The feeble American response to Russia's assertion of power in the Caucasus of Central Asia was appropriate, since our claims of influence in that part of the world are laughable. The US had taken advantage of temporary confusion in Russia, during the ten-year-long post-Soviet-collapse interval, and set up a client government in Georgia, complete with military advisors, sales of weapons, and even the promise of club membership in the western alliance known as NATO. These blandishments were all in the service of the Baku-to-Ceyhan oil pipeline, which was designed specifically to drain the oil region around the Caspian Basin with an outlet on the Mediterranean, avoiding unfriendly nations all along the way.
At the time this gambit was first set up, in the early 1990s, there was some notion (or wish, really) among the so-called western powers that the Caspian would provide an end-run around OPEC and the Arabs, as well as the Persians, and deliver all the oil that the US and Europe would ever need -- a foolish wish and a dumb gambit, as things have turned out.
For one thing, the latterly explorations of this very old oil region -- first opened to drilling in the 19th century -- proved somewhat disappointing. US officials had been touting it as like unto "another Saudi Arabia" but the oil actually produced from the new drilling areas of Kazakhstan, Turkmenistan, and the other Stans turned out to be preponderantly heavy-and-sour crudes, in smaller quantities than previously dreamed-of, and harder to transport across the extremely challenging terrain to even get to the pipeline head in Baku.
Meanwhile, Russia got its house in order under the non-senile, non-alcoholic Vladimir Putin, and woke up along about 2007 to find itself the leading oil and natural gas producer in the world. Among the various consequences of this was Russia's reemergence as a new kind of world power -- an energy resource power, with the energy destiny of Europe pretty much in its hands. Also, meanwhile, the USA had set up other client states in the ring of former Soviet republics along Russia's southern underbelly, complete with US military bases, while fighting active engagements in Iraq and Afghanistan. Now, if this wasn't the dumbest, vainest move in modern geopolitical history!
It's one thing that US foreign policy wonks imagined that Russia would remain in a coma forever, but the idea that we could encircle Russia strategically with defensible bases in landlocked mountainous countries halfway around the world...? You have to ask what were they smoking over at the Pentagon and the CIA and the NSC?
So, this asinine policy has now come to grief. Not only does Russia stand to gain control over the Baku-to-Ceyhan pipeline, but we now have every indication that they will bring the states on its southern flank back into an active sphere of influence, and there is really not a damn thing that the US can pretend to do about it.
We could have spent the past ten years getting our own house in order -- waking up to the obsolescence of our suburban life-style, scaling back on the Happy Motoring, reconnecting our cities with world-class passenger rail, creating wealth by producing things of value (instead of resorting to financial racketeering), protecting our borders, and taking the necessary measures to defend and update our own industries. Instead, we pissed our time and resources away. Nations do make tragic errors of the collective will. The cluelessness of George Bush is nothing less than a perfect metaphor for the failure of a whole generation. The Boomers will be identified as the generation that wrecked America.
So, as the vacation season winds down, this country greets a new reality. We miscalculated in Western and Central Asia. Russia still "owns" that part of the world. Are we going to extend our current land wars there into the even more distant and landlocked Stan-nations? At some point, as we face financial and military exhaustion, we have to ask ourselves if we can even successfully evacuate our personnel from the far-flung bases in Uzbekistan and Kyrgyzstan.
This must be an equally sobering moment for Europe, and an additional reason for the recent plunge in the relative value of the Euro, for Europe is now at the mercy of Russia in terms of staying warm in the winter, running their kitchen stoves, and keeping the lights on. Russia also exerts substantial financial leverage over the US in all the dollars and securitized US debt paper it holds. In effect, Russia can shake the US banking system at will now by threatening to dump its dollar holdings.
The American banking system may not need a shove from Russia to fall on its face. It's effectively dead now, just lurching around zombie-like from one loan "window" to the next pretending to "borrow" capital -- while handing over shreds of its moldy clothing as "collateral" to the Federal Reserve. The entire US, beyond the banks, is becoming a land of the walking dead. Business is dying, home-ownership has become a death dance, whole regions are turning into wastelands of "for sale" signs, empty parking lots, vacant buildings, and dashed hopes. And all this beats a path directly to a failure of collective national imagination. We really don't know what's going on.
The fantasy that we can sustain our influence nine thousand miles away, when we can't even get our act together in Ohio is just a dark joke. One might state categorically that it would be a salubrious thing for America to knock off all its vaunted "dreaming" and just wake the fuck up.
America is on vacation from its financial, fiscal, and economic problems, having left the centers of power in Wall Street and Washington for a Nantucket-of-the-mind, where, in a haze of artisanal vodka and bong smoke, it's out in the cool dune grass watching imaginary whalefishes blow, leaving only the TV Bubbleheads behind back home. Larry Kudlow of CNBC was practically drooling into his cufflinks on screen last week when the dollar popped against the Euro, and crude oil slumped, and the equity markets climbed up a flagpole.
This sort of euphoria is actually an alarming pre-crash symptom, in this case of a patient (the US) entering the terminal phase of sclerosis. Our society and all its playerz -- especially the appointed communicators -- just can't fathom the reality of the threats we face, which are 1.) the loss of primary energy resources, 2.) the loss of technological potency, and 3.) the loss of a comfortable standard of living.
As the boys over at the Financial Sense News Hour podcast have been saying for months, we're caught in a paradigm shift and we're trying desperately to prove (to ourselves) that we can get back to the way things used to be. This is a broad cultural phenomenon and helps to explain why even the greenest captains of environmentalism strive to find groovy new ways to run all our cars, while their counterparts on Wall Street strive desperately to salvage a set of "innovative" financial rackets based on getting something for nothing. It also explains the foolishness of the "drill drill drill" crowd, which believes we could be back to 99-cent gasoline if only Exxon-Mobil were allowed to prospect offshore where the codfish used to swim. (By the way, I'm in in full favor of granting them permission to do so, if only to put an end to this foolish debate.)
Reality, meanwhile, strives to take us in another direction. Our destination is a far less complex society in a larger, rounder, and less economically-integrated world. We will be leaving a lot of our technological comforts behind, staying closer to home, living in smaller cities and reactivated small towns, working the land more intensively to produce the food we need, and possibly organizing our governance at something less than the continental scale our dwindling riches used to afford. That is, if we're lucky enough to avoid the real possibility of social disorder and violence that would attend a fullblown economic collapse scenario.
August is historically a quiet time for oil, the so-called "shoulder season" when vacationing climaxes, but before deliveries of heating oil get underway in earnest. We have no real prospects of overcoming any of the structural problems now built-in to our oil supply, starting with the grim central fact that we import at least 70 percent of the oil we use. Add to this the fact that world production of conventional crude has not exceeded the 2005 rates; that export rates from our Number 3 and 4 sources of oil, Mexico and Venezuela, are down a combined 30 percent this year; that discoveries of new oil are meager to the degree that they fail by a long shot to offset current world-wide depletion; that the oil available on global markets is proportionately more sour and heavy crude than the light and sweet our refineries are designed for. And so on....
These geological matters form the base on which the geopolitical issues work their hoodoo. For instance, the war currently underway in former Soviet Georgia (I say this in case the folks in Atlanta wonder why Stone Mountain is not being bombed) will at least end up with Russia in control of the major oil pipeline that runs from the Caspian region across Georgia, through Turkey, to Europe -- even while parts of that pipeline get blown up. The net effect will be of Russia will taking control of even more of the oil now flowing to Europe. The whole point of building that pipeline was to bypass Russia, which was crippled by its own paradigm shift in the years when the pipeline was built.
The US might talk tough about this threat to the status quo, but what is it going to do? Pull troops out of Iraq and Afghanistan to mount a land war against Russia in a landlocked region of its own neighborhood? Fuggeddabowdit. Notice, the Europeans are not making so much as a peep -- because when the time comes that Russia does control that pipeline, the Europeans will do anything to keep the contents flowing toward them. Europe may be organized as a trade-and-currency confederation, but not as a military power. NATO is strictly a US auxiliary, not a power unto itself. The result of all this will be that Russia, already the world's leading oil producer, even as it has entered depletion, will now possess a potent geopolitical-and-financial weapon with control of that pipeline. A collateral effect will be Europe's inclination to bid more desperately for Middle East oil -- the oil that comes via the Suez Canal -- which can't help but boost the price-per-barrel that the US is forced to pay.
One part of the oil equation we haven't seen yet this year -- the prelude to the heating season which could be just as spectacular as the opening of the Beijing Olympics -- is the hurricane season. This will be an interesting week for that, as two tropical depressions have now formed off West Africa and begun their grinding progress into our part of the world. Stay tuned to that (National Hurricane Center).
With Wall Street on vacation at its various beaches, the idea has taken hold that the so-called credit crisis is mostly over. In fact, we're still in the first quarter of that classic. The big move before the investment bankers packed their snorkels and baggies was Merrill Lynch selling off a batch of its fraudulent securitized debt bundles for roughly five cents on the dollar. That pretty much marked-to-market the similar garbage that every other big bank or pension fund or hedge fund has hidden in its closet. My guess is that some of them will just declare "game over" without even bothering to haul their garbage out and hang a "for sale" sign on it. Fannie Mae and Freddie Mac are essentially there now.
The Federal Reserve will be in the awkward position of having to make more loans (that will never be paid back) to many of these companies and entities, and in the process will fork over their remaining treasuries in exchange for garbage collateral that they will never get rid of. I don't see how the Federal Reserve survives this process. It will not have any reserves left. The collapse of the Federal Reserve would take America into an outer space version of uncharted territory, really into a whole other dimension of distress.
