Sunday, July 12, 2009

July 12 2009: The invisible hand stacks the deck

Frances Benjamin Johnston Merry Maidens 1915
Four dancing figures

Ilargi: Yeah, it's true. Just one day after President Obama says there’ll be no new stimulus, his -public- economic number one has this on the topic: "I don't think that's a judgment we need to make now, can't really make it now prudently, responsibly [..]". And while Mike Shedlock celebrates Obama's "decision" against the new stimulus, those of you who follow me know better.

It's all a set-up to prepare the nation for another $1 trillion in spending later this year. Rising out of the ashes of deliberate confusion. It won't be easy to do. It's election fodder for the Republicans. They have little to hit Obama with until now, but that may change.

"The reality is it hasn't helped yet," said Sen. Jon Kyl, R-Ariz. "Only about 6.8 percent of the money has actually been spent. What I proposed is, after you complete the contracts that are already committed, the things that are in the pipeline, stop it."

They may have to sync their media appearances some more, though, and their scripts, if you consider this: "A lot of it has been spent on ridiculous projects," said Sen. John McCain. A lot of what? You mean a lot of that "only about" 6.8%, John? Kinda dilutes the message, don’t it? "The don’t spend (fast) enough", ehhh, "They spend too much -on silly projects-", ehhhh.

Weak. Well, unless McCain was talking about Bruce Krasting's little find that Freddie Mac bought $4.4 billion of its own subordinated debt with Goldman Sachs as designated lead manager in the deal, and undoubtedly a vault full of sub debt. Free money fresh from the taxpayer tab. Illegal as they come, but then, who's counting, there's so much of that going around.

Is anyone still surprised that Goldman will announce huge profits on Tuesday? Does anyone still care? Rigging computerized trading is just one small trick on the repertoire; rigging the government is a bigger one. Krasting predicts a similar buy by Fannie Mae is coming up. If Goldman plays its cards well, that'll be billions more in profits. Courtesy of you.

And didn't, ater all, that same government make it clear that its first priority was to make the banks healthy? Something about them being essential to the real economy. Looking at Goldman, you'd swear they got what they wanted.

Maybe it's more interesting to take a look at the increasing numbers of people who don't only get what they want, who don't get a thing. Well, other than foreclosure notices, pink slips and food stamps (if they grovel hard enough). Perhaps the most tragic thing is that most of these newly desolate actually believe the president when he says that they would be worse off without Goldman Sachs in their lives. And that his first stimulus will kick in soon, just hang in there, and all will be good once more. No need for a second stimulus.

Anyone who writes, as Obama did today, while his voters are falling into a dozen different deep dark abysses at a time, that: ”Now is the time to build a firmer, stronger foundation for growth that not only will withstand future economic storms but that helps us thrive and compete in a global economy,” is either fully delusional himself or expects the -democratic[sic]- majority of his audience to be.

That's all the flavors we got for you. Take your pick. As long as you can fool or pay off over 50% of the people, what happens to the rest is inconsequential. Make 'em grovel. Make 'em miserable as hell. But save the banks. It's their money that will buy you your votes.

Robert Frank is right on the money: Darwin trumped Adam Smith in economics a long long time ago. The invisible hand stacks the deck.

The S&P 500 Demolition Derby
by Doug Short

The S&P 500 continues its demolition derby with the 50- and 200-day moving averages and the 2009 opening price level. The index seemed poised for an extended winning streak, but it has taken some major hits of late. This weekend update — the first of the Q2 earnings season — shows that the S&P 500 is below all three major indicators. The rally in the last 30 minutes of the week put the index very near a close above the 200-day moving average. But it ended up a fractional point shy. Check out this photo-finish close up.

Earnings expectations are low this season, which may work to the advantage of the market. But cautious outlooks may undercut carefully orchestrated upside surprise.
We'll keep an eye on this "banger race" to see what happens.

Connect the Dow Dots
Willem Grooters in the Netherlands occasionally emails me his thoughts on the current S&P 500 relative to the Dow Crash of 1929. Mr. Grooters draws a line between the 1929 high and the 1932 bottom, noting the coincidental oscillation of today's bear around this line. His analysis of trailing 12-month earnings suggests that this pattern may continue — that the current correction could well take us back below the line.

I should emphasize that the line on this chart is arbitrary — the shortest line between two dots. It's not a regression, and the only thing it shares with the S&P 500 chart is the 0% starting point. However, if we let Excel plot a linear regression on our current bear, the slope is remarkably similar to Mr. Grooters red line:

Thanks, Willem, for sharing your work.

Addendum: For an apples-to-apples comparison, here is the same chart with linear regressions for both bears.

Is the Bear Market's Most Violent Decline Right Around the Corner?
Is the most powerful of all waves right around the corner? The short answer is "YES." The long answer will help you anticipate where and when …
First, let's describe wave 3. If wave 3 was a superhero, he'd probably be The Flash (though he could be The Hulk). Like The Flash, there's no mistaking wave 3's characteristics:
  • It gets to where it's going in a hurry.
  • It usually catches everyone by surprise, and
  • You'll know it when you see it.

An idealized impulse wave 3 in bull and bear markets:

Robert Prechter describes third waves in his seminal book with A.J. Frost, The Elliott Wave Principle:
"Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. … Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series."

But to truly appreciate the power and lightening-speed of third waves – and be prepared to anticipate one – you must first know how to identify the waves that precede it, namely wave 2. Here's what Prechter writes about wave 2 in The Elliott Wave Principle (two words have been reversed to apply to bear markets):
"At this point, investors are thoroughly convinced that the (bull) market is back to stay. Second waves often end on very low volume and volatility, indicating a drying up of (buying) pressure."

If you're thinking the description of wave 2 seems eerily similar to today's environment, you're right.
On February 23, Robert Prechter's Elliott Wave Theorist recommended aggressive speculators close their short positions to avoid being caught in a "sharp and scary" rally. Just a few trading days later, the market began a multi-month rebound – wave 2. BUT … Volume has steadily decreased since that rally began in early March. Volatility is on the rise. And perhaps most noteworthy of all: The investment herd – more specifically, the financial media – has jumped to proclaim the "worst is over."
All the classic characteristics of bear-market rallies are there. Even a quick online search turns up headlines like:
"Worst of the recession is over" ~ July 7
"Econ Crisis Not Over, But Worst Has Passed" ~ July 8
"June job bounce could mean worst is over" ~ July 7
"Wall St's fear gauge suggests the worst is over" ~ June 28

Recognizing the personality of wave 2 allows you to prepare for what's next, a move you really want to look out for, wave 3 – The Flash. Third waves move far and fast. They make good opportunities for aggressive speculators, but they can become a death knell for longer-term investors' portfolios.

Freddie Buys in its Sub Debt – Heinous!
After the bell on Friday (ahem) Freddie Mac announced that it would buy in $4.4 billion of its Sub Debt. This deal is another coup for our pals at Goldman Sachs who got the Lead Manager slot on the deal. No doubt but that GS has a ton of these bonds in portfolio. Some details:

"We’re doing it to provide liquidity to this market, and retiring these high-coupon bonds also reduces our cost of funding," Lisa Gagnon, a company spokeswoman, said. (Bloomberg)

That statement is malarkey. They are doing this to provide liquidity for sub debt holders? Why on earth would they care about that? Do they think they can sell new sub debt? Certainly not. They are bailing out the sub debt holders and that does give those holders liquidity but this has nothing to do with supporting a market. As for reducing their funding cost, that is bunk too. They are paying a big premium over par to buy in this paper. They have to borrow another 10% to get the deal done. It will take years for them to amortize this premium.

The money for this deal is coming straight from Treasury. So it will be cheap money. But this is not a fair comparison. They are arbing the Treasury/taxpayer AAA once again. These bonds are not now and never were guaranteed by Treasury. The conservatorship allows continued payment of interest but does not make these bonds money good. This buy back just puts more taxpayer money at risk to the Agencies.

There may be an interesting ‘unintended consequence’ from this move. I think there is a great lawsuit based on this. I am not a lawyer, so I would love some comments on this from those that are. Freddie has $14.1 billion of preferred stock outstanding. In the conservatorship this was wiped out. The Pref. stock is now changing hands around $1 versus the $25 offering price. There are always layers to a corporate balance sheet. Broadly they include:

-Senior Secured
-Senior Unsecured
-Preferred Stock
-Common Stock

In a bankruptcy the assets are distributed to theses classes of creditors by a judge. The higher you are in this layer cake the better off you will be. Typically the secured and senior guys get out more or less whole. The sub debt gets something and the pref. is usually converted to new common. The old equity ends being heavily diluted or worthless.

Preference is the guiding principal in dividing this up. But equity comes into the equation as well. In the case of the FRE sub debt buy back there is neither adherence to the rules of preference, nor is their any consideration as to the equity or fairness of this. How can the sub debt that is one notch above the pref. be money good++ while the pref. gets nothing? There is nothing fair about that.

If you do not like that legal argument try this approach. Sixty days prior to the Agencies crashing into conservatorship the President of the United States, The Treasury Secretary of the United States and the chief regulator of the Agencies Mr. James Lockhart all made the same public statement: "The Agencies are Adequately Capitalized". Bush, Paulson and Lockhart knew at the time that those statements were both false and misleading. Those statements were intended to calm down the nervous creditors, including the Pref. holders. If this had been a true public company there would have been hell to pay. The SEC would have been involved.

So what could this look like? There are 560mm $25 preferred shares outstanding. I think one could clear the whole lot at a $10 price. That implies a settlement of less than 35 cents on the dollar. That would be more than fair given that the sub debt is money good. Well, that settlement would be worth a cool $5 billion. A 20% payout would make for a $1 bill payday for the lawyers. No bad for a lay up case. These rules are simple. There is a hundred years of court cases in support of that. D.C. is breaking them.

Note: Fannie Mae has sub debt outstanding as well. Look for them to make an announcement of a sub debt buyback within a month . This means the lawyers can win twice. Double the fees to $2 bil. That should provide the proper incentive.

Goldman Sachs Likely to Post Huge Profits, Analysts Say
Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs. Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday. Analysts predict the bank earned more than $2 billion in the March-June period, thanks to its trading prowess across world markets.

If they are right, the bank’s rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so dramatically only months after the nation’s financial industry was shaken to its foundations. The obsessive speculation has already begun, along with banter about how Goldman’s rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall.

"They exist, and others don’t, and taxpayers made it possible," said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships. Startling, too, is how much of its profits Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 per employee. Top producers stand to earn millions.

Goldman was humbled along with the rest of Wall Street when the financial markets froze last year. As a result, it lost money in the final quarter of the year, a rarity for the bank. Along with other big banks, it was compelled to accept billions of dollars in federal aid, which it paid back last month. Amid the crisis, it also converted from an investment bank to a more regulated bank holding company to make it eligible for government lending programs. Goldman declined to comment over the weekend, pending its Tuesday earnings report.

But if the analysts are right — and given the vagaries of Wall Street trading, any hard forecast is little more than a guesstimate — the results will extend a remarkable run for Goldman that was marred only by the single quarterly loss last fall of $2.12 billion. Goldman Sachs is betting on the markets, but the markets are also betting on Goldman: Its share price has soared 68 percent this year, closing at $141.87 on Friday. The stock is still well off its record high of $250.70, reached in 2007.

In essence, Goldman has managed to do again what it has always done so well: embrace risks that its rivals feared to take and, for the most part, manage those risks better than its rivals dreamed possible. "It is, in many respects, business as usual at Goldman," said Roger Freeman, an analyst at Barclays Capital.

Traders said Goldman capitalized on the tumult in the credit markets to reap a fortune trading bonds. It profitably navigated a white-knuckled run in stock markets. It bought and sold volatile currencies, as well as commodities like oil. And it reaped lucrative fees from the high-margin business of underwriting stock offerings, which surged this year as other, more troubled financial institutions raced to raise capital.

Whether Goldman can keep this up is anyone’s guess. With so much riding on trading, the risk is that the bank might make a misstep in the markets, or that today’s money-making trades will simply vanish. The second half of 2009 looks tougher, many analysts say. Goldman is not the only bank that appears to be returning to health. JPMorgan Chase is also emerging as one of the strongest players in this new era of American finance. JPMorgan and several other big banks are expected to report strong second-quarter profits as well this week, again in large part based on robust trading results.

But to a degree unique among its peers, Goldman has turned the crisis to its advantage. Its perennial rival, Morgan Stanley, has refused to gamble in the markets and, as a result, is expected to post a humbling quarterly loss. The giants Citigroup and Bank of America, still in hock to the government, are struggling to regain their footing. Banks like Merrill Lynch, now owned by Bank of America, ran into trouble trying to replicate Goldman’s success.

