are the positive aspects of this crisis, the breaking of the shackles of illusion and going back to the land and your community. People will need each other more then ever.
Oh my GOD!
VK-
Who are you? Some sort of paid agent provocateur?
How DARE you state some of the positives! You are banned from TAE until you learn to ignore the real good that will come from this collapse.
VK-
1) I see the end of the consumerist economy cancer in this country. This will cause us to actually become producers again. Living standards in the United States will decline and the developing world will increase. We will become a net exporter again of finished goods.
2) Because of the death of the consumerist economy, there very well could be a spiritual and social renaissance that may arise after the necessary wrenching adjustments have been made. People will get back to enjoying free time, family and some of the more intangible benefits to a life. There will be less of an emphasis on conspicuous consumption.
3) Many of the jobs that do not create core value (production, mining & agriculture) are going to disappear (lawyers, ibankers, "managers" and bureaucrats). We will see more social valuable activities doing well (medicine, education, agriculture).
4) Due to the fact that many young people cannot find jobs to sustain themselves, many are moving back home with family. This will strengthen the family unit in this country, that has been under attack, due to the fact that families will once again have to work together to make it.
5) Because many people will lose a great deal of material wealth, they will be humbled and through humility we may actually see some positive social gains.
6) Because of the elimination of the global arbitrage system (US buys cheap goods and enjoys a high standard of living and exports dollars) other countries will be permitted to expand and increase their wealth and influence. This will be good for a newly surplus oriented USA, since long term, a prosperous and stable world will be better for us.
These are just a few examples off of the top of my head. Now, instead of just calling this fantasy, why not just address the comments?
CD - I have a tested IQ of 134. No I am not a dunce. As for why I am proud to be an American? It is because this country is a strong base for ingenuity and freedom (although this has eroded over time, there is still more freedom than there is in much of the world). I have lived in various countries and some of the things that Americans take for granted are not available to many other peoples.
I also respect the United States for having pre-eminent research facilities. As a product of one such institution, I can extol its virtues.
Ultimately, being an American has opened up some wonderful opportunities to me. I am not from a well to do background and had to work my way up to where I am now. This is not possible in many countries (again places I have lived). So flame away, but yes I AM proud to be an American.
As for what I am doing. I live in a major city so having a self-sustaining garden is not feasible. What I have done is stock up on some non-perishables just in case there are any disruptions in living supplies. I have been actively trying to get myself out of debt. I am trying to help other to understand some of the challenges facing us (a difficult impact for sure). I am also trying to impress upon my neighbors in my community the gravity of the situation facing us and the necessity of forming a strong union in order to help and look out for each other. Not too dissimilar to what Stoneleigh has suggested we do.
Aesthete,
Thanks for the compliment, but unfortunately I have always been a very poor skater. As to your comment yesterday about Europeans and women, I did recognize that this was intended as a compliment about those supposedly womanly virtues - the ability to persevere under long term hardship and pain, while most men are just sprinters. And my little comment was an innocuous cheap shot, but I couldn't resist because I thought it was funny.
I am only a long time reader and poster, so I am in no position to set forth what the purpose of this blog site is. But I am free to express an opinion about it.
After long study and thought, our hosts have come up with a consistent theory of what is happening economically in the world, and how that will probably effect the life standards of all of humanity. Their purpose is to disseminate that information to all who are receptive. In addition, Ilargi combs the world's financial news for most of his day to allow us to keep abreast of the latest developments.
Apparently, there are "lurkers" out there who find I&S's ideas both offensive and wrong. They think the purpose of the comment section of this blog is to continually engage the hosts and their "hatchet men" in debate about the fundamentals.
Stoneleigh in particular, is more than capable of engaging these opponents in debate and systematically dismantling their specious srguments. But this takes a lot of time and energy. It involves constantly reinventing the wheel. Stoneleigh is willing to do this because she would like as many people as possible "to see the light of reality" and do what they can to protect themselves.