While Europe faces its problems on Russia and energy and its own economic performance, it has more probability of staying afloat than the US in this upcoming period. I would look for the dollar to make a new big "leg" down against the Euro.
It was fascinating to watch a CNBC report Sunday night about the progress of General Motors and McDonalds Hamburgers in China. It sure makes one wonder about the current mood of Sino-triumphalism -- the favorite car of the Chinese elite is... the Buick, a product that even demented old ladies in Columbus, Ohio, will not touch with a stick. It appears that China has succeeded in turning Peking and Shanghai into simulacrums of Atlanta and Dallas, complete with glass office towers and all the on-and-off-ramps they'll ever need -- a pretty stupid project when you consider how little oil of its own China actually has. One can only say, with a shudder, that they got into the Happy Motoring game a bit late, and wish them "good luck."
The Mickey-D phenomenon appears to be a mere fad, a toy that Chinese trade officials tossed to its people in the euphoria of ramping up the world's last manufacturing economy. For starters, China doesn't have enough groundwater or grain to feed the necessary steers (and hogs) that McDonald's uses for its "meat products" there.
The most amusing part of the CNBC segment was the deportment of the smarmy American executives representing those companies: Rick Waggoner of GM, who was depicted in the full flower of a campaign to hose his Chinese "partners," blowing smoke up their asses as if he were some kind of a human walking-talking bong, and the two necktied creeps from McDonalds' Asian office scheming on camera about opening tens of thousands of so-called "restaurants" across the ancient kingdom. These were all perfect representatives of people stuck in a paradigm already bygone. When the Olympic mania ends, China will find itself in a new reality, too. Its single advantage, as far as I can see, is that it holds a lot of US dollars in various formats, and I don't know that this is much of an advantage given the imminent tanking of American finance. Yes, China has become the world's factory. But if the world's leading shopper is shopped-out and busted, this might not be much of an advantage. Beyond that, as suggested above, they face huge problems with oil, water, and food, not to mention over-population and environmental degradation at a scale we can barely imagine here.
The slide toward Labor Day will remain interesting, even with all the Boyz off at the beach. Notice we haven't even touched on the upcoming political theater of presidential politics, a show that I'm inclined to call "The Party That Wrecked America."
Note: Posting early this week on account of weekend road trip.
The most striking thing about the new Batman movie, now smashing the all-time box office records, is its emphasis on sado-masochism as the animating element in American culture these days. It must appeal to the many angry people in our land who want to hurt others, even while they themselves feel deserving of the grossest punishments. In other words, the picture reflects the extreme depravity of the current American sensibility. Seeing it all laid out there must be very validating to the emotionally confused audience, and hence pleasurable, in all its painfulness.
The rich symbolism in this spectacle represents the tenor of contemporary America as something a few notches worse than whatever the Nazis were heading toward around 1933. We like nothing better than to see people suffer and watch things get broken. The more slowly people are tortured (including the movie audience) the more exquisite the pleasure derived from the act. Civilization offers no consolation. In fact, its a mug's game. Thus, civilization is composed only of torturers and their mug victims.
Gotham City, the setting for all these sadomasochistic vignettes, is a place devoid of comfort. (The suburbs are missing completely.) Even the personal haunts of "the Batman," a.k.a. zillionaire Bruce Wayne, are hard-edged non-spaces. His workplace (cleverly accessed via a dumpster) is an underground bunker the size of about three football fields with a claustrophobic drop ceiling and a single furnishing: the megalomaniacal computer console that is supposed to afford him "control" of the city, but which appears to be, in fact, a completely impotent sham piece of techno-junk, since it can't even outperform a $300 GPS unit in locating things. By the way, Hitler had a brighter sense of decor in the final days of the bunker. Bruce Wayne's personal apartment is one of those horrid glass-walled tower condos beloved of the starchitects, which, in its florid exposure to everything external practically screams "no shelter here!"
At the center of all this is the character called "The Joker." Judging by the reams of reviews and reportage about this movie elsewhere in the media, the death of actor Heath Ledger, who played the role, adds another layer of juicy sadomasochistic deliciousness to the proceedings -- we get to reflect that the monster on screen may have gotten away, but the anxiety-ridden young actor who played him was carted off to the bone orchard before the film even officially wrapped, (and therefore deserves extra special consideration for America's greatest honor, the Oscar award, while the audience deserves its own award for recognizing the lovely ironies embroidered in this cultural phenomenon.)
The Joker is not so much as person as a force of nature, a "black swan" in clown white. He has no fingerprints, no ID, no labels in his clothing. All he has is the memory of an evil father who performed a symbolic sadomasochistic oral rape on him, and so he is now programmed to go about similarly mutilating folks, blowing things up, and wrecking everyone's hopes and dreams because he has nothing better to do. He represents himself simply as an agent of "chaos." Taken at face value, he would seem to symbolize the deadly forces of entropy that now threatens to unravel real American life in the real world -- a combination of our foolish over- investments in complexity and the frightening capriciousness of both nature and history, which do not reveal their motivations to us.
By the way, forget about God here or anything that even remotely smacks of an oppositional notion to evil. All that's back on the cutting room floor somewhere (if it even got that far). And I say this as a non-religious person. But the absence of any possible idea of redemption for the human spirit is impressive. In the world of "the Batman," humanity at its very best is capable only of being confused about itself. This is perhaps an interesting new form of dramaturgy -- instead of good-versus-evil you only get befuddlement-versus-evil. Goodness has lost its way in the dark night of the American psyche, as might be understandable considering the nation of louts, liars, grifters, bullies, meth freaks, harpies, and tattooed creeps we have become. The best we can bring to this predicament is the low-grade pop therapy that passes for thinking nowadays in educated circles. Any consideration of the heroic is off the menu here. We can't ask that much of ourselves. It's too difficult to imagine. Meanwhile, The People -- that is, the citizens of Gotham City -- literally banish even the possibility of heroism from town at the end of the movie -- they take an axe to it! -- perhaps indicating that they deserve whatever befalls them or, shall I say, "us."
A few other striking elements of this spectacle deserve attention. One is the grandiosity that saturates the story elements, and the remarkable impotence of it all. The Batman possesses every high-tech weapon and survival implement ever dreamed up, yet they avail him nothing -- except a lot off sickening leaps off skyscrapers and futile hard landings on car roofs, shipping containers, sidewalks, and other human carcasses. I doubt the writers/director Chris and Jonathan Nolan consciously aimed to depict good old American ingenuity as utterly valueless in the face of chaos, but that's the effect. Otherwise, everything in the Batman's world is overscaled and out-of-whack from the size of Bruce Wayne's fortune (what an executive package his Daddy must have made off with, and from which investment bank?!), to the energy expended in so many car chases and explosions, to the super-sized doom-worthy towers of the gigantic, soulless city.
Finally there is the derivation of all this sadomasochistic nihilism out of a comic book. How appropriate, since we have become a cartoon of a society living on a cartoon of a North American landscape, that the deepest source of our mythos comes from cartoons. We're so far gone that real human emotion is beyond us. We're too far gone -- and even without shame -- to care how this odious movie portrays us to the rest of the world. It is already making a fortune out there.
Everywhere you turn in this nation, you see a society primed for implosion. We seem unaware how extraordinary the American experience has been, especially in the last hundred years. By this, I don't mean that we are a better people than any other society -- these days, ordinary people in the USA make an effort to appear thuggish and act surly, as though we were a nation of convicts -- but for decade-upon-decade, we were very fortunate. Even the Great Depression of the 1930s may seem like a relatively peaceful and gentle "time out" from a frantic era of hypertrophic growth, compared to the storm we're sailing into now.
We were fortunate to inhabit a New World filled with productive land, lots of minerals, and plenty of coal, oil, and gas; and the land itself was insulated physically from the great theaters of 20th century conflict, though we fought in wars "over there." That experience itself, especially our victory over manifest evil in the Second World War, left us with a dangerous mentality of triumphal exceptionalism. Even now, we think we are immune to the epochal hazards of history. The notion that nothing really bad can happen to us is reflected in the blind cluelessness of our current news media and their simple failure to report what is now happening.
I drove up along an obscure stretch of the upper Hudson river on Sunday, starting in the old factory town of Cohoes, north of Albany, where the Mohawk River runs into the Hudson. There is a powerful waterfall there, and along the high bank the massive old red-brick Harmony Mill still stands with its Victorian towers and mansard roofs, like a vision from an Alfred Hitchcock movie. Behind them are streets of red-brick, three-story worker row-housing from the same period. Today they are inhabited by a different kind of poor people, not necessarily working, and probably suffering from a sheer lack of structure in their lives as well as plain poverty of means. These are people who probably don't follow the Bloomberg financial bulletins, and their experience of a cratering economy may only be the rising cost of cigarettes and beer.
The tattoo quotient among both men and women there is impressive. In the days when the Harmony Mill was built, only South Seas cannibals and sailors wore tattoos. You wonder: are tattoos now the only way left for this class of Americans to assert their selfhood? And what exactly are they proclaiming? I am a warrior. Or is it: I am a television (I display pictures, too) !? The expanding class of the poor-and-idle has been remarkably passive in the face of their dwindling prospects. Perhaps they passed the point years ago (a generation or two ago!) when there was any sense of sequential improvement for the family's station-in-life. The destiny of their everyday lives must seem totally beyond their control. They are subject to the fate of distant corporations who sell the staple corn-syrup byproducts and gasoline on which daily life is based. Where government is concerned, they are all potential victims of Katrina-ism, awaiting their own personal disaster.