Richard Bookstaber, a former hedge fund executive and author of a "A Demon of Our Own Design," wonders if Goldman’s resurgence will prompt other banks to push once again into riskier forms of trading, possibly at their peril. "Someone takes risks and makes money — maybe they were smart, maybe they were lucky," Mr. Bookstaber said. "But then everyone else feels like they need to take the same risks."

While others are shying away from risks, Goldman is courting them. A common measure of risk-taking at Goldman and other banks is known as value at risk, which estimates how much money a firm might lose on a single day. At Goldman, that figure rose by more than 20 percent in the first quarter. Analysts predict Goldman’s V.A.R. ran high in the second quarter as well. "It’s taking opportune risk that others aren’t taking," said Charles Geisst, author of the forthcoming "Collateral Damaged" and a Wall Street historian. "They are scooping up all the risks that are available."

On Wall Street, where money is the ultimate measure, Goldman is both revered and reviled. Its bankers and traders are sometimes referred to as the Bandits of Broad Street. An executive at a rival bank characterized Goldman traders as "orcs," the warlike creatures of Middle Earth in J. R. R. Tolkien’s "The Lord of the Rings." Even mainstream America is taking notice. An article about Goldman in a recent issue of Rolling Stone, by Matt Taibbi, characterized Goldman as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Goldman dismissed the article as the ramblings of conspiracy theorists.

For all its success, Goldman is not impregnable. In addition to the federal money it took last fall, it benefited from the government’s bailout of American International Group, receiving an almost $13 billion subsidy from taxpayers after losing money on counterparty exposure to the insurer and has $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation.

Goldman’s chief executive, Lloyd C. Blankfein, has described the crisis as "deeply humbling." But his bank bounced back with remarkable speed. In the first quarter, it posted profits of $1.66 billion. Now, the second quarter looks even better. "They are a trading firm," said an executive at rival firm, barely able to hide his jealousy. "It’s what they do."

GOP unifies against any more stimulus spending
Republicans lined up Sunday in opposition to a second economic stimulus package, a rare demonstration of unity from an out-of-power political party in search of a rallying cry against President Barack Obama.
Republicans called Obama's $787 billion spending plan a "flop" and said it hasn't fulfilled its hype. They criticized the White House for increasing the federal deficit and doing little to combat an unemployment rate that hit 9.5 percent in June.

"The reality is it hasn't helped yet," said Sen. Jon Kyl, R-Ariz. "Only about 6.8 percent of the money has actually been spent. What I proposed is, after you complete the contracts that are already committed, the things that are in the pipeline, stop it." Obama urged patience with his spending program, which administration officials acknowledge was designed with incorrect or incomplete economic data. "The stimulus package is working exactly as we had anticipated," Obama told CNN in an interview from Ghana that aired on Sunday.

"We always anticipated that a big chunk of that money then would be spent not only in the second half of the year, but also next year. This was designed to be a two-year plan and not a six-month plan," he said. Republicans, though, were not willing to sit by idly. "I do think it is fair to say that the stimulus is a flop," said Rep. Eric Cantor, R-Va. "The goal that was set when we passed it was unemployment wouldn't rise past 8.5 percent, and what we see now is businesses just aren't hiring. Even the best projections have us losing 750,000 more jobs this year."

Congress passed Obama's economic stimulus plan over the objection of out-of-power Republican lawmakers. Since then, GOP aides on Capitol Hill and officials alike have seized on the spending's shortcomings and unfilled promises. "A lot of it has been spent on ridiculous projects," said Sen. John McCain, the Arizona Republican who was his party's presidential nominee last year. Obama's allies defended the spending they helped usher into law. "It's a two-year plan and we're four months into it," said Sen. Dick Durbin, D-Ill.

Some, including billionaire Warren Buffet, have called for a second round of spending to steady the economy. Obama and his allies have said it's too early to make that decision; his critics, though, pledged to redouble their opposition to any second spending bill. "I think that would be the biggest mistake we could ever make," McCain said. Kyl and Durbin appeared on ABC's "This Week." Cantor spoke with "Fox News Sunday." McCain was interviewed on NBC's "Meet the Press."

Commercial Real Estate–a Ticking Time Bomb?
In a committee hearing in Congress that just ended, Joint Economic Committee Chairwoman Carolyn Maloney said that commercial real estate is a “ticking time bomb.” That comment alone has generated a Dow Jones story, an Associated Press story, a blog entry at the Washington Post, a Reuters story, a CNBC story and a Bloomberg story.

The comment came in early in the hearing, which includes testimony from Jon Greenlee, Associate Director, Division of Banking Supervision and Regulation, Federal Reserve Board of Governors; Richard Parkus, Head of CMBS and ABS Synthetics Research, Deutsche Bank Securities; Jeffrey D. DeBoer, President & Chief Executive Officer, The Real Estate Roundtable and James Helsel, Partner, RSR Realtors, Harrisburg, PA and Treasurer, National Association of Realtors. All of their witness statements can be read at the bottom of this page.

One question: How can commercial real estate be a “ticking time bomb” when we’re already more than two years into the sector’s decline? This testimony is occurring as a wave of new data hits us that shows that commercial real estate has already been hit very, very hard. We got the June same-store sales data today. Sales came in down between 4.3 percent and 5.1 percent, depending on whose numbers you look at. Reis also released new numbers on shopping center and regional mall vacancies showing vacancies have hit 17-year highs. A report from Real Capital Analytics shows that commercial real estate worth $108 billion is now in default, foreclosure or bankruptcy. Isn’t the correction playing out? What exactly does the industry need?

The real problem at hand is the volume of refinancing that needs to be done in the coming years in the face of the fact that the securitization machine–which had accounted for up to 40 percent of annual commercial real estate financing by 2006 and 2007–is completely shut down. Other sources of financing–commercial banks, life insurance companies, etc.–are still out there. They have tightened underwriting standards for sure and loan sizes are dramatically smaller than in the past. But they are out there. Moreover, there are government programs in place to address this–namely, the TALF and the PPIP. In fact, today there were more announcements about PPIP that should supposedly get the program moving. (To be fair, though, there are major doubts that the PPIP will ever work.)

There is certainly a mess out there. And the delinquencies, defaults and foreclosures will continue to mount. But while lobbyists are taking the situation as an opportunity to convince the government to lend a helping hand, doesn’t the current dilemma–the volume of refinancing being much larger than the appetite of lenders to offer debt–get at a key problem in how commercial real estate financing is structured? Maybe it’s not such a great idea to have short-term loans on commercial real estate set up with huge balloon payments at the end of the loan terms. It sets up scenarios where the incentive is not to pay down the loan, but instead to sell the property or to refinance and keep rolling the debt over. Does leaving commercial real estate permanently encumbered by debt make sense?

There are plenty of owners that prefer to own assets free and clear with little or no debt against them. The current credit situation makes an argument that a more conservative debt structure is a better and safer business model. Perhaps we shouldn’t turn around and prop up a system that has proved to be so unstable. I also wonder how the players that have been more conservative and haven’t leveraged to the hilt feel about investors who took out too much debt getting bailed out by the government? What does all of this say about the concept of “moral hazard?” If the government steps in and restarts securitization, that just creates incentives to keep the same financing model in place rather than having the industry amend its business practices.

It will be interesting to read the full testimony of the hearing. I only caught snippets of what the panel had to say. It seems like at the very least the industry lobbyists are looking for further extensions to TALF. But how much more legislation or government-backed programs does the commercial real estate industry need to weather the current storm? That’s ultimately the question I’d like to hear an answer to.

The Invisible Hand, Trumped by Darwin?
by Robert H. Frank

If asked to identify the intellectual founder of their discipline, most economists today would probably cite Adam Smith. But that will change. Economists’ forecasts generally aren’t worth much, but I’ll offer one that even my youngest colleagues won’t survive to refute: If we posed the same question 100 years from now, most economists would instead cite Charles Darwin. Darwin, renowned for the theory of evolution, was a naturalist, not an economist, and his view of the competitive struggle was different from Smith’s in subtle but profound ways. Growing evidence suggests that Darwin’s view tracks economic reality much more closely.

Smith is celebrated for his "invisible hand" theory, which holds that when greedy people trade for their own advantage in unfettered private markets, they will often be led, as if by an invisible hand, to produce the greatest good for all. The invisible hand remains a powerful narrative, but after the recent economic wreckage, skepticism about it has grown. My prediction is that it will eventually be supplanted by a version of Darwin’s more general narrative — one that grants the invisible hand its due, but also strips it of the sweeping powers that many now ascribe to it.

Smith’s basic idea was that business owners seeking to lure customers away from rivals have powerful incentives to introduce improved product designs and cost-saving innovations. These moves bolster innovators’ profits in the short term. But rivals respond by adopting the same innovations, and the resulting competition gradually drives down prices and profits. In the end, Smith argued, consumers reap all the gains.

The central theme of Darwin’s narrative was that competition favors traits and behavior according to how they affect the success of individuals, not species or other groups. As in Smith’s account, traits that enhance individual fitness sometimes promote group interests. For example, a mutation for keener eyesight in hawks benefits not only any individual hawk that bears it, but also makes hawks more likely to prosper as a species.

In other cases, however, traits that help individuals are harmful to larger groups. For instance, a mutation for larger antlers served the reproductive interests of an individual male elk, because it helped him prevail in battles with other males for access to mates. But as this mutation spread, it started an arms race that made life more hazardous for male elk over all. The antlers of male elk can now span five feet or more. And despite their utility in battle, they often become a fatal handicap when predators pursue males into dense woods.

In Darwin’s framework, then, Adam Smith’s invisible hand survives as an interesting special case. Competition, to be sure, sometimes guides individual behavior in ways that benefit society as a whole. But not always. Individual and group interests are almost always in conflict when rewards to individuals depend on relative performance, as in the antlers arms race. In the marketplace, such reward structures are the rule, not the exception. The income of investment managers, for example, depends mainly on the amount of money they manage, which in turn depends largely on their funds’ relative performance.

Relative performance affects many other rewards in contemporary life. For example, it determines which parents can send their children to good public schools. Because such schools are typically in more expensive neighborhoods, parents who want to send their children to them must outbid others for houses in those neighborhoods. In cases like these, relative incentive structures undermine the invisible hand. To make their funds more attractive to investors, money managers create complex securities that impose serious, if often well-camouflaged, risks on society. But when all managers take such steps, they are mutually offsetting. No one benefits, yet the risk of financial crises rises sharply.

Similarly, to earn extra money for houses in better school districts, parents often work longer hours or accept jobs entailing greater safety risks. Such steps may seem compelling to an individual family, but when all families take them, they serve only to bid up housing prices. As before, only half of all children will attend top-half schools. It’s the same with athletes who take anabolic steroids. Individual athletes who take them may perform better in absolute terms. But these drugs also entail serious long-term health risks, and when everyone takes them, no one gains an edge.

If male elk could vote to scale back their antlers by half, they would have compelling reasons for doing so, because only relative antler size matters. Of course, they have no means to enact such regulations. But humans can and do. By calling our attention to the conflict between individual and group interest, Darwin has identified the rationale for much of the regulation we observe in modern societies — including steroid bans in sports, safety and hours regulation in the workplace, product safety standards and the myriad restrictions typically imposed on the financial sector.

Ideas have consequences. The uncritical celebration of the invisible hand by Smith’s disciples has undermined regulatory efforts to reconcile conflicts between individual and collective interests in recent decades, causing considerable harm to us all. If, as Darwin suggested, many important aspects of life are graded on the curve, his insights may help us avoid stumbling down that grim path once again.

The competitive forces that mold business behavior are like the forces of natural selection that molded elk. In each case, we see instances of socially benign conduct. But in neither can we safely presume that individual and social interests coincide.

A Homespun Safety Net
If nothing else, the recession is serving as a stress test for the American safety net. How prepared have we been for sudden and violent economic dislocations of the kind that leave millions homeless and jobless? So far, despite some temporary expansions of food stamps and unemployment benefits by the Obama administration, the recession has done for the government safety net pretty much what Hurricane Katrina did for the Federal Emergency Management Agency: it’s demonstrated that you can be clinging to your roof with the water rising, and no one may come to helicopter you out.

Take the case of Kristen and Joe Parente, Delaware residents who had always imagined that people turned to government for help only if "they didn’t want to work." Their troubles began well before the recession, when Joe, a fourth-generation pipe fitter, sustained a back injury that left him unfit for even light lifting. He fell into depression for several months, then rallied to ace a state-sponsored retraining course in computer repairs — only to find those skills no longer in demand. The obvious fallback was disability benefits, but — Catch-22 — when Joe applied he was told he could not qualify without presenting a recent M.R.I. scan. This would cost $800 to $900, which the Parentes do not have, nor has Joe, unlike the rest of the family, been able to qualify for Medicaid.