But there are two problems with this. It wastes a lot of energy to constantly reinvent the wheel. And more disconcertingly, most of our disloyal opposition appear to be rather dishonest. Mugabe ascribing today these ridiculous ideas to Stoneleigh is one example. Arnold accusing us of being "do-nothing whiners" is another.
If this were a parliament or congress, than this sort of thing must be tolerated. But this is a private blog site among tens of thousands. These people are free to espouse their ideas elsewhere and leave us to our doomster fantasies. Perhaps they should return to their great white father and be reassigned to different climes and let us become ingrown and degenerate please.
Ilargi:
"I threw away four times more today than I kept."
?... As in articles to post?
Arnold...
Some good points.
I think it's like an ole Shawnee once told me years ago... life is all about finding the balance.
To do this we have to shed our cultural biases and look at everything with the eyes of a truth-seeker.
El Gal - Perhaps they should return to their great white father and be reassigned to different climes and let us become ingrown and degenerate please.
Actually I am not caucasian. Also, what are YOU doing to try and make the situation better, other than just preparing yourself and your family. The truth is that if the US goes to pot. Having a bunch of materials stored and a farm or some such isn't going to do much when a hungry crowd comes a calling.
Geitner now on CNN...
sorry... Geithner
If I may interject to talk about finance...
El G asked about the health of Canadian Banks. The fact that the market seems to think so probably means that they will, in fact, last longer than the usual US/UK suspects. But don't count on them lasting much longer. About a year ago I did some research on the matter and, if memory serves, RBC had ~$4T of derivatives (all perfectly offsetting, of course, and to only other reputable financial institutions), CIBC around ~$2T. I just navigated over to this ScotiaBank pdf and found:
Total notional amounts of derivatives as at October 31, 2008, were $1,562 billion compared to $1,287 billion a year
ago.
BTW, if anyone here buys the whole Canadian financial/economic exceptionalism often spouted by the PM, the BOC governor and others, dig a little bit into CMHC. You will find numbers to make even Fannie blush.
Who has time to read all these comments? If comments are posted by the same people, over and over, I just skip them. Except for Stoneleigh and Ilargi, of course :) This is their blog, and it's important to read what they say.
Arnold,
God help you!
There are far more reasons NOT to be proud to be American. I think the reasons you give for being proud are extremely weak. There are loads of countries in the world that excel in the areas you mention AND are NOT war mongering, corrupt, consumeristic, jigoistic, wasteful etc. etc. etc. Places that even have universal health care and a wonderful education system for the young.
Ever been to Scandinavia? Exemplary. Just one example. America may have had many more positives in an earlier age (that is some time after the american indian population/culture) was wiped out....I'm afraid the US really got off on the wrong foot and has spread it's poison around the world ever since (not just fast food chains and crap television shows but also brute force, polution)...and I do strongly believe in cause and effect. What goes around, comes around. The US is a violent, wasteful, souless 'air-conditioned nightmare'. It's a pity too because it has some beautiful wild places.
It's now time for the US to pay the piper.
I think your view is very pollyanna-ish and completely out of touch with reality. You do say some well-meaning things but ultimately you miss the whole point. You are a perfect example of what I was referring to earlier - the Americans who are living in a bubble - it is fantasy land.
Wish you well nevertheless.
cd
Greetings Arnold,
Thanks for your response. I agree with much of what you said, there could be positive aspects of this crisis but we must also explore the dark side that the MSM and other financial outlets rarely do.
Most economic blogs reckon that unemployment can't go past 11% and that we will return to the world of growth and prosperity in a few years time. What makes TAE different is that we study the most likely scenario that is about to happen with deleveraging.
Ok so lets study some of the points you have made,
I agree on number 1 except for this, "We will become a net exporter again of finished goods." There might be a long period of time where world trade will be 90% below where it was. As an individual you also have to prepare for this possibility. To export goods, other countries must have purchasing power, something they might not have and also the US is a large importer of Metals and Minerals. In some cases it imports a 100% of certain kinds of minerals, these might simply be unavailable due to conflict or hoarding.