North of the junction of the Mohawk and Hudson was the old town of Waterford, where the Erie Canal began its journey west -- bypassing those powerful waterfalls. The locks are still there and still in operation for the infrequent tanker ships and ore barges that come and go to the Great Lakes. But the operation of the canal system is automated to the extent that it requires only a handful of people to run the locks now, and the town around them has deteriorated into slum and semi-slum garnished with a few convenience stores and pizza shops. There is no other commerce there. No matter how poor, the denizens are required to drive a car to a giant chain store for groceries or hardware or clothing.
As you leave Waterford, the river road becomes a suburban corridor of 1960s-vintage ranch houses and stand-alone small retail business buildings which, if used at all now, are mostly hair salons, chiropractic studios, and other services not generally rendered by the chain stores. All this stuff was deployed along the road with the expectation that Americans would be driving cars cheaply forever. Now that this is distinctly no longer the case, corridors like this are entering their death throes. The awfulness of the design and construction of these buildings is now especially vivid as the plywood de-laminates, and the vinyl soffits fall off, and the dinge of neglect forms a patina over it all. Hopelessness infects this landscape like a miasma. Whatever young adults remain in these places are not thinking about a plausible future, only looking to complete their full array of tattoos and lose themselves in raptures of sex, methedrine, and video aggression.
Eventually, after running through the disintegrating towns of Mechanicville (once a place of earnest labor, just like it sounds, now a morass of sinking car dealerships and Quik-stops), and Stillwater (smaller version of the same), the road turned completely rural and few other cars ventured up there. The decisive Revolutionary battle of Saratoga was fought near there on the bluffs and hills overlooking the Hudson in 1777. You wonder what the heroes of that battle would think of what we have become. What would they make of the word "consumer" that we use to describe our relation to the world? What would they think of excellent river bottom-land that is now barely used for farming -- or, where it is still farmed (dairying if anything), of farmers who will not even put in a kitchen garden for themselves because it might detract from their hours of TV viewing?
The sclerosis of American life is shocking. If you go further north up the Hudson River, to Fort Edward and Hudson Falls, you'll see a nation that seems ready to crawl off and die. There, it appears too far gone to even put up a proxy fight on a video screen. Frankly, I don't want that version of America to survive -- the America of chain stores, and muscle cars, and grown men obsessed with video games, drugs, and pornography, and women decorated like cannibals, and the vast, crushing purposelessness of it all. I have no doubt we're heading into a convulsion that will wring much of this junk and dross into the backwaters of history. We're capable of being something better than this, of putting our time on earth to better use, including a more respectful treatment of the land we inhabit. This year and the next will be the years of letting go, and out of that we'll commence a re-becoming.
Apology to readers: after being hassled by Canadian immigration officials at the Edmonton, Alberta, airport on Sunday afternoon, and in a rush to make my connecting flight to Grand Prairie, I stupidly left my Mac notebook in a plastic tub at the security gate. Luckily, they'd checked it into the security lost-and-found and gave me clear instructions for retrieving it when I called to inquire. I picked it up today (Tuesday) on my way back through Edmonton en route to Vancouver.
Written on Sunday July 20
The comprehensive bankruptcy of the United States, at every level, in all corners, atop each hill and mole-hill, and down not a few rat-holes, is preceding like some kind of hideous multi-media, inter-dimensional cosmic grand opera as produced and directed by the Devil. Every week, some bizarre new subplot is introduced by the stage managers, each turn and twist geared to produce maximum pain and carnage in the US economy, as if to foreclose any possibility of redemption on the way down. Well, the absence of hope is, after all, the essential nature of Hell (setting aside, for the moment, J.P. Sartre's quaint notion that Hell is other people).
Among the many developments in the story last week was the solidifying consensus that the nation is in really serious trouble, and the noticeable slippage of legitimacy among those pretending to run financial affairs. The howler of the week was the Securities and Exchange Commission's edict that Wall Street sportsters would be prohibited from trafficking in so-called "naked short" sales against a cherry-picked bunch of 19 banks and financial companies for the next two weeks. A cute trick, naked shorting is done by pretending to borrow a bunch of stocks, pretending to sell them high just before the share-price falls, pretending to buy them back at a lower price when the share price has fallen, and then pretending to return exactly the same number of lower-priced shares to the lender, pocketing the difference. Real shorting is cute enough, and involves "clearing" the sales -- i.e. proving that real stocks were really lent and really returned. Shorting is helped along by generating rumors that a given company is in trouble, thus nudging share prices down. This works really well when a company already is known to be struggling, as many now are. In fact, it usually works best when a struggle turns into a feeding-frenzy -- as when a bleeding mullet attracts the swarming sharks. When this scam is run using odd-lots of millions and tens-of-millions of shares sharked up at many dollars each, the profits to be made in this sport is obviously huge.
With naked shorting, however, the stocks being shorted are basically non-existent, imaginary, made-up, fictional, registered only as pixels in a program. It's a racket, pure and simple, run by both the supposed borrower of the stocks and the supposed lender and, more to the point, was wholly and absolutely against the law before the SEC declared a selective holiday from it last week. So, what the SEC action really demonstrates is the utter lawlessness reigning on Wall Street, and the SEC's singular unfitness as an enforcer of the laws, not to mention the criminal irresponsibility of the clearing authorities who only pretend to go through the motions of certifying the sales. What's more, the companies cherry-picked for immunity against shorting were some of the very companies believed to be most active in profiting off naked short sales against other companies.
Thus, the credibility of all the authorities in American finance, including the Secretary of the Treasury, Mr. Paulson, the head of the Federal Reserve, Mr. Bernanke, the director of the SEC, Mr. Cox, takes on the aroma of week-old dead carp, while the affairs of American banking and business as a general proposition look to the rest of the world like a simple looting operation, reflecting poorly on the paper certificates that we use as "money" in the land of the free. The odor of blood and desperation around these activities must be sending a strong signal to those offshore who hold American dollars in some form or other. It must make them rather itchy to dump them while the dumping is good -- before some clever American B-School Boyz figure out a way to short their own country (if they haven't already done that). Finally, Mr. Bush presides at a remove from all this, sitting just offstage in his own special velveteen loge of Hell, watching this opera-to-end-all-operas, and waiting for his reputation to be sealed as the historical equivalent of something found in a colostomy bag.
The sub-plot of Fannie Mae and Freddie Mac just lends a romantic edge to the show. You could spin it off as a sitcom called "The Fucked and the Feckless." This would include all the poor shlubs who signed $XXX-K mortgage contracts, for houses now worth $XXX-K-minus-XX-K (and still sinking), as well as the shareholders, who saw their share prices approach penny stock range (especially the pensioners whose fund managers gorged on Fannie and Freddie paper) and not least the sovereign wealth funds of China and Russia. Those responsible for fucking everybody, the investment bankers who engineered the tranches of securitized bundled non-performing mortgages, and pocketed huge fees for doing so, are now conniving to off-load the liability of all this worthless paper on the taxpayers, led by chief conniver, Secretary Paulson.
Meanwhile, the runs on the banks are just beginning with Indymac last week and Whachovia warming up to catch the baton this week, with more banks waiting to enter the relay race to insolvency. It's becoming obvious that the Federal Deposit Insurance Corporation will choke and croak on this wad of losses, and its liabilities will also be fobbed onto the taxpayers. In the meantime, though, it will be obvious that the full faith backing of the United States is an empty promise. That may be the near-term endgame for all this pretending. When American depositors get screwed out of their deposits and the deposit insurance doesn't come through, the full force of the fiasco will drag the dollar underwater like the legendary Kraken of old preying on a babe thrown overboard.
Then the forces of darkness will really be loosed.
Things may get so chaotic that Mr. Bush and his circle may actually be removed from the scene before his term in office expires. He could go out of office much the way he came in: by means unconventional. Mrs. Pelosi will keep the seat in the oval office warm for a few months. Then the prosecutions will begin.
There's a particular moment known to all Baby Boomers when Wile E. Coyote, in a rapture of over-reaching, has run past the edge of the mesa and, still licking his chops and rubbing his front paws in anticipation of fricasseed roadrunner, discovers that he is suspended in thin air by nothing more than momentum. Grin becomes chagrin. He turns a nauseating shade of green, and drops, whistling, back to earth thousands of feet below, with a distant, dismal, barely audible thud at the end of his journey. We are Wile E. Coyote Nation.
Is there anyone in the known universe who thinks that the US financial system is not fifty feet beyond the edge of the mesa of credibility?
Nothing will avail now. Not even if Sirhan Sirhan were paroled at noon today and transported directly to the West Wing with a .44 magnum in each hand (and a taxi driven by the Devil waiting outside to take him to the US Treasury and the offices of the Federal Reserve).
It's hard to imagine what kind of melodramas were unspooling on the Hamptons lawns this weekend, while everybody else in America was watching Nascar, or plying the aisles of BJs Discount Warehouse for next week's supply of mesquite-and-guacamole flavored Doritos, or having flames and chains tattooed on their necks, or lost in a haze of valium and methedrine.
With the death of the IndyMac Bank last week, and the GSEs Fannie Mae and Freddie Mac laying side-by-side in the EMT van on IV drips, headed for the Federal Reserve's ever more crowded intensive care unit, there was a sense of the American Dream having passed through the event horizon that denotes the opening of a black hole.