When Joe and Kristen married as teenagers, the plan had been for Kristen to stay home with the children. But with Joe out of action and three children to support by the middle of this decade, Kristen went to work as a waitress, ending up, in 2008, in a "pretty fancy place on the water." Then the recession struck and in January she was laid off. Kristen is bright, pretty and, to judge from her command of her own small kitchen, capable of holding down a dozen tables with precision and grace. In the past she’d always been able to land a new job within days; now there was nothing. Like most laid-off people, she failed to meet the fiendishly complex and sometimes arbitrary eligibility requirements for unemployment benefits. Their car started falling apart.

So in early February, the Parentes turned to the desperate citizen’s last resort — Temporary Assistance for Needy Families. Still often called "welfare," the program does not offer cash support to stay-at-home parents as did its predecessor, Aid to Families With Dependent Children. Rather, it provides supplemental income for working parents, based on the sunny assumption that there would always be plenty of jobs for those enterprising enough to get them.

After Kristen applied, nothing happened for six weeks — no money, no phone calls returned. At school, the Parentes’ 7-year-old’s class was asked to write out what wish they would ask of a genie, should one appear. Brianna’s wish was for her mother to find a job because there was nothing to eat in the house, an aspiration that her teacher deemed too disturbing to be posted on the wall with the other children’s.

Not until March did the Parentes begin to receive food stamps and some cash assistance. Meanwhile they were finding out why some recipients have taken to calling the assistance program "Torture and Abuse of Needy Families." From the start, the experience has been "humiliating," Kristen said. The caseworkers "treat you like a bum — they act like every dollar you get is coming out of their own paychecks."

Nationally, according to Kaaryn Gustafson, an associate professor at the University of Connecticut Law School, "applying for welfare is a lot like being booked by the police." There may be a mug shot, fingerprinting and long interrogations as to one’s children’s paternity. The ostensible goal is to prevent welfare fraud, but the psychological impact is to turn poverty itself into a kind of crime. Delaware does not require fingerprints, but the Parentes discovered that they were each expected to apply for 40 jobs a week, even though no money was offered for gas, tolls or babysitting. In addition, Kristen had to drive 35 miles a day to attend "job readiness" classes, which she said were "a joke."

With no jobs to be found, Kristen was required to work as a volunteer at a community agency. (God forbid anyone should use government money to stay home with her children!) In exchange for $475 a month plus food stamps, the family submits to various forms of "monitoring" to keep them on the straight and narrow. One result is that Kristen lives in constant terror of doing something that would cause the program to report her to Child Protective Services. She worries that the state will remove her children "automatically" if program workers discover that her 5-year-old son shares a bedroom with his sisters. No one, of course, is offering to subsidize a larger apartment in the name of child "protection."

It’s no secret that the temporary assistance program was designed to repel potential applicants, and at this it has been stunningly successful. The theory is that government assistance encourages a debilitating "culture of poverty," marked by laziness, promiscuity and addiction, and curable only by a swift cessation of benefits. In the years immediately after welfare "reform," about one and a half million people disappeared from the welfare rolls — often because they’d been "sanctioned" for, say, failing to show up for an appointment with a caseworker. Stories of an erratic and punitive bureaucracy get around, so the recession of 2001 produced no uptick in enrollment, nor, until very recently, did the current recession. As Mark Greenberg, a welfare expert at the Georgetown School of Law, put it, the program has been "strikingly unresponsive" to rising need.

People far more readily turn to food stamps, which have seen a 19 percent surge in enrollment since the recession began. But even these can carry a presumption of guilt or criminal intent. Four states — Arizona, California, New York and Texas — require that applicants undergo fingerprinting. Furthermore, under a national program called Operation Talon, food stamp offices share applicants’ personal data with law enforcement agencies, making it hazardous for anyone who might have an outstanding warrant — for failing to show up for a court hearing on an unpaid debt, for example — to apply.

As in the aftermath of Hurricane Katrina, the most reliable first responders are not government agencies, but family and friends. Kristen and Joe first moved in with her mother and four siblings, and in the weeks before the government came through with a check, she borrowed money from the elderly man whose house she cleans every week, who himself depends on Social Security.
I’ve never encountered the kind of "culture of poverty" imagined by the framers of welfare reform, but there is a tradition among the American working class of mutual aid, no questions asked. My father, a former miner, advised me as a child that if I ever needed money to "go to a poor man."

He liked to tell the story of my great-grandfather, John Howes, who worked in the mines long enough to accumulate a small sum with which to purchase a plot of farmland. But as he was driving out of Butte, Mont., in a horse-drawn wagon, he picked up an Indian woman and her child, and their hard-luck story moved him to give her all his money, turn his horse around and go back to the darkness and danger of the mines.

In her classic study of an African-American community in the late ’60s, the anthropologist Carol Stack found rich networks of reciprocal giving and support, and when I worked at low-wage jobs in the 1990s, I was amazed by the generosity of my co-workers, who offered me food, help with my work and even once a place to stay. Such informal networks — and random acts of kindness — put the official welfare state, with its relentless suspicions and grudging outlays, to shame.

But there are limits to the generosity of relatives and friends. Tensions can arise, as they did between Kristen and her mother, which is what led the Parentes to move to their current apartment in Wilmington. Sandra Smith, a sociologist at the University of California at Berkeley, finds that poverty itself can deplete entire social networks, leaving no one to turn to. While the affluent suffer from "compassion fatigue," the poor simply run out of resources.

At least one influential theory of poverty contends that the poor are too mutually dependent, and that this is one of their problems. This perspective is outlined in the book "Bridges Out of Poverty," co-written by Ruby K. Payne, a motivational speaker who regularly addresses school teachers, social service workers and members of low-income communities. She argues that the poor need to abandon their dysfunctional culture and emulate the more goal-oriented middle class. Getting out of poverty, according to Ms. Payne, is much like overcoming drug addiction, and often requires cutting off contact with those who choose to remain behind: "In order to move from poverty to middle class ... an individual must give up relationships for achievement (at least for some period of time)."

The message from the affluent to the down-and-out: Neither we nor the government is going to do much to help you — and you better not help one another either. It’s every man (or woman or child) for himself. In the meantime, Kristen has discovered a radically different approach to dealing with poverty. The community agency she volunteered at is Acorn (the Association of Community Organizations for Reform Now), the grass-roots organization of low-income people that achieved national notoriety during the 2008 presidential campaign when Republicans attacked it for voter registration fraud (committed by temporary Acorn canvassers and quickly corrected by staff members).

Kristen made such a good impression that she was offered a paid job in May, and now, with only a small supplement from the government, she works full time for Acorn, organizing protests against Walgreens for deciding to stop filling Medicaid prescriptions in Delaware, and, in late June, helping turn out thousands of people for a march on Washington to demand universal health insurance.

So the recession tossed Kristen from routine poverty into destitution, and from there, willy-nilly, into a new life as a community organizer and a grass-roots leader. I wish I could end the story there, but the Parentes’ landlord has just informed them that they’ll have to go, because he’s decided to sell the building, and they don’t have money for a security deposit on a new apartment. "I thought we were good for six months here," Kristen told me, "but every time I let down my guard I just get slammed again."

Geithner: Too soon to decide on more stimulus
U.S. Treasury Secretary Timothy Geithner said it was too soon to decide whether the U.S. economy would need the help of a second round of government stimulus to recover from recession. "I don't think that's a judgment we need to make now, can't really make it now prudently, responsibly," Geithner said in a taped interview with CNN that will air on Sunday.

According to a transcript provided by CNN, Geithner said the "biggest thrust" of the $787 billion package of spending and tax cuts signed into law earlier this year would take effect in the second half of the year. He also said a program that is setting up public-private partnerships to buy up toxic assets held by banks would likely see less use than had been expected a few months ago because the financial system had begun to stabilize.

Rebuilding Something Better
by Barack Obama

Nearly six months ago, my administration took office amid the most severe economic downturn since the Great Depression. At the time, we were losing, on average, 700,000 jobs a month. And many feared that our financial system was on the verge of collapse. The swift and aggressive action we took in those first few months has helped pull our financial system and our economy back from the brink. We took steps to restart lending to families and businesses, stabilize our major financial institutions, and help homeowners stay in their homes and pay their mortgages. We also passed the most sweeping economic recovery plan in our nation's history.

The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that. It was, from the start, a two-year program, and it will steadily save and create jobs as it ramps up over this summer and fall. 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.

I am confident that the United States of America will weather this economic storm. But once we clear away the wreckage, the real question is what we will build in its place. Even as we rescue this economy from a full-blown crisis, I have insisted that we must rebuild it better than before. For if we do not seize this moment to confront the weaknesses that have plagued our economy for decades, we will consign ourselves and our children to future crises, sluggish growth, or both.

There are some who say we must wait to meet our greatest challenges. They favor an incremental approach or believe that doing nothing is somehow an answer. But that is exactly the thinking that led us to this predicament. Ignoring big challenges and deferring tough decisions is what Washington has done for decades, and it's exactly what I sought to change by running for president.

Now is the time to build a firmer, stronger foundation for growth that not only will withstand future economic storms but that helps us thrive and compete in a global economy. To build that foundation, we must lower the health-care costs that are driving us into debt, create the jobs of the future within our borders, give our workers the skills and training they need to compete for those jobs, and make the tough choices necessary to bring down our deficit in the long run.

Already, we're making progress on health-care reform that controls costs while ensuring choice and quality, as well as energy legislation that will make clean energy the profitable kind of energy, leading to whole new industries and jobs that cannot be outsourced. And this week, I'll be talking about how we give our workers the skills they need to compete for these jobs of the future.

In an economy where jobs requiring at least an associate's degree are projected to grow twice as fast as jobs requiring no college experience, it's never been more essential to continue education and training after high school. That's why we've set a goal of leading the world in college degrees by 2020. Part of this goal will be met by helping Americans better afford a college education. But part of it will also be strengthening our network of community colleges.

We believe it's time to reform our community colleges so that they provide Americans of all ages a chance to learn the skills and knowledge necessary to compete for the jobs of the future. Our community colleges can serve as 21st-century job training centers, working with local businesses to help workers learn the skills they need to fill the jobs of the future. We can reallocate funding to help them modernize their facilities, increase the quality of online courses and ultimately meet the goal of graduating 5 million more Americans from community colleges by 2020.

Providing all Americans with the skills they need to compete is a pillar of a stronger economic foundation, and, like health care or energy, we cannot wait to make the necessary changes. We must continue to clean up the wreckage of this recession, but it is time to rebuild something better in its place. It won't be easy, and there will continue to be those who argue that we have to put off hard decisions that we have already deferred for far too long. But earlier generations of Americans didn't build this great country by fearing the future and shrinking our dreams. This generation has to show that same courage and determination. I believe we will.

The writer is president of the United States.

The Great Baby-Boomers Economic Stagnation of 2007-2017
by Rodrigue Tremblay

  • "Banking Establishments Are More Dangerous Than Standing Armies." Thomas Jefferson (1743-1826), 3rd US President
  • "... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall." Harvard Economic Society (HES), November 10, 1929
  • "While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us." President Herbert Hoover, May 1, 1930
  • "Under a paper money system, a determined government can always generate higher spending and hence positive inflation." Fed Chairman Ben Bernanke, in 2002

Many observers think that "prosperity is around the corner" and that this recession, like others since World War II, will end as soon as the stock market, as a leading indicator, recovers and people start spending again. This is a myopic view of the current economic big picture.

In fact, since the peak of the housing bubble (in the U.S.) in 2005, the onslaught of the subprime financial crisis in August 2007 and the beginning of the recession in December 2007, the U. S. economy, and to a certain extent, the world economy, have entered a period of protracted adjustments. For sure, there will be some quarters of positive economic growth ahead and the recession may be declared officially over in the coming months, but the radical economic reorganization that is taking place will go on for years to come.

Why is this so? Essentially, because we are at the very end of the 60-year inflation-disinflation-deflation Kondratieff cycle that began in 1949 when war-frozen prices were liberalized; and that powerful long cycle is ending now. The post 1980s era, i.e. the Reagan era, is over, but the excesses and bubbles of the last few decades have to be corrected, at a time when large population shifts are about to take place. Such adjustments will take years to unfold and this will entail a lot of efforts and a lot of changes.