On point two, I agree and I would like to highlight, "that may arise after the necessary wrenching adjustments have been made." EXACTLY. People must psychologically survive the gut wrenching adjustments and this is where being prepared for the worst can help hedge the outcome.
On point 3 I agree and I do reckon that 40% plus of the US population will have to go back towards agriculture in some form, growing food in gardens etc.
Agreed on point 4 but I would like to add that a large number of unemployed youth (24% in the US so far and 37% in Spain) is also a source of potential conflict and unrest, this must be taken into account. A disillusioned young populace is more likely to take to the streets then 70 year olds walking on crutches.
On point 5, Yes some people will definitely become humbler and be better for it. Some will find the move down the social ladder hard to swallow, following economic crashes suicides and homicide rates usually tend to go up - think of the declining Russian population and the large number of deaths in the former male middle class.
I agree with you least on point 6, as according to Game Theory the world we are moving into is a negative sum game due to declining resources. The competition for the remaining amount of resources will be intense amongst the remaining powers. Prizes include Morocco for phosphorus and hence global food supply, Mid East for oil as well as Africa for it's rich resources and land. In a negative sum game, Team A must make Team B crash much faster and harder to maintain the same level. It's a dangerous scenario unfortunately :(
Cheers!
cd - You say my reasons are weak without really any good explanation. Call me a pollyana when I acknowledge that we are in for rought times and chastise me when I don't engage in self-flaggelation. I learned long ago that it is impossible to please everyone, so I don't try. As for me, I am doing what it will take to protect myself, WHILE making a difference. In my community I can honestly say I have. How many of you can say the same? I think it is the people that think they can hide in a shell while the world goes to hell that are the naive set.
Farmerod
"Total notional amounts of derivatives as at October 31, 2008, were $1,562 billion compared to $1,287 billion a year
ago."
Please elaborate on notional derivitaves for the uninitiated...
Translation... a huge gain in virtual (worthless) money in one year?
Arnold
The "great white father" comment was not to imply that you were of any race. It was a reference, from the Western cinema mythos of my youth, to the central powers in Washington.
Your six point statement actually made some sense for the first time, not that I agree with much of it.
I have been living in a possession of the USA, bought from Denmark in 1917 for $25M. I cannot vote for president, senator, or a voting representative. I couldn't care less because politics in the USA is a complete and total sham.
At the risk of beating my chest, and though it may sound strange due to my cantankerous persona on this blog, I am involved with a small conmunity here and have been hugely helpful to it in numerous ways without remuneration. To say the least, this community is very upset at my coming departure. For one thing, I have saved the ones with liquid assets hundreds of thousands of dollars by getting them out of the stock market over 18 months ago after studying Stoneleigh's work. And this is just the beginning of my service.
The national and state governments are bought and paid for by the financial elites. In times of scarcity, you will see just how democratic this country will be. They will drop any pretenses. Katrina and New Orleans is just a taste. USNORTHCOM is in place. KBR has built the internment camps with our taxes.
I don't want to live in the USA anymore. It has transformed itself into a police state. I am getting old. Yes, I intend to plan for the benefit of myself and my family. And to do as little harm as possible to others. And to help deserving people with whom I come into direct contact when possible and without completely impoverishing myself. I hope to set up eventually some sort of communal farm in Latin America for indigent and landless people before my dollars become worthless or are confiscated.
Arnold, in your modest, ah shucks way, you are really quite adept at pissing people off. I could learn much from you.
Assume a market space with non-zero curvature, which contains all tradeable goods and services.
Also assume money-vectors that are
embedded in this space can attain non-zero curvature.
Now assume that distance between money and tradeable substance is increased or decreased by means of negative or positive market curvature, changing vector magnitude and thereby altering the monetary tensor-field into a state of 'flation.
Now assume that money torques.