What would happen if the US Government acted to bail out these feckless enterprises (and what if they don't)? Either way, it's not a pretty picture. If Mr. Bernanke does start shoveling loans into the GSE black hole, he'll further undermine the soundness of his own outfit and do nothing, really, to repair Fannie and Freddie's structural problem of having securitized too many loans that will never be paid back. If instead Fannie and Freddie are flat-out taken over entirely by the US government (and remember the Federal Reserve is not the government), then the national debt will roughly double overnight -- which will pound the US dollar down a rat-hole.
Meanwhile, the foreign holders of those decrepitating dollars might not rush to the redemption window, but they certainly would use them to buy up every oil futures contract on God's not-so-green Earth as fast as possible -- they'd be dumb not to -- which would leave American Happy Motorists with gasoline prices north of $5 a gallon, and possibly north of $10. (In that case, say goodbye to the airlines. In fact, say goodbye to what passes for the rest of the US economy, including especially the vaunted retail sector that supposedly counts for 70 percent of the action.)
If Fannie and Freddie are left to die out on the desert floor, say goodbye to the housing market, the major investment banks, countless regional banks, the retirement accounts of virtually everyone in America, the viability of all fifty states' governments, and the day-to-day operating ability of all their municipalities -- and very likely the current incarnation of the world banking system.
This process is really out of control now. The bottom line is the comprehensive bankruptcy of the United States. The Republican Party under George Bush will be known as the party that wrecked America (release 2.0). Painful as it is, Americans had better get a new "Dream" and fast. It better be a dream based on the way the universe actually works, which is to say an operating procedure run on earnest effort and truthfulness rather than merely trying to get something for nothing and wishing on stars. We might begin symbolically by evacuating Las Vegas and calling in an air strike on the loathsome place -- to register our new reality-based attitude adjustment.
After that, we've got to get to work re-tooling all the everyday activities of life, including the way we grow our food, the way we raise and deploy capital, the way we do trade and manufacturing, the way we go from point A to point B, the way we educate children, the way we stay healthy, and the way we occupy the landscape. I know, it sounds like a lot, maybe too much. But grok this: we don't have any choice if we want a plausible future on this portion of the North American continent.
Of course, none of that is likely to happen. Instead, and under the worst imaginable economic conditions, we'll probably embark on a campaign to prop up the un-prop-up-able and sustain the unsustainable -- that is, defend every status quo habit and behavior that we're used to, whether it can be salvaged or not. Of course, this would be a fatal squandering of our dwindling resources, but it it tends, historically, to be the last act of the melodrama in any faltering empire.
The result, pretty soon into that process, will be social breakdown and political upheaval. Every tattoo freak out there who has been prepping for his own starring role in some kind of comic book armageddon will finally get his chance to shine. Lots of people will get hurt and starve. Property will change hands in a disorderly way. And at the end of this process an American corn-pone Hitler may be waiting to set everything and everyone straight.
The markets open in about an hour. Good luck everybody.
Every time I saw a car towing a motorboat this holiday weekend, I wondered what was going through the head of the towee. Did they have a sense that darkness was falling on their careers in motor sports? Did they have an inkling that an oil-and-gas crisis is upon us and just not give a shit? Or were they just going through the motions, following some implacable rote programming induced by, say, forty-odd years of TV addiction and a diet based on corn-syrup byproducts?
The holiday to me was a creepy hiatus from an ever more desperate reality overtaking the nation like a miasma. Meanwhile, the mainstream media's ongoing narrative has gotten stuck in the moronic groove of "drill drill drill." The belief of people like Larry Kudlow of CNBC and uber-mega-idiot John Stossel of ABC-News is that we could go back to $1.50 gasoline if only congress would open the offshore exploration areas and the Arctic National Wildlife Refuge. This view is just plain erroneous. Nothing we get out of these regions will come close to offsetting the ongoing depletion of worldwide oil resources, or even arresting our own losses.
Larry King had a particularly dreary debate Sunday night between Robert F. Kennedy, Jr., and a grab bag of "drill drill drill" advocates. Kennedy took the position that the US could achieve a sort of energy independence by massive deployments of wind and solar equipment. It's an understandable wish, I suppose, but not something I view as consistent with reality. The unfortunate part of the Larry King presentation is that it gives the public an idea that these two fantasies are the only possible responses to our predicament. No one is interested in changing our current behavior.
In the background of these energy conundrums is the sickening spectacle of the nation's fatal insolvency, which remains partially disguised by the machinations of the Federal Reserve, using the various new loan "windows" to maintain the illusion that the major banks have not swindled themselves out of existence -- and in doing so, caused at least $3 trillion (so far) in capital to vanish in a black hole. This three-card-monte game has gone on for a whole year now, and the consequences are hitting home. No more money can be lent into existence now.
One consequence is that other nations sitting on our exported dollars (from our massive trade deficit) have apparently decided to spend off those dollars rather than wait for the fullblown financial collapse of the nation issuing them. My guess is that they are spending those dollars on oil, the primary resource of industrial economies, and that they are prepared to outbid other contestants (including the USA) no matter what -- because they know the dollar is losing value, and that those losses are apt to accelerate over time, and what else would they spend them on? I suspect this is behind the rising price of oil more than anything else -- certainly more than the phantom "speculators" the right wing is yelling about -- and that behind the spending off of those exported dollars are the geological facts of oil being a finite resource inequitably distributed around the world.
But to get back to my prior point, things are hitting home anyway, and with force. The US economy is crumbling because the way we conduct the activities of daily life is insane relative to our circumstances. We've spent sixty years ramping up a suburban living arrangement that has suddenly entered a state of failure, and all its accessories and furnishings are failing in concert. The far-flung McHouse tracts are becoming both useless and worthless in the face of gasoline prices that will never be cheap again. The strip malls and office "parks" are following the residential real estate off a cliff. The retail tenants of all those places are hemorrhaging customers who have maxed out every last credit card. The lack of business is now leading to substantial layoffs. The airline industry is dying and will probably cease to exist in its familiar form in 24 months. The trucking industry is dying, threatening the entire just-in-time distribution system of things that even people with little money to spend still need, like food.
These conditions will now get a lot worse, no matter whether the banks continue to conceal their problems. All of it leads to an inflection point that coincides with the November election. By then, I expect that quite a few banks will be toast, job layoffs will rise spectacularly, foreclosures and bankruptcies will be raging across the land, and homeowners north of the magnolia belt will be shattered by the cost of staying warm this winter.
All this hardship and woe will be blamed on the Republican party. It may actually kill off the party. Political parties do go out-of-business in American history, and this one deserves to die -- with its aggressive no-nothingism, its avaricious, punitive religious extremism (the religious part often being fake), its stunning inattention to financial malfeasance in areas under its direct supervision, and its gross incompetent mismanagement of the nation's strategic interests.
That said, I will feel a little sorry for Mr. Obama if he gets to the White House. He'll have to find a gentle way to tell the truth to the people who elected him, people who will be suffering mightily, and who will be very sore about their losses. He'll have to tell them that the previous "release" of the American Dream software is obsolete, and the new version will require a whole lot more of them in the way of earnest effort, delayed gratification, and revised expectations.
There's a whole lot we can do to greet the new circumstances awaiting us, but the one thing we can't afford to do is put all our efforts into keeping the current system running as is. Reality simply won't permit it. We would squander our dwindling remaining resources trying to keep it all going. The next president is going to have to lead us through the awful process of cutting our losses. So far, the debate has been about how to avoid that.
This isn't so funny anymore. Intimations of a July banking collapse rumbled though the Internet this weekend while mainstream news orgs like The New York Times and CNN pulled their puds over swift boats and Amy Winehouse's performance technique. Something is happening, and you don't know what it is, do you Mr. Jones...? to quote the master.
What's happening is that American society is sliding into a greater depression than the one Grandma lived through. On the technical side, there has been unending controversy as to whether we're gripped by inflation or deflation. It's certainly deceptive. Food and gasoline prices are rising faster than the rivers of Iowa. But the prices of assets, like houses, stocks, jet-skis, GMC Yukons and pre-owned Hummel figurines are cratering as America turns into Yard Sale Nation.
We're a very different country than we were in 1932. In that earlier crisis of capital, few people had any money but our society still possessed fantastic resources. We had plenty of everything that our land could provide: a treasure trove of mineral ores and the equipment to refine it all, a wealth of oil and gas still in the ground, and all the rigs needed to get at it, manpower galore (and of a highly disciplined, regimented kind), with fine-tuned factories waiting for orders. We had a railroad system that was the envy of the world and millions of family farms (even despite the dust bowl) owned by people who retained age-old skills not yet degraded by agribusiness. We had fully-functional cities with operating waterfronts and ten thousand small towns with local economies, local newspapers, and local culture.
We had a crisis of capital in the 1930s for reasons that are still debated today. My own guess is a combination of a bad debt workout that sucked "money" into a black hole (since money is loaned into existence, but vanishes if the loans are not systematically paid back) plus a gross saturation of markets, meaning that every American who had wanted to buy a car or an electric toaster had done so and there was no one left to sell to. (The first round of globalism -- 1870 - 1914 -- had shut down after the fiasco of World War One.)