Indeed, the era of excessive spending and of excessive debt is over. The era of excessive government economic disengagement and of financial deregulation is over. The era of irresponsible Ponzi-scheme finance is over. The era of unregulated derivatives is over. The era of greed as an ideology is over. The era of wild and predatory capitalism is over. The era of cheap oil, of cheap transportation, of cheap commodities and of cheap food is over. The era of excessive concentration of wealth and income is also over. However, the age of political corruption, of incompetent politicians and of destructive wars of aggression is not over. What has arrived is the age of hyperstagflation.

The central driving force behind most of these developments, besides the collapse of the financial sector, the debt pyramid and the derivative products structure, and irresponsible talk of larger wars by loose cannon politicians (as if there were not enough problems!) is going to be demographic. Indeed, we have entered a period during which the largest demographic cohort in the history of mankind, the post Word War II baby-boomer generation, has passed its spending peak. This is not something that can be reversed overnight. This is going to be a decade-long process of adjustment, of less spending, of more saving, and above all, of paying off excessive debt loads. Let's keep in mind that consumer spending represents 70 percent of GDP.

The economic consequences are going to be profound and will affect all sectors of the economy. We only have to consider how the automobile industry, once a major engine of economic growth, is presently going through a fundamental reorganization and downsizing. Even computer-based industries have matured and cannot anymore be considered fast growing industries. The only growth sectors left in the U.S. seem to be the health services industry, as the population is aging, and the war-related industries, as the U.S. military-industrial complex keeps on expanding. But even those sectors will have to slow down; lest they bankrupt the entire economy.

That's why I think these industrial and demographic trends herald a period of slower economic growth that could last many years. Governments better wake up to the challenges that such a slow growth environment entails. Very few people are prepared for such a prolonged period of economic stagnation that will be accompanied by forced debt liquidation, in a deflationary environment. This is particularly true of private pension plans that will have trouble paying pensions to recipients in the coming years. This is also true for employment that will expand at a slower pace than the working population, at least for a while, resulting in a rise in the level of unemployment.

Baby-boomers are those individuals who were born between 1946 and 1966. Because of its sheer size (more than 70 million people in the U.S.), this generation has been dominant in all spheres of life for the last fifty years. But now, it has passed its spending peak. This occurred in 2005-06, at the very top of the housing bubble. The average age of the baby-boomer demographic cohort was then 50, which is the age of top spending. At that time, the U.S. personal savings rate fell to a whopping minus 2.5 percent per year. As a comparison, it was 12.5 percent during the 1981-82 recession and it has now rebounded a phenomenal 5.7 percent in April 2009, and it's climbing fast.

Indeed, the end of the housing bubble, the financial crisis, and the economic recession altogether have sent a clear signal to Baby Boomers. You'd better begin saving soon, or your retirement will have to be postponed. And saving means consuming and spending less, while paying up debts, in order to boost net current personal assets to a level that could sustain retirement needs. But if the largest cohort of consumers cuts down on its spending and borrowing, what does it mean for aggregate spending and economic growth? It can only mean slower overall economic growth and some painful economic adjustments.

Therefore, there is a high probability that this recession will be a super one that may linger on for years, being interrupted by short-run upside bursts, but soon being followed by a return of stagnant conditions. In Japan, in the nineteen-nineties, a similar financially and demographically induced recession lingered on for an entire decade. And even after twenty years, it cannot be said that Japan is out of the woods yet.

In the short run, in order to counteract the effects of the financial crisis and to fight the current recession that began officially in December 2007 (according to the National Bureau of Economic Research- NBER), the Obama administration has devised a three-quarter billion dollar stimulus plan and has let the fiscal deficit explode to more than two trillion dollars a year because of its bail-out of the troubled banks.

Similarly, the Fed has lowered short-term rates to zero and has purchased billions of dollars in long-term Treasury securities, in government agency securities, and even in mortgage-backed securities, in a desperate effort to save large financial institutions such as AIG, Fannie and Freddie, and other American financial institutions from imploding. But now bond investors, especially international investors, are selling Treasury bonds and are pushing long-term interest rates up and the U.S. dollar down as inflation fears increase, even though paradoxically the collapse of the pyramid of debts creates a deflationary environment for the entire economy.

The danger here is that bond investors will be selling Treasury bonds faster than the Fed can buy them. In which case, there will be a downward spiral in bond prices as inflation and solvency fears are exacerbated. In a word, if the Fed does not tone down its current policy of excessive monetizing of public and private debts and its obvious 'benign neglect' policy toward the dollar, high inflation and possibly even hyperinflation become a possibility down the road. This has happened elsewhere in the past and there is no reason why it could not happen again, especially if the U.S. keeps getting involved in costly wars abroad, paying those adventures with money it does not have.

For now, a quick resurgence of inflation is only a remote possibility. This is nevertheless a possibility, considering that central banks have a tendency to overdo the printing of fiat money. In fact, if governements attempt to print their way out of the coming structural demographic problem, they will end up generating an hyperstagflation. In a nutshell, this is what the huge international dollar-denominated bond market sees and fears, at a time when it has to absorb a huge supply of new bond issues. In reality, the bond market will always win against any central bank, any time. The solvency woes and the likely default of the state of California on its outstanding debt will only add to the anxiety.

A few weeks ago, I warned against the risk of future long term interest rates hikes and future U.S. dollar depreciation following the decisions by the U.S. Treasury and by the Fed to flood the markets with trillions of dollars of new Treasury bond issues and with newly printed money. The undertow is coming even faster than I thought. Only when the markets expect relative economic stagnation and a lasting deflationary environment will long term interest rates taper off. Brace yourself and hold on to your britches. There is a rough economic decade ahead.

French workers threaten to blow up factory
Workers at collapsed French car parts maker New Fabris threatened on Sunday to blow up their factory if they did not receive payouts by July 31 from auto groups Renault and Peugeot to compensate for their lost jobs. New Fabris was declared in liquidation in April, so the workers stand to get no redundancy money, although they are entitled to draw state unemployment benefit.

They want Renault SA and PSA Peugeot Citroen to pay 30,000 euros ($41,800) for each of the 336 staff at the factory, or some 10 million euros in total, in return for its remaining stocks of equipment and machinery. "The bottles of gas have already been placed at various parts of the factory and are connected with each other," CGT trades union official Guy Eyermann told France Info radio. "If Renault and PSA refuse to give us that money it could blow up before the end of the month," he added.

A delegation of the workers has a meeting on Thursday with Renault, which had no immediate comment. Police also declined to comment on the threat by the workers, who are occupying the New Fabris factory at Chatellerault, near Poitiers in central France. The company is the successor to Fabris, founded in 1947 and put into liquidiation in 2007. It was later acquired by ZEN of Italy which is headed by Florindo Garro. ZEN SpA, based in Albignasego near Padua, makes cast iron parts for vehicles.

Garro controls other metal firms in France such as Rencast and SBFM that also have financial difficulties. Some French workers have adopted militant tactics in the economic crisis, including "bossnappings" where managers have been held hostage in their offices.

Henderson to lead new GM, with old team
How do you change a company’s culture when you can’t really do much about changing the group of people in charge? That’s the intriguing challenge facing Fritz Henderson, president and CEO of the new General Motors Co., who pretty much has to make do with the same old management team as GM emerges from Chapter 11 bankruptcy. Indeed, the big personnel news on Day 1 of GM’s new life today was that Bob Lutz, by far the company’s oldest executive at age 77, is canceling his retirement plans and sticking around in a new role spearheading the company’s marketing and various other creative functions.

Henderson can’t quickly go out and make a splashy new executive hire now, unless the new hotshot is willing to work for free, because Henderson doesn’t know how much he can pay a new executive. That’s because the new GM, now 61% owned by the U.S. government after receiving $50 billion in federal loans, must get compensation for its 100 top executives approved by federal salary czar Ken Feinberg. Last month, Feinberg was appointed by the Obama administration to monitor executive compensation at the seven companies that have received the most bailout money, including GM and Chrysler.

"Ultimately, how people are paid is a function of what Ken Feinberg approves," Henderson said today, "and in this world, actually, your ability to recruit people from the outside if you don’t know how you can pay ’em is, pfft!" But he added that yes, he’s open to bringing in new blood from outside in principle. At today’s news conference, Henderson said several times that one of his top three priorities is to change GM’s culture to be leaner, faster, more high-performance. But in the absence of hiring change agents from the outside, Henderson must do what he can by shuffling the deck of existing executives. And he’s clearly intent on doing plenty of that. Lutz’s new role clearly means a change of duties, for example, for Mark LaNeve, GM’s vice president of vehicle sales, service and marketing.

Some Choice Words for "The Select Few"
by Bill Moyers and Michael Winship

If you want to know what really matters in Washington, don't go to Capitol Hill for one of those hearings, or pay attention to those staged White House "town meetings." They're just for show. What really happens - the serious business of Washington - happens in the shadows, out of sight, off the record. Only occasionally - and usually only because someone high up stumbles - do we get a glimpse of just how pervasive the corruption has become.

Case in point: Katharine Weymouth, the publisher of The Washington Post - one of the most powerful people in DC - invited top officials from the White House, the Cabinet and Congress to her home for an intimate, off-the-record dinner to discuss health care reform with some of her reporters and editors covering the story. But CEOs and lobbyists from the health care industry were invited, too, provided they forked over $25,000 a head - or up to a quarter of a million if they want to sponsor a whole series of these cozy get-togethers.

And what is the inducement offered? Nothing less, the invitation read, than "an exclusive opportunity to participate in the health-care reform debate among the select few who will get it done." The invitation reminds the CEO's and lobbyists that they will be buying access to "those powerful few in business and policy making who are forwarding, legislating and reporting on the issues "Spirited? Yes. Confrontational? No." The invitation promises this private, intimate and off-the-record dinner is an extension "of The Washington Post brand of journalistic inquiry into the issues, a unique opportunity for stakeholders to hear and be heard."

Let that sink in. In this case, the "stakeholders" in health care reform do not include the rabble - the folks across the country who actually need quality health care but can't afford it. If any of them showed up at the kitchen door on the night of this little soiree, the bouncer would drop kick them beyond the Beltway. No, before you can cross the threshold to reach "the select few who will actually get it done," you must first cross the palm of some outstretched hand. The Washington Post dinner was canceled after a copy of the invite was leaked to the web site, by a health care lobbyist, of all people.

The paper said it was a misunderstanding - the document was a draft that had been mailed out prematurely by its marketing department. There's noblesse oblige for you - blame it on the hired help. In any case, it was enough to give us a glimpse into how things really work in Washington - a clear insight into why there is such a great disconnect between democracy and government today, between Washington and the rest of the country.

According to one poll after another, a majority of Americans not only want a public option in health care, they also think that growing inequality is bad for the country, that corporations have too much power over policy, that money in politics is the root of all evil, that working families and poor communities need and deserve public support if the market system fails to generate shared prosperity. But, when the insiders in Washington have finished tearing worthy intentions apart and devouring flesh from bone, none of these reforms happen. "Oh," they say, "it's all about compromise. All in the nature of the give-and-take-negotiating of a representative democracy."

That, people, is bull - the basic nutrient of Washington's high and mighty. It's not about compromise. It's not about what the public wants. It's about money - the golden ticket to "the select few who actually get it done." When Congress passed the Helping Families Save Their Homes Act, "the select few" made sure it no longer contained the cramdown provision that would have allowed judges to readjust mortgages. The one provision that would have helped homeowners the most was removed in favor of an industry that pours hundreds of millions into political campaigns.

So, too, with a bill designed to protect us from terrorist attacks on chemical plants. With "the select few" dictating marching orders, hundreds of factories are being exempted from measures that would make them spend money to prevent the release of toxic clouds that could kill hundreds of thousands. Everyone knows the credit ratings agencies were co-conspirators with Wall Street in the shameful wilding that brought on the financial meltdown.

But when the Obama administration came up with new reforms to prevent another crisis, the credit ratings agencies were given a pass. They'd been excused by "the select few who actually get it done." And by the time an energy bill emerged from the House of Representatives the other day, "the select few who actually get it done" had given away billions of dollars worth of emission permits and offsets. As The New York Times reported, while the legislation worked its way to the House floor, "It grew fat with compromises, carve-outs, concessions and out-and-out gifts," expanding from 648 pages to 1,400 as it spread its largesse among big oil and gas, utility companies and agribusiness.

This week, the public interest groups Common Cause and the Center for Responsive Politics reported that, "According to lobby disclosure reports, 34 energy companies registered in the first quarter of 2009 to lobby Congress around the American Clean Energy and Security Act of 2009. This group of companies spent a total of $23.7 million - or $260,000 a day - lobbying members of Congress in January, February and March. "Many of these same companies also made large contributions to the members of the Senate Environment and Public Works Committee, which has jurisdiction over the legislation and held a hearing this week on the proposed 'cap and trade' system energy companies are fighting.