El Gal - It's funny. I talk to some (here) who call me a Pollyana. I talk to others who call me a naysaying doomer. A negative Nancy. I just cannot find a group where I get any love. I guess mine is to be a loner and wanderer in life.
Here are people we could learn a lot from.
http://news.bbc.co.uk/2/hi/europe/8144165.stm
I was in Prague, in 1968- 9 days before the tanks.
Arnold,
I see the end of the consumerist economy cancer in this country. This will cause us to actually become producers again. Living standards in the United States will decline and the developing world will increase. We will become a net exporter again of finished goods.
I also see an end to consumerist culture (involuntarily). I don't think this will make us producers in the sense that I think you mean though. Depressions are not times when people get their collective act together and become productive on a societal level. Depressions are times of division, lack of trust and risk aversion, which mitigates against people starting businesses that would employ others for instance. I do think we will become producers at a basic level for our own family and friends, as we will have no choice whatsoever. As a result, the bonds of community should strengthen, which will be a positive impact IMO.
Because of the death of the consumerist economy, there very well could be a spiritual and social renaissance that may arise after the necessary wrenching adjustments have been made. People will get back to enjoying free time, family and some of the more intangible benefits to a life. There will be less of an emphasis on conspicuous consumption.
I don't think anyone will have any free time. Free time is a result of the virtual energy slaves we have doing the heavy lifting for us. We will all be doing far more physical work than we ever imagined possible in the future IMO. This could lead to elements of social renaissance in places and will refocus attention away from consumerism and on to the human relationships that really matter. As a counter point to this, I also think there will be far more crime, as there will always be people who recognize that it is easier to steal than to produce.
Many of the jobs that do not create core value (production, mining & agriculture) are going to disappear (lawyers, ibankers, "managers" and bureaucrats). We will see more social valuable activities doing well (medicine, education, agriculture).
Indeed many middle-man jobs will disappear. Unfortunately, the vast majority of jobs fall into that category, which means skyrocketing unemployment, and that is profoundly destabilizing. For a while, even socially useful activities will do poorly, as they are currently mediated by money, and money will be in very short supply. Once a shift to a barterable skills model has been achieved, we could transition to the model that exists in many parts of the third world, where basic medicine is available at vastly less cost than in the developed world. The transition will be uncomfortable though, as medical services have been turned into businesses, and businesses depend on paying customers, or the availability of deep government pockets to cover services.
Arnold (continued),
Due to the fact that many young people cannot find jobs to sustain themselves, many are moving back home with family. This will strengthen the family unit in this country, that has been under attack, due to the fact that families will once again have to work together to make it.
Families will indeed need to work together, as they do in much of the world where social services are very limited. People will also need to create their own extended families where their own family is not close enough. Working with other will not be optional, and that is in many ways a good thing. We already live communally here.
Because many people will lose a great deal of material wealth, they will be humbled and through humility we may actually see some positive social gains.
Agreed.
Because of the elimination of the global arbitrage system (US buys cheap goods and enjoys a high standard of living and exports dollars) other countries will be permitted to expand and increase their wealth and influence. This will be good for a newly surplus oriented USA, since long term, a prosperous and stable world will be better for us.
We will see anything but a stable and prosperous world. We will not rebuild a productive economy and pull ourselves out of depression by exporting to others, as not one else will have any purchasing power either. The export economy model will be dead for years.
These are just a few examples off of the top of my head. Now, instead of just calling this fantasy, why not just address the comments?
The element that you do not factor in is the attitude people will have during a depression. It will not be a constructive one. People will be angry, mistrustful, full of recrimination and hungry to blame others. They will be risk averse and will lose the sense of common humanity that takes a long time to build and very little time to destroy. These things sadden me beyond belief, but they are unfortunately inevitable.
El Gal - I am actually descended from the Caribbean. First generation American with dual citizenship. Interesting that you are from the same region. I agree with some of your core frustrations. Re: the corruption and irrelevance of the current political structure. One of the things that I am doing now, is trying to get involved in a political party that calls for a constitutional separation of corporation and state. That is one of the primary problems here. Otherwise, yes, I agree that the political system no longer works for the people and if change is not made, and soon, then participation will not make any sense.