Our debt problems today are of a magnitude so extreme that astronomers would be hard pressed to calculate them. By any rational measure our society is comprehensively bankrupt. From the federal treasury down to the suburban cul-de-sacs so much loaned money is either not being paid back, or is at risk of never being paid back, that the suckage of presumed wealth has passed through an event horizon out of the known universe into some other realm of space-time, never to be seen again in this realm. This would seem to be the very essence of monetary deflation -- money defaulted out-of-existence.
This condition is partly disguised by both the loss of credibility of US currency and real-world scarcities of oil and food, but the upshot will be something at least twice as bad as the Great Depression of the 1930s: people with no money in a land with no resources (with manpower that has no discipline), hardly any family farms left, cities that are basket-cases of bottomless need, comatose small towns stripped of their assets and social capital, an aviation industry on the verge of death, and a railroad system that is the laughingstock of the world. Not to mention the mind-boggling liabilities of suburbia and the motoring infrastructure that services it.
The banks have been doing their death dance for an entire year now, pretending that their problems are those of mere "liquidity" (i.e. cash-on-hand) rather than insolvency (no cash either on hand or in the vault and nothing else to sell to raise cash except worthless "creative" securities that nobody would ever buy). But the destruction of money (resulting from loans not paid back) is now so intense that the game of pretend has reached its terminal point. The question for the moment is exactly who and what will be crushed as these institutions roll over and die.
Complicating matters is a global oil predicament that is really not hard to understand, but which the organs of news and opinion have obdurately failed to explicate for an anxious public. Call it Peak Oil. There are only a few elements of it you need to know. 1.) that demand has now permanently outstripped supply; 2.) that new discoveries are too meager to offset consumption; 3.) That under under the circumstances, the systems we rely on for daily life are crumbling. I've called this situation The Long Emergency.
Our chances of mitigating this, and of continuing our current way-of-life is about zero. I've tried to promote the idea that rather than waste remaining resources in the futile attempt to sustain the unsustainable (i.e. come up with "solutions" to keep suburbia running), that we should begin immediately making other arrangements for daily life -- mainly by downscaling and re-scaling everything from farming to commerce to the way we inhabit the landscape -- but my suggestions have proven unpopular even among the "environmental" elites, who are too busy being entranced by new-and-groovy ways to keep all the cars running.
So where we are at now is the equivalent of standing in the slop by the ocean shore under a gathering hundred-foot-high wave that is about to come crashing down on our heads. Since I sure don't know everything, I can't say how this will all play out in the months ahead, especially with the presidential election coming at the exact moment that voters will be turning on their furnaces for the cold and dark winter beyond. I would venture to say that so far our society as a whole has done a piss-poor job of comprehending the situation. But there is still the possibility, with four months of politicking left, that the nature of our predicament can be articulated in a way that few can fail to understand, the way Mr, Lincoln articulated the terms of the Civil War on the eve of its fateful outbreak.
The telling moment last week was Robert Hirsch's appearance on the CNBC morning "Squawkbox" financial show in which he proposed the probability of $500-a-barrel oil within "a three-to-five-year time-frame." Squawkhead Becky Quick was clearly nonplussed by the stolid Mr. Hirsch, author of a (then)-startling 2005 US Dept of Energy report (since referred to as the Hirsch Report and buried by the Secretary of Energy) that warned of dire effects on the American way of life as the Peak Oil predicament gained traction.
Perhaps more reality-challenged was the uber-idiot Larry Kudlow on CNBC's night-time money show, who kept repeating the mantra "drill, drill drill" when presented with signs that something other than "oil speculators" was driving up the price and creating global scarcity. These idiots always return to the shibboleth that "there's plenty of oil out there." What they don't get is that even while the world is enjoying the all time peak of production (somewhere around 85-million barrels-a-day), that same world is demanding at least 86-million barrels -- so even though there's more oil than ever, there's not enough. And the gap is only bound to get bigger.
The difference between what's available and what's demanded is being felt by poor countries and poor people in richer countries. Third world nations lacking their own oil are simply dropping out of the bidding, and the lower classes in the US are having to choose between buying gasoline and velveeta. The floods in the corn belt will surely aggravate the problem here in the USA. Lunch breaks may soon be a thing of the past for WalMart Associates. Maybe they'll just play video games on their cell phones in the parking lot to allay their hunger.
Meanwhile the notion that drilling drilling drilling offshore the US and up in Alaska will solve this problem shows how incredibly misinformed the news media itself is. The probability is next to zero that anything found off California or Florida would even fractionally offset ongoing depletion in the handful of old, established super-giant fields that the world gets most of it oil from. By the way, I support the idea of drilling in Alaska's ANWAR reserve because I think it can be done in a sanitary way and, more importantly, it would get the idiot cornucopian right-wing assholes to finally shut up about it -- before they discover that it contains less than half a year's oil supply for the US at current rates of use.
Also on the "meanwhile" front, the OPEC meeting Sunday at Jeddah, Saudi Arabia, was simply a desperate dodge, a mummery, a kabuki theater of powerlessness. Once again, the Saudis are pretending that they can increase their production -- in essence, pretending that they actually have some power in the game. As Jeffrey Brown has pointed out on TheOilDrum.com, the Kingdom will still show a steady three-year decline over their 2005 production rates even if they're able to goose current output as much as they say they will in 2008.
All this reality content is beginning to penetrate the collective consciousness in the US, but the result is mostly panic or paralyzed disbelief rather than any set of intelligent responses. For example, I got a call from one of Katie Couric's producers at CBS news on Friday. Somehow, they had noticed that oil prices were becoming a problem in America. They called me for a comment. The scary part was they were clearly treating the issue as a "lifestyle" story. Did I think more suburbanites would move downtown? And would that be a good thing...? They have no fucking clue how broadly and deeply these dynamics will affect the life of this nation, or even our ability to remain a nation. Also, by the way, this demonstrates how the nightly network news has become the equivalent of the old "women's pages" of the daily newspapers.
The parallel universe of the financial world is showing the strain of all this oil anxiety -- since, after all, oil is the primary resource for running industrial economies. It has been some time since the banker boyz embarked on their fateful venture to alchemize a new mutant strain of investment instruments to replace the tired old stocks and bonds which represented the hope for production of surplus wealth from industrial activity -- now mooted by the oil story. The idea of the mutant investments was to produce wealth with no real wealth-producing activity. This old trick, formerly known as Ponzi finance or a "pyramid scheme," was naturally self-limiting, and in a way that would prove ultimately very destructive to society as a whole. In fact, it has fatally undermined the legitimacy of the entire financial system, and a state of comprehensive nausea has set in as we all witness the dissolving foundation of the US economy under a tsunami of debt that will never be repaid.
The markets seem to know this, the more vocal playerz are squawking more about it, some banks are issuing frightening "duck-and-cover" warnings, using horror movie phrases such as "...worse than the Great Depression of the 1930s..." and the general public is sinking into the quicksand of bankruptcy, repossession, and ruin. I haven't been to any lawn parties in the Hamptons this year, but I imagine that eczematous anxiety rashes are competing with suntans and Versace separates out there this year. Really, we're right back where we were last year about this time, only worse. Oil has doubled, food is outasight, the levees have broken, the people who run things are shitting their pants, and everybody is waiting for a whole lotta other shoes to drop.
A catastrophe for Iowa farmers will not be just a catastrophe for Midwestern Americans. In the Iowa floods, we'll see more evidence of how the problems of weird weather (climate change) combine and ramify the problems associated with peak oil. In this particular case they lead to an inflection point sometime around the 2008 harvest season, which will also be our time of political harvest.
These are not your daddy's or granddaddy's floods. These are 500-year floods, events not seen before non-Indian people starting living out on that stretch of the North American prairie. The vast majority of home-owners in Eastern Iowa did not have flood insurance because the likelihood of being affected above the 500-year-line was so miniscule -- their insurance agents actually advised them against getting it. The personal ruin out there will be comprehensive and profound, a wet version of the 1930s Dust Bowl, with families facing total loss and perhaps migrating elsewhere in the nation because they have no home to go back to.
Iowa in 2008 will be an even slower-motion disaster than Hurricane Katrina in 2005. Beyond the troubles of 25,000 people who have lost all their material possessions is a world whose grain reserves stand at record lows. The crop losses in Iowa will aggravate what is already a pretty dire situation. So far, the US Public has experienced the world grain situation mainly in higher supermarket prices. Cheap corn is behind the magic of the American processed food industry -- all those pizza pockets and juicy-juice boxes that frantic Americans resort to because they have no time between two jobs and family-chauffeur duties to actually cook (note: reheating is not cooking).
Behind that magic is an agribusiness model of farming cranked up on the steroids of cheap oil and cheap natural-gas-based fertilizer. Both of these "inputs" have recently entered the realm of the non-cheap. Oil-and-gas-based farming had already reached a crisis stage before the flood of Iowa. Diesel fuel is a dollar-a-gallon higher than gasoline. Natural gas prices have doubled over the past year, sending fertilizer prices way up. American farmers are poorly positioned to reform their practices. All that cheap fossil fuel masks a tremendous decay of skill in husbandry. The farming of the decades ahead will be a lot more complicated than just buying x-amount of "inputs" (on credit) to be dumped on a sterile soil growth medium and spread around with giant diesel-powered machines.