Data shows oil and gas companies, mining companies and electric utilities combined have given more than $2 million just to the 19 members of the Senate Environment and Public Works Committee since 2007, the start of the last full election cycle." It's happening to health care as well. Even the pro-business magazine The Economist says America has the worst system in the developed world, controlled by executives who are not held to account and investors whose primary goal is raising share price and increasing profit - while wasting $450 billion dollars in redundant administrative costs and leaving nearly 50 million uninsured. Enter "the select few who actually get it done."

Three out of four of the big health care firms lobbying on Capitol Hill have former members of Congress or government staff members on the payroll - more than 350 of them - and they're all fighting hard to prevent a public option, at a rate in excess of $1.4 million a day. Health care policy has become insider heaven. Even Nancy-Ann DeParle, the White House health reform director, served on the boards of several major health care corporations.

President Obama has pushed hard for a public option but many fear he's wavering, and just this week his chief of staff Rahm Emanuel - the insider di tutti insiders - indicated that a public plan just might be negotiable, ready for reengineering, no doubt, by "the select few who actually get it done." That's how it works. And it works that way because we let it. The game goes on and the insiders keep dealing themselves winning hands. Nothing will change - nothing - until the moneylenders are tossed out of the temple, the ATM's are wrested from the marble halls, and we tear down the sign they've placed on government - the one that reads, "For Sale."

Wells Fargo Bank Sues Itself
You can't expect a bank that is dumb enough to sue itself to know why it is suing itself. Yet I could not resist asking Wells Fargo Bank NA why it filed a civil complaint against itself in a mortgage foreclosure case in Hillsborough County, Fla. "Due to state foreclosure laws, lenders are obligated to name and notify subordinate lien holders," said Wells Fargo spokesman Kevin Waetke. Being a taxpayer-subsidized, too-big-to-fail institution, it's possible that one of the few ways for Wells Fargo & Co. to know what it is doing is to notify itself with a court filing.

In this particular case, Wells Fargo holds the first and second mortgages on a condominium, according to Sarasota, Fla., attorney Dan McKillop, who represents the condo owner. As holder of the first, Wells Fargo is suing all other lien holders, including the holder of the second, which is itself. "The primary reason is to clear title and ownership interest in a property to prepare it for sale," Waetke said in an email exchange. "So it really is not Wells Fargo vs. Wells Fargo." Yet court documents clearly label "Wells Fargo Bank NA" as the plaintiff and "Wells Fargo Bank NA" as a defendant.

Wells Fargo hired Florida Default Law Group., P.L., of Tampa, Fla., to file the lawsuit against itself. And then Wells Fargo hired another Tampa law firm -- Kass, Shuler, Solomon, Spector, Foyle & Singer P.A. -- to defend itself against its own lawsuit, according to court documents. Wells Fargo's defense lawyers even filed an answer to their client's own complaint. "Defendant admits that it is the owner and holder of a mortgage encumbering the subject real property," the answer reads. "All other allegations of the complaint are denied."

This is even dumber than the lending practices that led to this foreclosure mess, yet this is what the court record says. I learned about this from "The Consumer Warning Network" Web site, which posted an article by Angie Moreschi titled, "Have The Banks Gone Crazy?" "We've apparently reached the perfect storm for complete and utter idiocy by some banks trying to foreclose on homes," Moreschi wrote. McKillop, the condo owner's attorney, told me he thinks Wells Fargo doesn't know what it's doing, and that its lawyers figure it is all billable hours to them. "You can't sue yourself," McKillop said. "It's just so ridiculous. .. It's a waste of paper. It's a bastardization of the legal process."

Wells Fargo's two law firms didn't return messages to explain their filings. The condo owner is belly up and hired McKillop to pursue a "friendly foreclosure," attempting to escape any lingering liabilities after the foreclosure sale. "It was a property they thought they were buying as a good investment as a lot of people did back in 2005 and 2006," McKillop said. "All we want to do now is get this property taken care of as fast and as easily as possible for all parties."

Rather than suing itself -- a stunt that was never even attempted on the MTV show "Jackass" -- wouldn't it be easier for Wells Fargo to release one of the liens to itself? Or pursue some other internal accounting strategy rather than tie up the court with nonsense? "This is just folks cranking out paperwork without conscious thought," said Anthony Sabino, a law professor at St. John's School of Law in New York City. Sabino added that it is possibly more confirmation of the old saw that a lawyer is one who can speak from both sides of the mouth.

Still trying to comprehend this legal lunacy, I called the Florida Bar, which put me in touch with Florida mortgage foreclosure lawyers. One of them, Tampa attorney Kristofer Fernandez, said he's seen several cases where a large bank has sued itself for foreclosure as the holder of both first and second mortgages. "Four or five years ago, you would have never seen this," Fernandez said. "Now, it's very common." In the final years of the housing boom, banks were lending to homeowners with no money down. To do this, they often made 80/20 loans, giving homeowners an 80% first mortgage and a 20% second mortgage.

Now, it seems these moronic mortgages require moronic foreclosures. Perhaps this strategy may speed up a summary judgment. Or maybe it preserves the position of the second lien holder so it is next in line to collect surplus funds after the first lien is satisfied, Fernandez said. But fat chance of surplus proceeds in the Florida condo foreclosure market these days. It takes some pretty shameless lawyers and a rich culture of corporate stupidity for a company to sue itself. I hope Wells Fargo loses this case and ends up having to drag itself all the way to the Supreme Court.

Lloyds braced for £13 billion writeoff
Lloyds Banking Group is poised to write off as much as £13 billion on its loans to commercial property, businesses and mortgage holders as the crisis engulfing the taxpayer-backed bank deepens. First-half results due to be posted in three weeks will show that its losses are accelerating, in spite of recent suggestions that the worst of the recession is over. UBS analysts expect Lloyds to announce a bottom line half-year loss of £6.3 billion as a result of the soaring provisions.

The writeoffs for the first six months of the year would match the losses recorded by Lloyds TSB and HBOS in 2008, as they consummated their disastrous merger. The expected bad debt charge is almost twice what Lloyds paid for HBOS when they came together under the government’s watch last autumn. Total writeoffs for this year at Lloyds could exceed £20 billion. The bad debts come as the bank struggles to find a new chairman to replace Sir Victor Blank, who has agreed to stand down following pressure from UKFI, the government’s shareholder body, which owns 43% of the bank’s shares.

A number of the City’s biggest fund managers have warned Lloyds not to press ahead with the appointment of Sir Win Bischoff to the role. Although Bischoff had been widely tipped to get the job, a wave of resistance has emerged. Investors believe he is tainted by his former role as chairman of Citigroup, which has received a series of bailouts from American taxpayers. Bischoff is also close to Eric Daniels, the chief executive of Lloyds and a former colleague at Citigroup. Many of Lloyds’ biggest shareholders are keen for the new chairman to find a replacement for Daniels over time — a job they fear Bischoff may not have the stomach for.

City grandee Chris Gibson-Smith has also been linked to the job, although investors have queried how he would be able to dedicate the time needed for it, given his existing position as chairman of both the London Stock Exchange and British Land. Lloyds is also fighting off a full-frontal assault from Brussels, over claims it may have benefited too much from state aid.

Neelie Kroes, the European Union’s competition commissioner, warned two weeks ago that she was examining both Lloyds and Royal Bank of Scotland, and she threatened to break them up. Analysts say that when the huge provisions are put to one side, Lloyds is now highly profitable and has a dominant market share in the UK. Daniels is confident that, in the long term, investors will enjoy enormous benefits from the marriage of the two banks. Alistair Darling, the chancellor, and Tom Scholar, his most senior civil servant, have made a number of submissions to Kroes in recent days pressing the case for the banks to remain intact.

The Treasury argues that the UK’s bail-out programmes have been much tougher on banks than similar deals around Europe. According to banking sources, however, EU officials are concerned that Lloyds and Royal Bank of Scotland are gaining too big a share of certain markets. Ironically, their rising market shares are partly due to government pressure to pump more lending into the real economy. John Kingman, the chief executive of UKFI, will reveal his strategic plan on Monday. He is expected to say that the taxpayer banks should be allowed to lend profitably, irrespective of government pressure.

Iran's Lake Parishan dries up
As the threat of rising temperatures looms over the planet, Iran's largest freshwater lake dries up despite being under a UN conservation program. Lake Parishan, which was once home to thousands of migratory birds, has suffered from low water levels for the past few years. After losing up to 80 percent of its water reserves due to draught and lack of proper management, the lake has now dried up, Mehr news agency reported.

When the lake began to dry up, water department officials of the nearby city of Kazeroun petitioned against the illegal drainage activities by some well owners. However, by the time court orders were issued against 120 well owners the lake was beyond saving. Lake Parishan was once one of Iran's largest lakes, spanning an area of over 5,266 kilometers squares during its best years. A few years ago, after the Hamoun Lake, in southeastern Iran, dried up it was also seen as the country's vastest permanent freshwater lake.

The Parishan wetland was the focus of a joint project between Iran and the United Nations Development Program (UNDP) and the Global Environment Facility (GEF), which aimed to remove or at the very least to decrease the threats facing its globally significant biodiversity and sustainability. The program, however, failed to safeguard Parishan and its wildlife, as construction work cut off some of the springs pouring into the lake and devastating fires killed the specifies living in the wetland in large numbers.


el gallinazo said...

Re Engdahl

I can see politically why Engdahl could view peak oil and climate change as a sham. As Naomi Klein points out in great detail in the Shock Doctrine, the crises originally just happened and they rode the wave. Then they realized that they could manufacture the wave customized and they wouldn't have to wait for it to come along. Like the Neocons in the New American Century. Who knew how long "another Pearl Harbor" might take to develop naturally? Their franchise might have been gone by then and their surfboards stacked on the beach abandoned. Rahm Emmanuel could have writtten the Shock Doctrine as an operational manual with his, "Never let a good crisis go to waste."

So what I am saying is that peak oil and climate change could make great shock crises, and I can see how Engdahl could go off base with their convenience and deny their scientific actuality. Real or imagined, TPTB will ride the wave.

Ilargi said...

El G,

Abiotic oil really dents anyone's credibility hugely. And not just in that particular field. It doesn't mean he's got everything wrong, but it does mean everything he writes has to be scrutinized a dozen times.

rapier said...

The bond market can't take another stimulus package. The snails pace of dispersing the first one has been a huge gift to the Treasury market. Not that you would know it looking a the 10yr and longer charts.

GS's big quarter sounds big but $2 billion isn't squat now days. If we taxed their profits 100% that would be only around 3% of what Uncle Sam borrowed, last week.

I could be wrong and another stimulus could get passed and maybe the Treasury market could survive but if it happens there isn't going to be enough money left to support much else in the financial markets. Or in my kidding nightmare scenario daydream all of Americas income is going to come from Treasury securities yielding 0%.

jal said...

We at TAE are trying to establish/follow a “survival plan”.
If you haven’t purchased and learned how to operate a farm within the next 4-5 years, forget it.
Hope that you will be able to be among the employed as the economy contracts.
After reading, “Some Choice Words for "The Select Few"
by Bill Moyers and Michael Winship
“The game goes on and the insiders keep dealing themselves winning hands.”
It is obvious that the insiders are also trying to implement THEIR survival plan.
Those baby boomers that are not preparing a survival plan will be doing the most suffering. They will also be finding that their spoiled children will be coming back for help at the “mom-pop” bank and finding that the bank is broke. It will not be a pretty family discussion.
The Great Baby-Boomers Economic Stagnation of 2007-2017
by Rodrigue Tremblay
“Therefore, there is a high probability that this recession will be a super one that may linger on for years, being interrupted by short-run upside bursts, but soon being followed by a return of stagnant conditions.
There is a rough economic decade ahead.”
Is the author indicating that the republicans are going to let the democrats handle the bouncing ball until Obama’s term runs out.
Somebody has got to be blamed for cutting the support social services/programs and for raising taxes.

thethirdcoast said...

I would posit that Mr. Engdahl, like Mr. Taibbi, has some major blindspots in his otherwise above average track record of reporting.

I don't think I need to go into what those blindspots are as the readership here is more than astute enough to grasp them on their own.

Anonymous said...

1. Thank God for Bill Moyers.

2. re Norway discussion
An exchange student once lectured me that in contrast to the USA, "In Norway we don't have people in slums."
Is that because circa 1930's they obediently shipped them out for the Nazis?