Stoneleigh - Thank your for responding without any vitriol. Your points are extremely valid ones and I will reflect on them and comment later, after I have given it some thought and done a bit more research, if you don't mind.
Gravity,
I don't think anyone has applied Einstein's general theory of relativity to economics. What an opportunity!
El G,
I'm thinking more of Schrödinger. If you don't open the box, you can forever keep telling yourself that the cat is alive.
re: The American discussion
I am always amazed at how much we remain fiercely "tribal"
Scary
Mellowg
@ arnold
"...I see the end of the consumerist economy cancer in this country. This will cause us to actually become producers again."
Stoneleigh says it far more eloquently. Here's my 'off the top of my head' rant.
We don't need an end to the consumerist economy, we need an end to the consumerist mentality. They are not the same thing by a long shot. Be more precise with your terms.
Being poor and destitute doesn't mean you are not of the 'consumerist mentality', it might just mean you don't have access to credit/money. Your head can still be up your far, far up your ass and just waiting for a windfall of cash to go consumption crazy with.
Having the majority of 300 million people suddenly plunged into poverty will not ennoble or enlighten most of them, it will make them scared and angry and even more delusional and prone to 'magical Jiminy Cricket' thinking, as if Duhmerica needs anymore encouragement in that department.
Got your Star Spangled Banner commemorative limited edition half time medley ringtone uploaded yet? Priorities, Priorities. I've taught basic 'shop class' to the general population and believe me, an amazing number of people can't find their own butt with both hands. It actually takes practice.
As to becoming 'producers' again, with what, mountains of debt and no capital formation or credit/loan system to finance industrial infrastructure? Duh ya think the Chinese or Japanese or Russians want to lend us money to compete with them? In case you were sleeping through it, the U.S. has just about finished three non stop decades of willfully and savagely destroying it's own industrial based.
It reminds me of someone lighting their hair on fire and then trying to put it out with a hammer.
It's what put the 'duh' in Duhmerica.
Mission Accomplished.
To call for building a new national 'green' industrial base, or even an older 'dirty' style one is hallucinogenic and one would take many decades of working at near universal sub-minimum wage labor by the vast majority of the population, assuming you could 'fund' it with enough fossil fuel.
Not even WWII completely pulled the country out of the Depression, and that was with most of the men in the service earning next to nothing in wages as soldiers while the Rosie Riveters worked in factories, earning next to nothing in wages. This allowed a lot of almost 'free' industrial base building, all without pesky Labor Union demands to cramp the industrial elites bottom line.
The capital base and investment sector took until almost 1960 to recover from the Depression of the 30's
This Greater Depression will take even longer because of it's sheer monstrous dimensions.
And we have no domestic oil supply to speak of to power this miraculous re-industrialization , and no factories, and no small farms to retreat to regroup on after we lose our 'city' jobs.
The US will never recapture or reinvent it's 'industrial base'. That would indeed be Full Spectrum Ignorance
It will become Scavenger Nation after it devolves from being Gangster Nation.
Invest in vise grips and bailing(out) wire.
~~Resistance is Feudal~~
Resistance is Feudal @ 6:18 says "And we have no domestic oil supply to speak of to power this miraculous re-industrialization ".
That is it in a nutshell. Without an abundant supply of cheap oil, we cannot re-industrialize nor can we transport the produced goods or even people.
As Orlov said in the video, the link is above, Americans don't know it yet, but the majority have already purchased their last car.
In addition, Orlov talks about food, shelter, transportation and security. Here is the link again
http://tinyurl.com/nqlegd
The video is in QuickTime format, but in the comments, someone has posted a link in mp3 format.
I liked Engdahl's "A Century of War", although I was a bit surprised when he had an epiphany of sorts regarding peak oil. Around 2005 or so, he said it was a scam.