Like a lot of other activities in American life these days, agribusiness is unreformable along its current lines. It will take a convulsion to change it, and in that convulsion it will be dragged kicking-and-screaming into a new reality. As that occurs, the US public will have to contend with more than just higher taco chip prices. We're heading into the Vale of Malthus -- Thomas Robert Malthus, the British economist-philosopher who introduced the notion that eventually world population would overtake world food production capacity. Malthus has been scorned and ridiculed in recent decades, as fossil fuel-cranked farming allowed the global population to go vertical. Techno-triumphalist observers who should have known better attributed this to the "green revolution" of bio-engineering. Malthus is back now, along with his outriders: famine, pestilence, and war.
We're headed, it seems, toward a fall "crunch time," and that crunching sound will not be of cheez doodles and taco chips consumed on the sofas of America. I think we're heading into a season of hoarding. As the presidential campaign moves into its final round, Americans may be hard-up for both food and gasoline. On the oil scene, the next event on the horizon is not just higher prices but shortages. Chances are, they will occur first in the Southeast states because oil exports from Mexico and Venezuela feeding the Gulf of Mexico refineries are down more than 30 percent over 2007.
Perhaps more ominous is the discontent on the trucking scene. Truckers are going broke in droves, unable to carry on their business while getting paid $2000 for loads that cost them $3000 to deliver. In Europe last week, enraged truckers paralyzed the food distribution networks of Spain and Portugal. The passivity of US truckers so far has been a striking feature of the general zombification of American life. They might continue to just crawl off one-by-one and die. But it's also possible that, at some point, they'll mount a Night-of-the-Living-Dead offensive and take their vengeance out on "the system" that has brought them to ruin. America has only about a three-day supply of food in any of its supermarkets.
The yet-more-ominous thing here is that shortages of food and oil are two fiascos that are pretty clearly predictable for the second half of the year. That's bad enough without figuring in the "unknowns" that could kick up American hardship a few more notches.The hurricane season just got underway -- obscured for the moment by the bigger weather story in Iowa. The fate of the banks is a train wreck still waiting to happen. As it occurs -- also heading into the high political and hurricane seasons -- we could find ourselves not only a nation wet, hungry, and out-of-gas, but also completely broke. I'm sorry that Tim Russert will not be here to talk us through it all.
The banking “industry” slept like a dog through the climax of the political primary season. Meanwhile, the banks sucked in scores of billions in cheap loans from the Federal Reserve, using bundles of devalued-to-worthless “innovative” securities as collateral. This dodge has worked for about three months, allowing them to pay their employees and cover their electric bills, and is now collapsing because American society can’t maintain the flow of repayment on current debts and can’t take on any additional debt – meaning both the regular “churn” of revenue flowing to the banks is impaired at the same time that fees for originating new loans cannot be generated. Uh Oh.
Out there in the cul-de-sacs and the strip malls, people are months behind in their mortgage payments, maxed out on their plastic, handing over their car keys to the lien-holders, and feeding their kids Spam filets. Truckers get paid less for their loads than the cost of transporting the load. The airlines have financial cancer and will be dead in eighteen months. Container ship costs are heading out-of-sight. Municipalities are going broke. A weekend flood just destroyed part of the Midwest corn crop. And, of course, oil prices took a jagged turn upward last Friday en route to their next stop: $150-a-barrel.
The New York Times reported Monday that rural Americans are being hit hardest by the rise in gasoline prices. Duh. It's worst, naturally, in the big southern states where wages are low and the distances are vast. There's a reason why Nascar is the second-biggest religion down there: the automobile rescued southerners from the tyranny of geography. Cheap gas allowed them to build a "new " economy based mainly on the construction of suburban sprawl. In the process it deified the pickup truck. Guess what? The rural South made a big mistake. The Dukes of Hazard show is now drawing to a close. They are about to take a turn back to being what they were before the Second World War: an agricultural backwater. God knows what will happen to the asteroid belts of "production housing" and big box shopping outside the relatively tiny pre-automobile cores of places like Houston and Atlanta.
The New York Times made a particularly inane point in their lead business section story today (Rural U.S. Takes Worst Hit as Gas Tops $4 Average) saying:
...Sociologists and economists who study rural poverty say the gasoline crisis in the rural South, if it persists, could accelerate population loss and decrease the tax base in some areas as more people move closer to urban manufacturing jobs.
Is it possible, nobody informed the reporters (and editors!) that A.) America has already hemorrhaged manufacturing jobs; and B.) That much of the little manufacturing that remains is not located in any cities per se?
So we now head into the general election. One thing the pundits of the mainstream media seem to miss is how much more room for economic carnage there is in the months remaining. They seem to be laying their current odds on the idea that McCain and Obama are starting on a "level playing field." In fact, McCain is already up to his hips in trouble from his sheer association with the Republican establishment, which will be so badly discredited by the shattered economy that it may actually go the same route as the 19th century whig party and dissolve in a putrid vapor of fecklessness. By November, the Republicans will be viewed as the party that wrecked the nation, and McCain will be in a hole so deep (still on the 20-yard-line by the way) that nobody will be able to see his lips move.
It was a relief, at long last, to see the odious Hillary step aside on Saturday -- though she could not have engineered a more self-glorifying exit. There is talk, all of a sudden, about a President Obama perhaps stashing Hillary in the Supreme Court seat currently occupied by Ruth Badar Ginsburg, whose health is failing. I'd like to see Hillary packed off there. It would get her out of the senate. You can't really grandstand on the Supreme Court. The nation -- if it remains a nation -- could forget about her.
Well, here we are about twenty minutes from Wall Street's Monday open. I imagine it's going to be quite a day. Over 90-degrees and oil cutting its overnight losses. Praise the lord and pass the Xanax.
This meme, which has been the mantra among supposed political "progressives" for years now, was reignited over the weekend with the publication of a memoir by former Bush press secretary Scott McLellan claiming that President Bush and his cronies wove a spell of lies to get a war in Iraq underway. This is the narrative that Americans tell themselves to prove that, if it weren't for bad leaders, we would be a morally upright nation.
I don't think so. And, remember, I write the following as a registered Democrat (and an Obama voter in my primary state). Warning: many readers are not going to like this.
The chanters of this mantra seem to forget what the 9/11/01 attack on US targets represented: a grievous act which in any other moment of history and any other place on earth would have been construed as an act of war. Roughly three thousand people were killed, many choosing to jump out the windows of skyscrapers to avoid roasting to death.
Setting aside the crank theories (which I've always regarded as utter paranoid nonsense) that the attacks were somehow orchestrated by the US government itself, it became clear quickly that the nineteen airplane hijackers were Arab nationals, mostly from Saudi Arabia. It also became clear that their acts were not directly sponsored by any legitimate Arab government, but rather by a trans-national Islamic extremist network. So the question for the US, after the morning of 9/11/01, was: what to do about this act?
Well, the first response, weeks later, was a US attack on the supposed headquarters of the the trans-national Islamic extremist network (which came to be known as al Qaeda, "The base") in Afghanistan. The rather robust campaign necessitated the occupation of this threadbare nation, but it failed to accomplish its chief aim, which was to capture the charismatic leader and financial sponsor of the 9/11 attack, the Saudi Arabian rogue millionaire fanatic Osama bin Laden. It did accomplish its other chief aim: to evict the extremist Taliban government from control of the capital, Kabul.
What happened after that is what has provoked the now-familiar mantra: it became evident that evicting the Taliban and occupying Afghanistan was not enough. It was not a sufficient response to the grievous injury of 9/11. Why? The Afghans were not Arabs.
From a strategic point-of-view, 9/11 required a severe punitive response against the people responsible (casualties were higher than the attack on Pearl Harbor, 1941). That meant against an Arab people. Since the act was not perpetrated by any Arab nation per se, this left the US in a quandary. And of course, it begs the question: why was such a response even required?
Because 9/11 was the most recent of a spate of attacks, occurring over a period of years, by the same group of people, and the one to most severely damage important targets within sovereign US territory itself. It is important to emphasize the significance of this. The other acts in the series included the first World Trade Center bombing in 1993 which killed six people and injured over a thousand. The next was the 1996 bombing of the Khobar Towers in Saudi Arabia, which killed nineteen Americans. This was followed in 1998 by the simultaneous bombing of two US embassies in Kenya and Tanzania, which killed 223 people (mostly African employees) and injured over 4000 others. The next, in October, 2000, was the suicide bombing of the USS Cole in the port of Aden, Yemen, which killed seventeen American sailors. The US response to all these acts was little more than hand-wringing which, in retrospect, was thought to have emboldened the further and far more traumatic injury of 9/11.
Now, it might be argued that even if 9/11 was an act of war by any normal definition, it was an act of what is called these days "Fourth Generation War," the new decentralized warfare carried on by small units symptomatic of the breakdown of nation-states and enabled by high tech weaponry in which a very few individuals can create tremendous carnage. For good or for ill, the US military still operates on the basis of the previous generation of warfare, involving large massed units on land, sea, and air. Our response was geared to that manner of warfare.
And the response was determined to be a grievous strike against an Arab nation. Why? To demonstrate that acts of any generation-type warfare against sovereign US territory perpetrated by Arab people would be answered by the type of warfare still practiced by the US. So the next question was: which Arab Nation?
The answer was Iraq, for a number of strategic reasons. Iraq had the largest untapped oil reserves outside Saudi Arabia and it would benefit the oil-guzzling US to have something to say about its disposition. Iraq was geographically positioned between two of the most troublesome nations in the Middle East, Iran and Saudi Arabia and a US military presence between them would influence their behavior. Iraq was ethnically Arab. Iraq's leader, Saddam Hussein, had a long record of mischief-making in that unstable region and it was believed that getting rid of him would be beneficial (hindsight, at that point, was not yet operational).