3. Question: What's the greater liklihood: courts forcing sheeple into indentured servitude to pay off their debts 'to society'; or a revolution-induced debt jubilee?

Anonymous said...


Love the photo!


Alan Greenshoots said...

Re: Scroll-to-bottom command

I found a web page that has a "bookmarklet" that provides scroll-to-bottom of page functionality for the iPhone, here. Follow the instructions on the linked web page to add the bookmark. Seems to be a multi-step process of saving the bookmark to Safari and then syncing up iPhone via iTunes.

Anonymous said...

There are lots and lots of fine, intelligent writers on the net. Hundreds. Thousands. Too many, in fact.

So when Engdahl espouses crap like "abiotic" oil why should I even pay attention to him? I don't.

And when Matt Taibbi makes the remark that oil prices "have nothing to do with supply and demand," why should I listen further? I don't.

These aren't mere "blind spots." It's ischemia, dead brain tissue.

Anonymous said...

The other bothersome, fatal feature of the Taibbi article (that everyone seems to want to place votive candles around) is its undisguised contempt and lack of even a modicum of restraint. Too much "ain't I witty and cute."

My thought was: what's this axe he has to grind?

People have forgotten the power of understatement, of letting facts speak for themselves.

el gallinazo said...


I have to meet with some of my friends this week to discuss what to do with their IRA's. I know IRA's are a US thing which you may not have that much expertise about, but my questions for you are pretty general. If one is under 59.5, then in addition to adding that withdrawal to your income tax for the year, one must pay an additional 10% early withdrawal penalty. The people I must talk to fall on both sides of 59.5.

My question is the following. You have mentioned in earlier posts that the federal government, when things get rough, may either seize IRA's or prevent or limit them from being withdrawn. Since IRA's may be invested in practically any type of public or private financial instrument, I can't understand a motivation for this. For example, why would the government want to prevent people from selling stocks to say pay their mortgage or buy food?

If IRA's were government organized monolithic pension funds, it would be obvious why they would want to seize the funds, a la Argentina. But here they are totally individualized investments in pretty much anything. The only things that separates them from any other investment is the legal umbrella of tax deferred status.

I also recognize as an argument for withdrawal the inevitability of taxes going up, so pulling the money out now, particularly for the over 59.5 crowd makes sense. Most of the extra income tax they would pay will be in the highest bracket, but the rates will be higher in the future anyway.


el gallinazo said...


I am slowly and reluctantly coming around to Ilargi's view of Engdahl. In some respects the guy is amazingly brilliant, particularly in his understanding of the "real politik" of imperial strategies. Then he comes out with this last fall:

It is an economic analysis of what is going on in the USA, with particular emphasis on the TARP and FED balance sheet. He predicts a depression far greater than the 30's along with Zimbabwe style hyperinflation. Duh?? He focuses totally on the growth of M1 and while he dwells on the crash of credit re interbank lending, he ignores the total dominance of credit in terms of effective money supply.

He is definitely worth reading like Taibbi, but with great skepticism.

Re Taibbi, his primary goal is to be a pop star. He is willing to be an iconoclast, but only within the limits set by conventional thinking. Thus his piece of trash (an actual book) about 9/11 (beyond the pale) and a basically sound article on GS, as he terms it our international vampire squid. It's OK to hate GS now, in fact it's the cutting edge of journalism. Reminds me of the '30's song, "My name is Morgan but it ain't JP."

el gallinazo said...

The NY Times deserves to die alone for that GS piece of crap they just published. I will shed no tears at the funeral. Ilargi, you must have put on a nose clip before handling it.

Re iPhone/iPod touch problem

More gurus weigh in but no really useful solutions.

Anonymous said...

Re: Scroll-to-bottom command

If you don't have safari like me, you can just paste this into an email to yourself so that you can copy the code from the email into your iphone bookmarks. I did have to replace the back quotes around the word "body" to single quotes, but it works.


ric2 said...

. . . and another follow-up financial advice-type question for Stoneleigh (or other knowledgable reader):

You have mentioned how short-term treasuries function as cash equivalents. Can you explain how short-term treasuries are equivalent to cash-in-hand during a systemic banking crisis event like a bank holiday? My understanding is that, for individuals like myself, the easiest way to invest in US treasuries is through the treasury direct web site, where you must connect your account there to a bank account. Therefore, it would seem that if banks are shut down, you would not be able to cash in your treasuries (and thus cash-in-hand seems far more secure). Besides minimizing the physical risks to cash stored on your property, is there any other reason one would want to hold short-term treasuries vs. cash? Am I correct in worrying about the risk to value individuals have stored in short-term treasuries when bank transactions have been halted?

Thanks again.


Anonymous said...

NEW YORK, July 13 (Reuters) - With U.S. unemployment at a 20-year high, some Americans are working for free while looking for a job, but experts are split over whether it is a sign of dedication or desperation.

Unpaid job seekers can keep their resumes fresh by boosting their experience and learning new skills, experts say, but others warn businesses may take advantage of the jobless and that it is illegal for commercial companies not to pay workers.

Not to bright, they should be in DC burning that place to the ground. Maybe latter.

Ilargi said...

El G,

Funny things: the NYT has renamed the article "For Goldman, a Swift Return to Lofty Profits", while Barry Ritholtz characterizes it as "eloquent Goldman bashing".

There's much more today: Meredth Whitney is bullish on Goldman, and JPM and even Citi. She's fast losing her street cred, swapped for Wall Street cred.

Still, sure, the Obama Sachs coup has been successful to date: hide losses at all price, pump in all you can get away with, and voilà: the financial economy looks rosy. All it takes from there is ignoring the real economy and/or continuing to insist that it would have been even worse without the bank bail-outs. Who's going to prove you wrong?

But they still can't fool all of the people all of the time, and we'll inevitable get to see that it's true: everything they've done makes everything worse. And then it'll get worse with another stimulus plan.

Anonymous said...

The latest news of the miraculous return to profitability of GS masks the reality of the "connected" feeding on the corpse of the real economy.

Coming from the peak oil viewpoint,I have a hard time reconciling the top work on one hand with the next-to-crackpot view on the other....or it might just show his humanity[we all be human,and are silly in each of our own ways]

Climate change will be a top topic soon I fear,as the changes will be felt by all....think hurricanes in the gulf,and the result of giving a good whack to domestic supplies....

off to be productive.


Ahimsa said...

Re Engdahl

I, too, do not accept everything he says. However, I do appreciate his research and analysis on topics that most scholars and mainstream media do not delve in. Even great thinkers have inconsistencies and flaws.

This saying from Siddhartha Gautama comes to mind:

“Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything simply because it is found written in your religious books. Do not believe in anything merely on the authority of your teachers and elders. Do not believe in traditions because they have been handed down for many generations. BUT AFTER OBSERVATION AND ANALYSIS, when you find that anything agrees with reason and is conducive to the good and benefit of one and all, then accept it and live up to it.”

el gallinazo said...

For those with significant others who refuse to hunker down:

My name is Morgan but it ain't J.P.

And the other (better) NY Times article:

Take the case of Kristen and Joe Parente, Delaware residents who had always imagined that people turned to government for help only if "they didn’t want to work."

And from the late, great John Lennon:

Instant karmas gonna get you
Gonna knock you right on the head
You better get yourself together
Pretty soon you’re gonna be dead

thethirdcoast said...

"...others warn businesses may take advantage of the jobless and that it is illegal for commercial companies not to pay workers.

The above statement from the Reuters article would be true if we did not live in a corporatocracy. As things stand that contention is laughable on its face.

Take the case of Kristen and Joe Parente, Delaware residents who had always imagined that people turned to government for help only if "they didn’t want to work."

I also read and enjoyed this op-ed in the NYT. I would love to know how the Parentes' worldview has evolved between say, March 2003 and the present.

jal said...

From the Marker ticker …
“… a letter that the administration had just sent out calling for yet another big meeting at Treasury with yet another sector of the financial industry. Signed by Treasury Secretary Timothy Geithner and Shaun Donovan, the housing and urban development secretary, the letter demanded that representatives from the top 25 mortgage servicers assemble in Washington on July 28.”
I wonder if they will be able to get around the problems that Karl points out by setting up a “RENT-TO-OWN” program.

Bigelow said...

“...People are blaming China for stealing manufacturing jobs. The truth is even China is losing manufacturing jobs. With every passing year, it simply takes fewer and fewer workers to assemble anything. And manufacturing jobs, once lost, seldom if ever come back.

Given that another housing bubble is not going to happen, unless there is another disruptive invention such as the internet that captures the imagination of the world and creates millions of jobs, prospects of a huge recovery are slim. Since no such invention appears likely anytime soon, odds of an L-Shaped recession are extremely high.”

Japan's Robots Join Ranks Of Unemployed

Anonymous said...


There's much more today: Meredth Whitney is bullish on Goldman, and JPM and even Citi. She's fast losing her street cred, swapped for Wall Street cred.

I read that as an immediate term plus for GS stock not long term. I think you should re read it. Or you might try shorting GS and find out that way.

Anonymous said...

Just a your receipts. Because only criminals have large amounts of cash. (Welcome to the American police mindset.)

Ilargi said...

"I think you should re read it."

I don't think you understand what I wrote.

Gravity said...

Is anyone compiling a list of the forms of novel 'flation people keep making up?

Now its hyper-stagflation, which makes no sense at all, and can't even be expressed as curvature in a market continuum.


'flation is always and everywhere expressed as random noise, or the function of a monetary tensor-field which is active between goods and services, inducing either positive or negative curvature.

Anonymous said...

Ho, ho! :)

Ian said...

@ Gravity

You missed:


el gallinazo said...

Japan's Robots Join Ranks Of Unemployed

Time for Terminator-san to get rid of those pesky humans taking all the jobs that should go to robots

D. Benton Smith said...

I have another true-story parable for those of you who want it (don't I always?) that speaks to the perennial issue of 'Doom & Gloom' vs 'Don't Worry Be Happy'.

Last year when the Mississippi rose from its banks to wipe out our tiny hamlet of Hamburg Illinois two FEMA fools wasted the better part of two days with a transit/level trying to estimate the projected 'high water' flood level (they would have been far more useful, at $500 per day, slinging sands bags with the rest of us.)

Anyway, they eventually tie two yellow plastic ribbons around the trunk of a prominent tree by someone's front porch near the center of levy raising activity. One ribbon encircled the tree about 6 feet up, and the other was about 1 foot up.

Someone in the crowd voiced the question everybody was thinking, "So what's with the yellow ribbons? What use are they? The flood is either going to be so high that we might as well quit right now, or so low that we don't even need a levy!"

Always the smart mouth I answered up.

"The bottom mark is HOPE and the top one is MOTIVATION. It's gonna take both if we're going to save this town."

I would say the same thing about the several global crises currently rising up to wipe out our civilization (and conceivably even our species.)

The point is not that we can or cannot win. In the end the river always wins (as does gravity, aging and, ultimately, universal entropy itself.)

The point is the spirited playing of the game and the myriad rewards that derive from just being alive and giving life our best shot.

Just for the record: The flood destroyed one fourth of the town, and we saved the other three fourths. I lost one old house ($40K net loss) )and saved the other. People got angry and joyful and defeated and victorious and bonded into a true community. It was a great and painful experience that I would not trade for anything.

el gallinazo said...


I think we are in for a bout of hyperdisinfaltion.

Notice that the Latin root for all this is "flatus" defined as one or more economists deep in thought.

Anonymous said...

Gravity you also missed a big one ... Economeisterdeflation

el gallinazo said...

I said yesterday that the Cap & Trade attempted bubble can't succeed. Karl explains why toward the end of today's excellent rant:

What's even worse is that it appears that we have now crossed the "zero line" in terms of new debt .vs. GDP - that is, taking on new debt in the system is actually depressing, not helping, GDP growth. This can and will get out of hand very quickly if we don't cut it out, and could easily lead to an all-on collapse of our monetary and political systems. I've written about the marginal contribution of debt to GDP many times, and from the data it appears that we are either very close to or may have crossed already into negative territory. We must not allow that to happen under any circumstances.

EBrown said...

Re Engdahl and intellectual holes

The conundrum I struggled with longest and hardest regarding financial collapse and deflation was that of debt collection. If one is in Starcade's fast-crash camp there is every incentive to run up massive debts buying anything and everything one could dream of ever wanting in a post-apocalyptic future. Then just hang on and make interest payments until the big switch in the sky turns to the "off" setting."