Here's a great article naming some top "playas" in the MIC-
http://www.scoop.co.nz/stories/HL0907/S00124.htm
Arnold,
Thank your for responding without any vitriol. Your points are extremely valid ones and I will reflect on them and comment later, after I have given it some thought and done a bit more research, if you don't mind.
I don't do vitriol, it's not my style :)
Take all the time you like. I wish I could agree with you about the future. I don't want to see my view of the world come to pass any more than anyone else would. It's not a very hopeful message, but sadly I think it is realistic. Time will tell of course.
I am a great fan of cooperative efforts, and very much wish they were more common. In my experience it is very difficult to convince people to join communal structures, as they simply don't see the need. It would inevitably involve less privacy and autonomy, and most people are not ready to make the sacrifice in advance. Unfortunately, digging your well before you are thirsty is essential.
Trying to put together cooperative structures is much easier when people are not desperate - when they come together for positive reasons rather than because they have no choice. I wish I could convince more people that this is the way forward. Even my own family doesn't believe me :(
I am always amazed at how much we remain fiercely "tribal"
Reminds me of this quote from the Mideast,
Me against my brother, my brother and I against our uncle, my brother and uncle and I against our neighbor. . .
El G,
I realize you were only having some fun, just as I was. I am glad you took no offense
There is no question that Illargi and Stoneleigh present some very astute analysis. Their vision is boldly presented, even if the vistas are far from pleasant. At the same time, have a little empathy for the recoiling and covering of eyes and fear based rationalizations. Ilargi and Stoneleigh’s brutal vision of the world and the future, which is not of their doing, leaves parents and people everywhere trembling in fear for the future of their children and relatives. Those beautiful and innocent spirits that make life worth living. And yes, I do understand this blog seeks to blunt and minimize the potentially unfolding misery via the tools of awareness and preparation.
And I don’t think the impetus of their cause is fueled with anti-American sentiment; although, I have no illusions about their sentiments in that regard either. That line of diversion is simply a red-herring anyway. Real Americans of high intelligence have always sought out Europeans for their special areas of expertise. And some of the most elite Europeans have encouraged the cultivation of American idiosyncrasy. Anton Dvorak was especially notable in this regard as his Symphony No 9 paid poignant homage to the new world. Anyone who listens to the second movement of that symphony, which evokes the haunting pathos of African-American spirituals, will come to realize this was a man who loved all people regardless of nation. Dvorak writes:
"I am convinced that the future music of this country must be founded on what are called Negro melodies. These can be the foundation of a serious and original school of composition, to be developed in the United States. These beautiful and varied themes are the product of the soil. They are the folk songs of America and your composers must turn to them."
Aesthete
I can't cure the distorted views Americans have of themselves and their country. And the fact that many of their countrymen agree with me will not make the slightest dent in those views either. Such are the tribulations or religion.
Arnold - thank goodness we are not Dutch. They seem truly f***ed, if Ilargi is any example.
I think he seems truly pissed if anyting from the USA would succeed.
Ilargi,
That cat is dead. 100 percent probability. It's been in that box for like 85 years and nobody has fed it or cleaned out its litter box.
Anon @3:03,
Ilargi is one of my favourite people in the whole world, and one of the most intelligent people I know. We have been a team for three years, and I wouldn't have it any other way.
Stoneleigh: "digging your well before you are thirsty "
ooo, I like it, a lot. From somewhere, or yours? Haven't bumped into it before.
I think that the commentators of this blog are too old, too wise, too smart and too rich. You, (we), are not reaching enough of the under 40 crowd to make enough of an impact.
jal
I don't think anyone will have any free time. Free time is a result of the virtual energy slaves we have doing the heavy lifting for us. We will all be doing far more physical work than we ever imagined possible in the future IMO.