I believe that the decision to punish an Arab nation for 9/11 was probably made very soon after the event. Whether Iraq specifically had anything to do with 9/11 was not part of the equation. It didn't matter one way or the other anymore than it would have mattered if the 9/11 hijackers had decided to strike the Empire State Building and the US Capitol instead of the WTC and the Pentagon. And arguments made on the basis of Iraq's involvement or non-involvement are therefore specious. As a strategic matter, it was necessary to make the "statement" that attacks on US territory would provoke a response that Islamic extremists could not fail to understand -- something along the lines of "an eye for an eye...." In short, we set out to kick the ass of an Arab nation. Iraq was by far the best candidate.
Being Americans, however, we also decided to finesse it, to provide a theoretically ideal outcome, which in this case would be the ouster of the dictator Saddam Hussein and his replacement with a sleek democratic government for which the Iraqi masses would be eternally grateful -- thus allowing us to kick their ass and then pick them up off the ground, dust them off, give them some pocket money, and teach them the benefits of government of-by-and-for the people.
The run-up to this project involved some dissembling. It was preceded by an elaborate ceremonial dance with a UN weapons inspection team to ascertain whether Saddam Hussein possessed any weapons of mass destruction, WMDs. Their efforts were inconclusive. Remember this. It is a key point. A lot of people remember it differently. They mis-remember that the UN team reported that Saddam Hussein had no WMDs for certain. This was not the case. Among other things, the Iraqi leader had designated all kinds of installations as "presidential palaces," and placed them off-limits to inspectors. There he could easily have hidden a cache of fissionable material in a bathroom-sized space, not to mention stores of other exotic weapon-grade materials such as smallpox viruses, anthrax spores, etc. You didn't need a whole lot of storage space for these things. And the collapse a few years earlier of the Soviet Union had, it was widely suspected, loosed an orgy of kleptomania in Russia commencing a black market trade in everything from bomb-grade uranium to weapons-grade bio-organisms.
In any case, the UN search was a frustrating and basically inconclusive exercise, and the bottom line of it all was this: in order to find out if anything was there, we had to search the place ourselves, including the "off-limits" areas. So, the argument was made by the Bush administration that this would be the basis of an ultimatum to Iraq. A lot of intelligence (spywork) was gathered from many sources -- Europe, Israel, Russia -- and not all of it was verifiably truthful. Some of it, such as rumors of a transfer of yellowcake uranium ore from Africa to Iraq, proved to be erroneous, even though it was used as the basis for our ultimatum. This is the kernel of the argument that "we were lied to."
War is an inexact art. In the history of nations, lies and exaggerations are almost universally employed by heads-of-state to engage in wars even when causes are righteous. In all wars, the contestants believe that God is on their side, and that acts justifying war are justified by God. Anyway, the search for WMDs was used as the justification for America's invasion of Iraq in 2003. Another important point uniformly ignored by the "we were lied to" faction is that just because no WMDs were found, does not prove that we didn't have to look. The truth is, nobody knew for certain what was there or not there, and to this day nobody knows if anything was moved out of Iraq to some to some other nation (Syria being the usual choice) in the long interim of the UN search.
However, the true objectives of the action were still as stated above: to punish an Arab nation for 9/11, to establish a military presence between Iran and Saudi Arabia, and to "secure" a large reserve of oil (not to steal it, but to assure access to buying it). This was an extremely ambitious program in which an awful lot of things could go wrong.
And they certainly did. The Iraqis were not grateful for the American occupation. They proved uneducable in the ways of American-style democratic governance. They reverted to a persistent diet of religious-ethnic-and territorial warfare within their own artificially-drawn borders. They regarded their American teacher-protectors as detestable interlopers and blew them up whenever possible. They ran what was left of their economy into the ground, including their oil industry. The incompetence of the US military occupation, its reliance on mercenary security thugs, it's "out-sourcing" important tasks to venal corporations such as KBR, its ineptitude in carrying out the mission of restoring basic electric and water services -- all contributed to the disastrous quagmire that Iraq turned into.
But all the backward-looking crybaby complaints that "we were lied to" still doesn't answer the basic question: what should have been the appropriate response to the extreme injury of 9/11? A diplomatic protest? Another investigation by the UN? The surreptitious assassination of Arab troublemakers all around the world? I don't think the "we were lied to" contingent has a credible answer to this question.
There's another hugely important realm of inquiry that the "we were lied to" folks have never addressed: who lied to us about the way we live in this country? About the amount of oil we consume in the service of all our comforts and conveniences? About our extreme car dependence and what is required in our relations with the rest of the world to sustain it. All these years, Frank Rich and all his whining colleagues at the New York Times barely acknowledged the domestic fiasco of the suburban sprawl economy that placed us in such jeopardy to begin with. Even now, with the airlines disintegrating and gasoline over $4 (diesel over $5) I haven't heard any of these crybabies even raise the issue of restoring the US railroad system. How many of these crybabies live suburban lives themselves, in places like Louden County, Virginia, or Westchester, or Long Island, or the San Fernando Valley? Who lied to us about that?
For my money, the "we were lied to" chorus only represents the obdurately self-righteous cluelessness in every band of the American political spectrum. We lied to ourselves. We continue to lie to ourselves every day. The US public barely understands the first thing about the energy predicament we're in, and what it means for how we live in this country -- or how we get along with the rest of the world -- and the news media tragically reflects that ignorance. We fantasize about being "energy independent" and still being able to drive to the mall three times a day to eat caesar salads grown on the other side of North America. Get this: we deserve exactly what is happening to us. We might as well keep on lying to ourselves to pretend that we are not descending into a dark phase of our own history. After all, the true basis of American life these days is to feel good about yourself no matter what you do.
Loveliness was everywhere this holiday weekend in upstate New York, and it was probably hard for many to believe that the wayward nation would return to the dread uncertainty of life in the crash lane when the barbeques were over. There was even a wan overtone to the late-night sports news about the Indy 500 race -- as though the spectacle of cars droning round and round a speed oval epitomized the futility of American life in this moment of our history.
I had a discussion with one guy at a Sunday night party about the prospects for hydrogen-powered cars. We rehearsed the usual reasons why such a system was unlikely to get up-and-running -- and then he said, "...but what if we took all the money from the war and put it into something like the space program and... they came up with some way to make it happen...!"
This is certainly the golden heart of the great wish out there, as the empire of Happy Motoring begins to run down on $4 gasoline. It seems inconceivable that a society so bold as to put men on the moon (fer crissake) can't overcome such a prosaic problem as finding something other than oil byproducts to run our cars on.
From this holy font all cognitive dissonance flows.
It seems inconceivable, but it begins to look like that's the way it really is, and we just can't accept it.
Of course, one of the reasons that Americans are so anxious to get away on a holiday weekend from the places where they live is because we did such a perfect job the past fifty years turning our home-places into utterly unrewarding, graceless nowheres, where the private realm of the beige houses is saturated in monotony, and the public realm has been reduced to the berm between the WalMart and the strip mall. Now, we barely have the gasoline to run all this stuff, let alone escape from it for a weekend.
We're at a dead end with all this and a lot of Americans are paralyzed with fear about what's next. This may actually be a deeper fear than the anxiety about money and banking in 1933, when Franklin Roosevelt was sworn in and tried to reassure the nation. Back then, despite the grave problems of capital, we still had plenty of everything: plenty of good productive land, plenty of manpower earnestly eager for hard work, plenty of ore in the ground, shining cities equipped with excellent streetcar systems, a railroad network that was the envy of the world, sturdy small towns and small cities fully equipped with locally-owned business, and a vast number of small family farms that could re-absorb family members unable to get wages in the cities. Most of all, we had plenty of oil in the ground, and the world's biggest industry for getting it out and selling it. What we didn't have in 1933 was cash money.
The crisis at hand now goes way beyond a crisis of capital -- though that is certainly part of it. Notice how many of the things we had in 1933 are gone now. Our cities, with a few exceptions, are imploded husks. Our small towns and small cities (Schenectady, home of G.E.!) are gutted, especially in terms of locally-owned business. Our passenger rail system is worse than anything a Soviet ministry might produce (while the airline industry that replaced it is dying of a kind of financial hemorrhagic fever). Our local transit hardly exists anymore. Family farms have all but disappeared. We have plenty of manpower earnestly eager to become American Idols (but certainly not for heavy labor). Our oil industry now supplies only a fraction of the world's daily supply (and not even enough for half of our own needs).
What happens now? We face not just change but convulsive change. The public senses the rapid unraveling of our car-centric arrangements. In the week before the holiday, gasoline prices went up several cents each day -- in upstate New York, it crossed the $4 mark and kept going up. The trucking system faces collapse as diesel fuel price-rises exceed even the rise in gasoline, and the vast number of independent truckers who make up the system confront the individual calamity of a personal business failure. American Airlines last week announced severe measures to keep operating through the fall of 2008. but none of the airlines can feasibly carry on as usual with oil prices above $120-a-barrel -- and the ominous message is of a business model that has no conceivable way to adapt to the new reality. Most likely, in a very few years air travel will no longer be a "consumer" enterprise.
In the background of these practical problems -- "off screen" during the holiday of car races and ball games -- is a crisis of capital orders of magnitude worse than the one faced by Franklin Roosevelt in 1933. For behind the "liquidity" (i.e. insolvency) issues faced by the big institutions lurks the Godzilla of the derivatives trade, which has evolved into a black hole capable of sucking all notional "money" into oblivion. That "money," which represents the aggregate value of our society, also amounts to the emperor's new clothes of an empire in serious trouble. As the black hole of derivatives sucks away these "new clothes," America will stand naked against the elements of fate.