I see a crash coming, but one of less (slightly) rapid onset than that envisioned by some. I wonder though, how much of the tracking of mortgage payments and other types of loan payments is done electronically? Are there paper trails on the banks books? Are there sufficient staff to process interest payments in the event of rolling blackouts? I ponder these questions because I see an energy constrained future rushing toward us, or we toward it, and wonder how many people with significant debt on their balance sheets will be able to walk with the goods because no one is able to put together a string of data and collect on missed payments. Already there are examples of people challenging banks to prove they own the title on a house and the bank being unable to do so. Calculated Risk today has post about a guy who recieved a foreclosure notice and the bank never followed through and took the house, though this incident had to do with the cost of pursuing the foreclosure through to the end, and was not prevented by a lack of documentation.

Personally, I can see the larger trend and I believe there probably will be some, maybe many, who owe money on their homes but never get foreclosed on because the holders of their mortgages go under or staff and equipment failures make it impossible to process the needed papers. I'm not willing to gamble that way though. It would be playing with fire to attempt to take on a loan and then hope it becomes impossible to track.

I keep coming back to the rate of the crash as all important when I try to take my intellectual hole and make it whole.

Currently I'm operating on a hypothesis that there will be a further stockmarket cascade this fall with concomitant job losses. But I don't have a clear picture of other problems... supply chain breakdown? Rolling blackouts? Bank holidays? Are these going to happen this year, next, or the one after that?

Anonymous said...

el galenazo, your quote from Denninger and, I think the reason you say, cap and trade will not fly:

taking on new debt in the system is actually depressing, not helping, GDP growth."

But what has that got to do with banking profits and big bonuses, are we not a myopic people? Also Cap and trade is not just a 'US only' bowl of chip dip, it will be there for all to stomp about in, the shod and shoeless alike.

-Knuckles for Nickles-

Nassim said...

I see a crash coming, but one of less (slightly) rapid onset than that envisioned by some. I wonder though, how much of the tracking of mortgage payments and other types of loan payments is done electronically? Are there paper trails on the banks books? Are there sufficient staff to process interest payments in the event of rolling blackouts?

During the Iranian revolution, I was living in Tehran. I left only a few days before the Shah did.

In those days, Iran was bursting with banks. The joke was that if you didn't pay attention, you may find that a new branch of Bank Saderat had opened up your backside.

All the main streets in Tehran had numerous bank branches. The banks were lending like crazy to people who owned land or buildings and prices went up dramatically for many years. The bank branches were little different from ordinary shops and they had lots of glass protected by an ordinary metal grill secured by a padlock - just like for the neighbouring furniture shops and so on. In the middle of each bank stood a safe about 1 metre high. The lights were kept on all night - the idea being that no thief could tamper with the safe while the place was lit up. Obviously, any bank branch without lighting would draw attention of the police pretty quickly. The safe contained all the various original deeds and agreements. All the banks were computerized in the sense that the data was also held offsite. However, the legal system required the original documents.

In, I think, November 1978, pretty well all the banks were vandalized almost simultaneously. The people who owed money to the banks seem to have played a leading role in this. They would break the padlocks, tie a cable to the safe and drag it out into the street using a lorry. Once the safe was in the open, they would blow it up and destroy its contents. Rumours abounded that the merchants of the Bazar played a leading role in this - they supported the revolution and many of them were deeply in debt to the banks. Business was quite bad at that time and so they had every reason to try and deleverage.

el gallinazo said...

I am digging a sewer pipe trench in the back 0.40. It is horribly hot here and when I can't see the pick for the sweat pouring into my eyes, I take a TAE break in front of a fan.


Don't eat your heart out pining for the banks, After NORTHCOM their computers will be next in line in the energy dole. Owing debt is like being a dead fish in the ocean. There will always be some one to snap you up and extract the last gram of energy from your carcass on the way down, even if its the worms in the mud.

Knuckles for Nickles

Much of the profits are obviously bogus accounting scams. What is real is transfer of debt to the public and theft of credit from the public. This cannot go on much longer. The government won't be able to sell out our grandchildren after the bond dislocation, and there will be little for GS to poke its blood funnel into after it wipes out the pension funds and the last of the 401-K's this fall. Then even GS will have to tighten its belt around its blood funnel.

A bubble is by definition an increase in credit debt. TPTB have kicked the can down the road by blowing a bigger bubble after each collapse. If they can't blow a bubble bigger than the last collapse, it's L'sville as in depression. Their next attempted bubble is Cap & Trade. But it can't work because, as Karl has noticed, we have reached the point that an increase in debt is positive reinforcement to the down spiral.

Swinging a pick must have pumped a little blood to my brain while I was thinking about Engdahl. No one would deny that Zimbabwe is in hyperinflation, and in real terms the country is in a great depression, defined as a drop of its GDP by at least a real 25%. So in a non-credit, paper fiat economy, one can have a great depression and hyperinflation. Would someone pull me back from the edge of heresy? I am not implying that this is possible in a credit fiat economy like the USA, so it doesn't get Engdahl off the hook.

el gallinazo said...

I think Karl has been on a role lately. He really is a must read right now. Back to the trenches. Not that I like him.

ric said...

Ric2—I’ve the same question about the tactical problem of relying too much on TreasuryDirect. You ask S: Am I correct in worrying about the risk to value individuals have stored in short-term treasuries when bank transactions have been halted?

After a bank run, your money may be restricted at best because you have to move it out of TD into your bank. July 8 in her conversation with Krowne, S wrote: The very few who hold liquidity, and have been able to avoid losing it in a bank run, will find that their expenses will fall, but they will be a tiny minority.

Enough said.

EBrown said...

Old Bird,
Don't worry, I'm not pining for any banks. I'm well aware that it would be risky business to assume any debt at this juncture and have no plans to do so. On the whole I think as you do, that most debt will be your proverbial dead-fish in an ocean. And also I think there is a reasonable possibility that some debts will slip through the cracks and go unnoticed. There is no way to predict it though so only a fool would play at such a game. And for those who do have their debts forgotten or lost, it will hardly mean happy days have returned. In order for the larger system to devolve to such a point they (the debtors who have debts they no longer pay and are not taken to court) will have long since lost access to credit, many supply chains will have fractured under the strain of financial instability, and many services common today will be nothing but memories.

Anonymous said...

...after the bond dislocation, and there will be little for GS to poke its blood funnel into after it wipes out the pension funds and the last of the 401-K's this fall.

So insular and self concerned, you Americans, what about the rest of the world's wealth? Are there no dinars, no francs or lira no Nova sols, that a naughty 'blood funnel' might partake of?

About Karl, I quite like him and though I feel not a few of his right wing ideals may be well worth avoiding, his heart seems to be in a right place.

-Knuckles for Nickles-

whetherforecast said...

"Earth provides enough to satisfy every man's need, but not every man's greed." - Mahatma Gandhi

I'd say greed has led us, and continues to lead us, down a very dreary funnel. I hope there is some light at the end.

el gallinazo said...

@Knuckles for Nickles

"So insular and self concerned, you Americans, what about the rest of the world's wealth? Are there no dinars, no francs or lira no Nova sols, that a naughty 'blood funnel' might partake of?"

One should assume that the same game is being played around the world - an equal opportunity blood funnel.

Re TD and a bank holiday

Stoneleigh is quite clear that one should be storing several months worth of cotton hundreds in the mattress in honor of the up coming bank fiestas. She phrases it more demurely as a creatively safe place. If your corresponding bank with TD goes belly up, you can always select a new one. If there are no banks standing, we have a problem


It's always easier to avoid debt when you send the current presidente (or Shah) running and whimpering to a foreign country. While the old police state endures, it's tougher. But an interesting and amusing story. Makes you want to buy a pick-up with a V-8 engine in order to drag those safes around.


Your attitude was clear. Pining for banks was totally tongue in beak.

Gravity said...

Aggriflated assault.

VK said...


We've reached the zero line in the marginal productivity of Debt to GDP? WTF! That's too soon, where's the data, there doesn't seem to be much online about it recently?!

VK said...

@ EL G

So in a non-credit, paper fiat economy, one can have a great depression and hyperinflation. Would someone pull me back from the edge of heresy?

It's pretty simple, in Zimbabwe the country got isolated by the international community, so they just decided to print. Basically rather then depending on people borrowing, the Government flooded the economy with money by paying salaries and the like with printed money. Oh and the elite resorted to getting dollars on the cheap directly from the Central Bank, while the population were getting exchange rates of 10,000+ to 1, the elite got dollars for 30:1 or something like that.

Zimbabwe earned foreign currency through exports of minerals, they are (blood) diamond rich.

Rototillerman said...

Back after a weekend away... very little actual work done down at the farm, though my little Depression Garden is doing OK. On a whim I had put some little chicken wire protectors over some bean starts last week; I had been losing seedlings like crazy, leaves eaten off on all the small plants. The protectors worked! So it is likely a bird (sorry El G), and not slugs. At least I know now how to beat them going forward.

We had a camp-out at the farm, with kids running around and a potluck, and adults doing music around the camp fire. My friend who is living at the farm is seeing his hours reduced below his expenses, so he's hurting. Another friend is an insurance inspector; she says that she's seeing an epidemic of small businesses folding up shop and then literally disappearing. These are typically in the construction sector. She says that they're disappearing without winding down their businesses, and some of them could even claim money from the insurance company for time left on their policy, but they don't. They owe too much in the other parts of their balance sheets, so they dry up and blow away. The job losses in the medium size businesses seem to have temporarily stabilized at half their former size.

Speaking of construction, there's a HUGE auction this week at the east end of town: hundreds of construction bulldozers, tractors, heavy equipment, etc being sold on a former small airport.

Skimmed through the last couple of days of comments. I was struck by Stoneleigh's response to Arnold on how Depressions are not a time of social cohesiveness. I agree with her in the large aggregate - society is not going pull together and suddenly come up with effective solutions to new and old problems. However, I think that personal social cohesiveness is going to make a comeback; we're all going to learn who our real friends are. Same point that Snuffy was making.

For a rather dark, yet entertaining at times, look at how things might play out as the government loses its ability to effectively govern, check out The American Apocalypse. Yes, it's so-called Doomer Porn, a serial novel on-going.

Stoneleigh said...


I do think we'll see cooperation at a small scale, as that will be the only option. I just don't expect it on a society-wide scale.

Stoneleigh said...

On the whole I prefer cash, but for some people that's not practical due to the amounts involved, especially if they've sold a property and cashed out a lot of equity. Of course holding cash under your own control has its own risks, but IMO they are lower than for anything else. I would suggest holding a minimum of several months cash, and a year would be better if you can manage it.

Ilargi said...

VK, El G,

Don't overlook the enormous advantages to the Mugabe clan of the hyperinflation -artificially created!- in Zimbabwe. VK is right: in isolation, alll is possible. There's the difference with the US. For now.

The advantages: the clan sells off to foreigners everything in the country that's not bolted down. Which is a lot. Zimbabwe is one of the richest countries in Africa, ironically.

They get paid in US dollars, which the next morning are worth twice as many Z Dollars. So domestically they get richer by the minute, while internationally they're as rich as they want to be, or as they can sell the place. There's a reason we've not seen more protests around the issue. Not from Brussels, not from Washington, not from Beijing, and also not from African sources. Then again, Mbeki was the go-to guy, and he simply sold/sells off Zimbabwe as a premium for whoever bought/buys South Africa.

Ilargi said...

To get back briefly to your answers to Arnold:

I noticed nobody broke the bad news to him. Too much? Well, perhaps.

And I'm referring not just to the upcoming social unrest, which can take a zillion unpredictable shapes, all of which will lead to large-scale bloodshed. More important still, since it's much more predictable, is the breakdown of healthcare systems. Yes, it's certain that we can't keep paying for it.

So many people who are now continuing to live in one way or another through either million dollar treatments or even thousand dollar drug regimes, will simply fall off the cart by the wayside. Life expectancy will plummet as it did in Russia starting 20 years ago.

The most difficult adaptation, and therefore the least talked about, we need to face is right there. Once you get real sick, it'll be over. No more life-long planning to spend 20 years in Florida on an IV drip complaining about the heat.

Number one in preparation: get a medical doctor in your close surroundings, read on basic medicine, and get all the medical essentials you can get your hands on, Get morphine!!

Edmund and some doctors here may shine their lights on this.


thetinfoilhatsociety said...

Stoneleigh, and Rototillerman -

I think the reason we will see small scale cooperation rather than society wide is that as humans we are genetically programmed for nothing more than tribal loyalties, if even those. It takes a lot of stability and prosperity for any type of cohesiveness outside of that.

Tribal is local, tangible. Friends and coworkers, family, etc. are tangible people to interact with; society is an abstract concept. When push comes to shove, we'll go with the tangible interactions and the rewards that go with them every time.