Sort of hard to talk to this as there are different periods involved. Anyway, in transition there will of course be chaos when, amongst other things, the useful energy slaves will have not yet been sorted out from the over scaled and useless ones. The process will be one of movement to small individual energy devices with a human rather than the present monumental scale and purpose. Likewise, Adam smith's B ship will have it's passengers gradually take up much of that heavy lifting talked aboout. There is much hidden slack in the system and if taken up, will leave everyone with some and maybe more leisure time than currently. Along with the elimination of unnecessary an in many cases destructive occupations and machinery, commuting will become local with an incidental great savings of time.
I remember the latish 40's, which, I understand, were not all that much different than the 30' as far as energy use goes, It seems to me, remembering the time, that there was plenty of spare time for hobbies and avocations as well as for each other. (Incidentally my family was recent immigrants not wealthy and just off of the prairie homestead to the big city, at the time). The only problem I see in an energy-use transition is that the population has nearly tripled since the late 40's. It will be space, rather than energy, that will be the most important factor to deal with, in my opinion.
-guild-
Stoneleigh: As a counter point to this, I also think there will be far more crime, as there will always be people who recognize that it is easier to steal than to produce.
While there may be far more observable crime, there may be less crime in total as many of the oligarchy's tools may malfunction and their crimes are vast and invisible to most.
Wow, the noise level has gone way up here! I suggest threaded comments if possible and more moderation of off topic posts.
Who is that swain that all the posters do declare?
Well it's 'Arnold' hands down! Great S. disturbing old bean:)
-guild-
Arnold
I am of the opinion we don't have a clue as to what propaganda,fads,mindsets or stark raving lunacies will result as a collapse of this collection of well drugged neurosis that we call "society",here in the USA.Think cargo cult on steroids with a little meth on top....
I am sure we have a lot of "controllers"that think they can control the mob once things get hinky with northcom,no fly lists which are really "pick me up"lists,and all the info toys.ect
Reality will be more like a very bad dream that does not end.
Yes,I have my little farm with goodies and toys...but I count on knowing my neighbors,and the social capital me and mrs snuffy have carefully built for the last 15 years as more valuable than the small bit of silver,and less gold,as well as our small bit of "supplies".
Example.
Last night before the grandchildren arrived,as I arrived home wife told me that both her and other neighbor had just heard a women screaming her head off,and would I go investigate.....
As we have had several nocturnal visits by LARGE cats[cougars]I un-easily
got the 12ga,the flashlight,screwed my courage up and went for a looksee.Me and the dog spent a half-hour walking the neighborhood ...I put all the critters inside,so as to not present a smorgasbord for kitty- kitty.
Our other neighbor called and ask what was going on,as they had their adult daughter and her hubby staying at their home,while they vacationed...[both carry,concealed],but could not contact them...as they dropped land lines and only have cells
Turns out it was the daughter screaming,they got into a old car that was stored on the property...and found out about the Large hornets nest...a bit late..
But I received heartfelt thanks from all parties for taking the time to take a looksee ...as I would thank them in the same case...
This kind of interaction,and paying attention to others needs has to be part of whatever living arrangements one has in the future
Arnold,your heart may be in the right place man,but watch out for the optimism,and understand you will not be allowed to change a system that soooo many connected people are making sooo much money out off.The sooner you figure that out the sooner you will understand reality a bit better...
I also would like to respond to the comment about S.America,and other parts of the "new" world who had a large influx of immigrants,and did not see the change that the culling here did.
In each of those areas..what was also brought to these countries was the catholic church,and rule by aristocracy fiat...[off with your rebellious head]the catholic church did more to neuter advancement of native populations,as well as immigrant populations with their theocracy/aristocracy,the actions of the Jesuits.This is why Mexico stayed poor and enslaved [as a example]While the cutthroat mercantilism ruled America.We have been close many times to "removing"those in power,but the social contract that Roosevelt installed here worked for a long time. There is a whole bunch of folks now that want to see it gone...they will rue that day when it comes,as life is about to get a lot meaner...
The two "tornadoes on two little feet"[ boy 9 ,girl 5 ]that ruled my life for the last 24 hrs have went home...I think a nap would be good...
snuffy
snuffy- thanks. very nice.