What I worry about is people who have been dehumanized to the point that they only want to dominate and take, not cooperate and interact. We seem to have raised an entire generation that has quite the sense of entitlement. What do we do about them as we try to forge local communities and connections?


Anonymous said...


I will keep it short and sweet.

You are a doomer.

Embrace it.

Is that why you don't put your real name out there?

timekeepr said...

Rototillerman said...

Back after a weekend away... very little actual work done down at the farm, though my little Depression Garden is doing OK. On a whim I had put some little chicken wire protectors over some bean starts last week; I had been losing seedlings like crazy, leaves eaten off on all the small plants. The protectors worked! So it is likely a bird (sorry El G), and not slugs. At least I know now how to beat them going forward.

Cutworms maybe? They got all our field corn seedlings last month. :(

Just went out and pick some of our first green beans of the season and put them in the steamer.

Need to invest in a vacuum sealer. I hear it is good for freezing food. Anyone used one before?

Coy Ote said...

Ahimsa 9:58 Good comment!

We are in resonance... That should be the basis for all our observations and critical thinking.

It can also keep one out of situations of total embarrasment.

TAE posters... I went over and read some of Engdahl. I agree with those who find him both very intelligent and yet prone to error (the abiotic oil thing)

But isn't this true of everyone? Look at all the varied economic opinions among the "experts". Truman could not find his "one handed" expert.

Still, I'm basically hanging tough with I&S and their "hatchet man" :-)

Anonymous said...

Gravity Wrote:

"Is anyone compiling a list of the forms of novel 'flation people keep making up?"

How about: deflagration

I think everyone can agree that the economy is going up in flames

Ahimsa said...

Hey, Ilargi, a healthy diet is the best preventive medicine. :)

Anonymous said...

"Back after a weekend away... very little actual work done down at the farm, though my little Depression Garden is doing OK. On a whim I had put some little chicken wire protectors over some bean starts last week;"

Wait until the voles come! I've seen them take down plants, just like Bugs Bunny does in the cartoons with carrots. The can pull down whole bean plants in about 30 secs.

Put Chicken wire under the ground (about 8 inches) to restrict the movement of voles.

Anonymous said...

TimeKeepr wrote:

"Need to invest in a vacuum sealer. I hear it is good for freezing food. Anyone used one before?"

Others vac-sealers require special bags to work.

Rototillerman said...

@ Susan: see the link I posted above for what tribal looks like in future America.

@Ilargi: for those of us in moderately good health our number one medical weakness is dental. Start replacing dodgy fillings, or converting them to crowns. Start eating healthily, whatever that means to you; certainly more raw food, fewer processed carbohydrates. Important: stop eating between meals. We've been conditioned to snack intermittently throughout the day, but I think that there is good research to back up the claim that our teeth are more healthy without feeding the bacteria in our mouths incessantly.

rapier said...

"It is assumed that the skeptic has no bias; whereas he has a very obvious bias in favor of skepticism."
G.K. Chesterton

Skepticism is often seen as a very good thing especially in forums like this. Nothing is universally good or bad. Skepticism can become a habit and the devout skeptic ends up believing in nothing. Nothing but their own mind that is.

Belief in abiotic oil I find more and more common among economic skeptics. The habit of skepticism taking strong hold of them. What most fail to grasp is the orign of oil makes absolutely no difference for the supply for the next billion years of so, give or take.

Abiotic oil believers are I think universally global warming debunkers. Now warming debunkers have a better case but the common thread is a rejection of the scientific method. I saw a quote from I think Alfred Whitehead the logician, or perhaps it was another English philosopher but I lost it long ago. The gist was if the experts are 90% in agreement on something then the diletante had better just step back and go along.

Carrying over to economics that would seem to mean that things will return to some normalcy that is familiar to us. Two points.

First I don't think the huge majority actually think so. It's just the ones we hear that do.

Second I think many of the financial and economic experts are not stating their true belief. They are not reporting the true belief but rather their hopes or the party line, on which their income and status depends.

More than a few warming debunkers claim similar dynamics are at work in climate sceince. I'm skeptical.

el gallinazo said...


Re Zimbabwe
What exactly do you mean by isolation? They are stealing everything they can and exporting it.


Get morphine? It's a felony to bring in cipro or ampicillin to the US from South America. The average price of drugs in Peru is about 15-20% of the USA. They mainly come out of China and India now anyway including the laughably referred to **ethical** houses in the USA. (I was in the bulk pharmaceutical import/export business from 1975 to 1993 - mainly importing for sale to the generic houses in the USA).

The fastest way to reduce medical costs in the USA is to let people buy their drugs anywhere in the world and mail them in. If bungee jumping and sky diving are legal, so should buying your own drugs. But big pharma along with the banks, AIPAC and the MIC own the place and it would never happen. If I need a pharmaceutical in Peru, I just go to the farmacia and buy it - no muss no fuss. If I don't know what I need, I go to a physician and he tells me. He might write it down but just so I remember it, it's not a legal thing.

Strictly for Usacos - Canadians et al may skip.

I had to go to a dermatologist in Cusco. He spent twenty minutes with me. It cost me $17 dollars. When I was in Lima, I went to the central hospital, got a **complete** automated blood and urine work-up, met with a gp and two specialists, and got two sonograms of my prostate before and after peeing. Total cost for everything - $107.

In Cusco I went to the dentist. I had my two front top incisers capped, 6 fillings, a cleaning, and he "balanced" my jaw with epoxy. Two hours a day for five days. This was four years ago. The caps are perfect. $385. Of course you are taking a chance, but I have become good friends with Cecelia, who has lived there her whole life and runs a small, non-chain pharmacy. She tells me who the best medical people are.

To a Peruvian working class person, though, these prices are not easy.

And OTOH, I didn't have the benefit of conducting this business in the land of the free and the home of the brave.

Coy Ote said...

Ian... 11:34

...and antidisestablishmentarinflation!

Greenpa said...

yes, yes, I see what you are leaving for me; but I REFUSE to suggest supercalifragilisticexpialaflation.

Anonymous said...

A good friend of mine, who happens to be a truly great painter ( he was part of the Taos painting circle in the sixties) confessed that he hasn’t sold a painting in seven months. A typical 24” x 24” still life arrangement that took a day to paint sold for four or five grand in better times. And the very high end gallery in Sante Fe which shows his work is rumored to be on the edge of folding.

Basically he is in a very tough spot. He doesn’t want to lower his prices because that would undermine the 'investment’ of his collectors. On the other hand, what is his work really worth if he hasn’t sold anything in three-quarters of a year. Ultimately, there is no doubt what he will have to do; but for the time being, the illusion of a return to the same old better days persists.

Some good will come in the bursting of the art world bubble, and make no mistake, it was, and still is in many ways, a mirror of greater society largesse. Art for the sake of appreciating investment is a cancer cell reflection of the Antique Road Show lottery mentality. Let it vanish and be replaced with Art for the sake of pure aesthetic enjoyment and beauty.


jal said...

I am pleasantly surprised at our community garden.
I've explained the nutrition of (free) lambs quarter.
I've gotten recipes for pumpkin leaves. (Didn't know that they were edible)
Due to the mix crops, companion crops, (its a sustainable organic approach), there has not been an invasion of pests. Very little snail and slug damage.
The weather has been good and some people are already putting their second crop.
We have received the support of commercial growers. They have been donating fruit trees and flowers and shrubs. We put in the sweat equity.
It’s not all perfect. I have been hilling the potatoes and when it comes time for the harvest, it will be divided among those who understand ,“Those who work get to eat”. (No, I do not expect the frail old lady to put in the hard labor of hilling the potatoes.)
The remainder will go to the food bank. I’ve already talked to the director and he is willing to organize a “gleaning” party.

Depending on what main stream media is saying by this fall, I would expect that the participants will be grateful to very grateful for the new knowledge that gardening will have given them.

VK said...

@ El G

What exactly do you mean by isolation? They are stealing everything they can and exporting it.

In February of 2004 Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the International Monetary Fund (IMF). Plus the United Nations World Food Programme stopped its food aid due to insufficient donations from the world community.

Guess what! Zimbabwe is rich in platinum, gold, copper, nickel, tin etc etc. Platinum is mined by Anglo America PLC one of the largest mining companies in the world, headquartered in London.

Most of their trade is with South Africa, so basically the elite in Zimbabwe have hugely profited, the environment and people be damned and South Africa has benefited enormously, companies get to make bigger profits, lower costs and Zimbabwe is a cheap source of labour. Whites and the Black Elite in South Africa prefer Zimbabwean workers primarily because they are cheaper and work harder.

Oh and did I mention the military carries out illegal diamond activities employing people as virtual slave labour and these diamonds are exported to Europe and the US so that a rich investment banker may profess his love (lust?) for his mistresses and wife :)

Rinse and repeat: Same story in West Africa, Congo, Sudan, Somalia. War is a profitable business and collapsed countries are wonderful for business, low cost and big margins. (It's a sick world)

Coy Ote said...


"...Oh and did I mention the military carries out illegal diamond activities employing people as virtual slave labour and these diamonds are exported to Europe and the US..."

Good point, and one might say the whole of "corporate globalism" has acted a similar vein.

Oh no! I forgot. They moved the manufacturing from first world to third world as a benevolence to the populace. Right! ;-)

Coy Ote said...

One of Kunstler's better articles...

jal said...

Kunstler said … “How about walkable communities connected by public transit?”
Lets make it Free mass transit.
As a result, maybe, the Overall, two-thirds of American adults which are now obese or overweight, might loose a little bit of weight and become more productive.

Persephone said...

Ilargi and Stoneleigh -
Thank you for another enlightening information exchange. The Darwin/Smith article was dead-on and I appreciate the Elliot Wave article.

@ Anon 9:02 am
Not to bright, they should be in DC burning that place to the ground.


@ Taibbi bashers - Taibbi is not an economist. The fact that he was so close to the truth is astounding. Moreover, he writes for primarily 20-something musicians - explaining why his style is so over-the top.

@fellow Safari users
Something has happened with the most recent Safari upgrade. At least once a day now, it suddenly closes all windows. No difference in usage from before. Anyone else having problems?

EBrown said...

Re health,

Writing as a total hypocrite since I do not have a primary doctor at this time (due to moving), I think Ilargi's advice to get hooked up with an MD is very good advice.

The following will be US centric since I am a US citizen and my experience of the healthcare system is entirely American.

I whole-heartedly concur that now is the time to get dental work done. Tooth pain truly sucks, not to mention that fact that any infection that gets going is then close to vital stuff like sensory organs and brain. As an aside, my mother has periodically worried about the collapse of the grid and asked her dentist two years ago "have you ever thought about collecting some tools in case, you know, we have a prolonged blackout? Peoples' teeth will hurt whether we have electricity or not." The dentist's reply, "no, it would be impossible to provide quality results."

I don't think this means it would be impossible to do any dental work, but many modern dental tools cannot be translated to hand power.

Some good points to consider if you are in the position of finding a new doctor -

A. Make sure he or she able to explain complex (or simple) health issues clearly without a lot of extranous baggage or medical lingo. That may sound like a silly point to lead off with, but thus far in my experience doctors who use more lingo in thier explanations are less often right in their diagnoses.

B. Find a friendly doc. If he or she rubs you the wrong way or comes across as self-inflated go find a new doc. Life is too short to waste your time messing around with a doctor who will potentially be making very important decisions WITH you (as opposed to for you).

C. Ask lots of questions. The more the better. If the doctor won't take a crack at answering them he or she isn't worth his salt.

D. In some regions of the country the above points may be moot. There are some places where the few doctors practicing are so swamped they cannot take new patients. Then its a matter of taking what you can get. Where I lived in Vermont this was the case and only got a doctor to take me on because I am a nurse and he was a coworker doing me a favor.

I'm totally a doomer. I admit as much. Many people are going to die as a result of fuel shortages, electricity shortages, and other financial freeze-ups. For starters dialysis patients, some cancer patients, and some types of auto-immune disease will be virtually untreatable in the coming years. I don't know how long our interim grace period will be... I remain hopeful that we can continue to provide sources of insulin for type I diabetics and antibiotics for those random nasty infections that strike otherwise healthy people.

Anonymous said...


"Is anyone compiling a list of the forms of novel 'flation people keep making up?"

You forgot the most important one:


Anonymous said...

No, the most important one is fellatio-flation

Anonymous said...


"being enamored with methane containing bubbles prior to collapse"


"what's left when the stink catches everything ablaze"

Anonymous said...

...but many modern dental tools cannot be translated to hand power.

Right! Where the hell are we gonna be without electric pliers?

-Knuckles for Nickels-

Ilargi said...

New post up.