Things are tough all over:
http://www.nytimes.com/2009/07/13/technology/13robot.html
Japanese robots are out of work.
And from the Washington Post (sorry, but their links expire quickly)
"A senior Justice Department official familiar with Holder's thinking stressed anew yesterday that the attorney general had reluctantly come to lean toward naming a criminal prosecutor from inside the department, after months of reading classified material including a still-secret 2004 CIA inspector general report.
The announcement to appoint a prosecutor who may look into whether CIA interrogators operated outside the boundaries set by George W. Bush's Justice Department could come in the next few weeks, perhaps in concert with the release of an ethics report involving Bush lawyers, said the official, who spoke on the condition of anonymity because the process is continuing.
Federal law enforcement officials are obliged to investigate possible violations of anti-torture statutes and other criminal laws. That makes it difficult for the Obama administration to ignore material gleaned from watchdog reports, the International Committee of the Red Cross and other sources, former government lawyers said."
-------------------------
This is something I predicted, "no, no, we don't want to cause trouble!" and then "sadly, it's all so heinous we can't ignore it..."
Good herding. Get along, little dogie.
And what a lovely distraction it will be in the months ahead; and just possibly; a little more priming for "You know, these conservative guys are really not nice at all. Criminal, even..."
maybe maybe. call me a dreamer. :-)
Oooh, goody! It's coordinated!
Obama orders investigation into Afghan kilings
I think Arnold's visit was good for this blog. He is representative of our friends and relatives who are not bad people but just don't get it. He lives in the lala land of the American myth of exceptionalism. It is unescapable. I remember being six years old, out in the country for the summer, and listening to the radio about an action in the Korean War. They were reporting that over 30 American soldiers were killed in the incident. I put down my garter snake, turned to my mother confused and asked, "I don't understand. How can **Americans** be killed?" That's how early the machine gets our minds.
i don't think I&S are anti-American as in the American people. They are just tired of this jingoistic exceptionalism crap. Well, the exception is going down the drain as we breath.
Now the preacher looked so baffled
When I asked him why he dressed
With twenty pounds of headlines
Stapled to his chest
But he cursed me when I proved it to him
Then I whispered, "Not even you can hide
You see, you're just like me
I hope you're satisfied"
So Arnold has had a purgative effect. It's been like eating the Hershey bar and then discovering it was Ex-Lax.
Snuffy,
The Church culture may have played a role. Another theory is that the rise of the North American behemoth sucked up all the oxygen in the room and didn't need any competition for industrial goods. Some founding fathers were still alive when James Monroe told Europe to stay out of our sandbox. Back then it was the mouse that roared.
Speaking of mice, reading Arnold's six points and 134 IQ reminded me of Flower for Algernon. Hope he doesn't fall into remission.
Aesthete
Yeah Dvorak. Back in my mid teens the New World Symphony was my favorite piece of music. I wore out the record. Of course the world was a lot newer then.
Gravity is definitely trying to merge the general theory with economics. I am afraid of the result. The special theory resulted in nuclear weapons.
Greenpa,
Yeah, W's legal mafia said it ain't torture if ya don't killem. Well, they did kill a lot of them a Bagram.
S says... "I wish I could convince more people that this is the way forward. Even my own family doesn't believe me" :(
Hmmmm. Same here. It's a fine line between being honest & straight-forward--and being perceived as a loon. Yesterday, though, my aunt enthusiastically told me all about eating from her new garden--and thanked me for helping her to get going. Came as a complete surprise, so I guess it's good to keep trying.
Hello everyone,
I noticed an ad at the bottom of the TAE about DIY solar and wind. I was wondering if there are people on this list who have had experience with this company and if so could they elaborate just a little. Thanks
0
Another solution for the 'jump to the end of the page' problem:
http://www.ipuhelin.com/en/safariplus/ (bookmarklets collection for Mobile Safari)
Post a Comment