Those were the words that Fed chairman Ben Bernanke used to describe the financial markets (and by extension the economy) these heady spring days when everybody else with a rostrum, it seems, has pronounced the so-called liquidity crisis contained. There's a great wish for American finance to return to business-as-usual -- raking in fantastic fees for innovating new modes of tradable paper, and engineering mergers and buy-outs that generate huge fees plus $100 million kiss-offs for corporate CEOs in the noble struggle to dismantle America's productive capacity -- but apparently events are still out of hand.
The Federal Reserve itself has been instrumental in promoting abnormality by doing everything possible to prevent the work-out of bad debts in the system. Since money is loaned into existence, and loans are debts, the work-out of bad debt suggests the discovery that a lot of money has disappeared -- which is exactly the case. The Fed has postponed the work-out by sucking up truckloads of impaired, untradable securities in exchange for loans to giant banks who don't have enough cash on hand to pay their janitors.
Personally, my theory has been that the specter of peak oil pretty clearly implies the inability of industrial economies to continue producing real wealth in the customary way. In the face of this, either consciously or at a more mystical level, the worker bees in banking recognize that, in order to maintain their villas in the Hamptons, money has to be loaned into existence some other way (than in the service of industrial productivity).
We've tried just about everything else. There was the so-called service economy, an attempt to replace manufacturing with hamburger sales. Then there was the information economy, in which work would be replaced with knowing about stuff. Then there was the tech thing, which was about bringing internet companies that existed only on the back of cocktail napkins to the initial public offering stage of capitalization -- which allowed a few-hundred-or-so thirty-year-old smoothies to retire to vineyards in the Napa Valley, while hundreds of thousands of retirees lost half the value of their investment portfolios. Then there was the housing boom, which was all about the creation of more suburban sprawl under the theory that houses (or "homes" in the jargon of the realtors) represent an obvious sort of wealth, and therefore that using houses as collateral would allow humongous sums of money to be loaned into existence -- along with massive fees for structuring the loans into bundles of bond-like thingies.
This has all failed now because the racket went too far. Every possible candidate for a snookering got snookered. Too much collateral for which there were no takers went into the ground. The insane run-up in house values made a downward price movement inevitable, and as soon as the turnaround happened, it fell into the remorseless algebra of a deflationary death spiral. More importantly, however, this society ran out of tricks for loaning money into existence and instead began to experience the pain of money thought-to-be-in-existence being defaulted into a vapor -- and worse, these defaults led to logarithmic chains of money destruction in its places of origin, the investment banks that had created the racket.
The important part of this is that the money is gone. What makes matters truly eerie is that the "bubble" in suburban houses has occurred at exactly the moment in history when the chief enabling resource for suburban life -- oil -- has entered its scarcity stage.
The logical conclusion of all this is not what the American public wants to hear: we have become a much poorer society and are now faced with the unavoidable task of making major changes in how we live. All the three-card-monte moves at the highest level of finance lately amount to an effort to avoid the unavoidable, acknowledging our losses. Certainly the political fallout of all this will be awesome. But it's not about politics, really. It's about the entire society's inability to form a workable new consensus of reality.
It's hard to predict how long these institutions at the heart of our economic system can linger in the "far from normal" limbo of pretending that money has not been defaulted out of existence. Since the same process is underway in Great Britain and Spain, places beyond the control of Bernanke, Secretary Paulson, and the Boyz on Wall Street, and since actions and reactions there will affect the destiny of money here, its hard to escape the conclusion that we're at most months away from the brutal recognition that Wall Street has managed to bankrupt itself (and, by extension, the United States). This is dark heart of the matter of which no one dares speak.
Meantime, on the ground, every mook and minion in the land sees the gas pumps levitate beyond the $4 hash mark, and notes with bugged-out eyes the double-digit price stickers on common supermarket items, and feels the rush of blood from the extremities when some check-out clerk at the WalMart declares that a certain proffered credit card is maxed out, and some strangers in overalls -- the neighbors say -- managed to hot-wire the GMC Sierra in the driveway, and took it away....
The candidates for president will have a lot to talk about. I wonder if they'll dare to.
I was pretty disturbed eight years ago when Hillary Clinton up and announced she was running for a New York seat in the US Senate. Say what? She didn't even live here after she quit Arkansas. Why didn't she run for the single non-voting District of Columbia House of Representatives seat (in a primary against Eleanor Holmes Norton)? Why? Because Hillary is a monster of ambition.
So, Hillary and Bill bought a piece of real estate in Westchester County, NY, and that theoretically qualified her to run for that senate seat. Of course, her move was a huge slap in the face to the 15 million or so adult native New York staters who were also theoretically entitled to run for that office -- including especially the smaller but still substantial number of New Yorkers with serious qualifications. They all rolled over for Hillary, allowing the Clintons to maintain a major power base in American government when the Big Show of Bill's White House tenure was up.
Her run for president took off on schedule with a disturbing sense of inevitability. It was clear that she had internalized the arc of the women's movement to the degree that the nation owed her a turn in the White House, since this was the logical symbolic destination of the Boomer political ethos: absolute equality above all other considerations -- Hillary gets to play, too! The American public seemed willing to go along with this national psychodrama. It satisfied a certain school days sense of morality. Then Barack Obama had to come along and spoil it all. The nerve of that... uppity Negro!
Or so, apparently, Hillary would have us believe, now that her campaign has run off the rails. In awful desperation she has so much as said that the Democratic party has to nominate her because non-white people are unelectable -- forgetting for a moment that Barack Obama is as much white as he is black.
The spectacle of Hillary's un-making has been pretty horrible to witness, the efforts to stage her as a lumpenprole Nascar mom drinking boilermakers while celebrating her latest hunting exploits. (How worried is Hillary about making her mortgage payments, or filling her gas tank?) Naturally, the final act of this nauseating play takes place in Hillbilly Heaven, the states of West Virginia and Kentucky, where Hillary expects to make a big "statement" about exactly whom voters will go for. She'll win big and the effort will symbolically disgrace her.
She's carrying on now like William Jennings Bryan at the Scopes Trial -- an obvious, gibbering loser unwilling to shut up and go home, even after every measure of consensus from the bailing super delegates to the cover of Time Magazine has made it clear who the preferred party nominee will be.
I hope New York voters will not fail to remember this ghastly final act of the 2008 primary season. I hope a bona fide New Yorker will step up and challenge Mrs Clinton for the senate seat she will return to for the next several years. I hope the Clintons will move offstage and do something else -- enjoy their millions... make even more money... use it to "go green" or something....
Back around the year 2000, I used to joke with my friends that Bill Clinton would return (despite the two-term limit) as Emperor Bill the 1st. He almost made it. I voted for him twice in the 1990s, but the new script addition wasn't so appetizing. It would have been one of the stranger occurrences in all of modern world history. The political "death" of Hillary and Bill is a story of Shakespearean dimensions. It seems to be ending as farce, though. Who knows, before the day is over, Hillary may yet put on a pair of overalls with one suspender and have her picture taken sucking on a jug of moonshine likker. Of course, irony has been the Boomer's intellectual stock-in-trade.
Whatever America's fate may be in these very trying times of peak oil and climate change, a consensus seems to have formed that we can't afford to leave the same old cast of characters running things.
As the West's industrial regime sputters toward a cheap-energy-crackup conclusion, there have been attempts to recast what our economy is actually about, how to account for whatever wealth we manage to produce, and project what our society will actually be organized to do in the years ahead.
For a while in the 1990s, the idea was a "service economy," kind of like the old fable of the town whose inhabitants made a living by taking in each other's laundry -- only in our case it was selling hamburgers to tourists on vacation from their jobs making hamburgers elsewhere, or something like that.
Then came the idea of the "information economy" in which making things of value would no longer matter, only the processing and deployment of information (sometimes misidentified as "knowledge"). This model seemed to suggest a yin-yang of software engineers who made up games like "Grand Theft Auto" serving the opposite cohort of people who bought and played the game. If nothing else, it certainly explained how lifetimes could be frittered away on stupid activities.
That illusion yielded to the housing bubble economy, which actually did produce a lot of things, but not necessarily of value -- for instance, houses made of particle board and vinyl 38 miles outside of Sacramento. It was a tragic and manifold waste of resources, as well as an insult to the landscape. But the darker side of the housing bubble lay in the world of finance, where a vast empire of swindles was constructed to support the Potemkin facade of production homebuilding.
Now we are in a strange period when those swindles are unwinding. The people who run the finance sector -- the Wall Street investment banks, hedge funds and ratings agencies, the Federal Reserve, and the US Dept of the Treasury -- in desperately trying to prevent the unwind, have rapidly ramped up another new economy based entirely on the buying and selling of risk. Risk, as a pure abstraction unconnected to any real capital activity, is all that's left to buy and sell after all other plausibly practical vehicles for finance have failed.
While a lack of transparency in the individual risk vehicles has been an object of complaint over the past year, the system as whole is transparently absurd. The system is also abstruse enough to prevent most mortals (including many employed in the system) from understanding its operations. But the general public and the news media are virtually helpless to intervene in this last gasp racket, so the probability increases that it will do tremendous damage to whatever remains of the US economy.
One feature of the risk economy is the Federal Reserve's new willingness to absorb any sort of crap collateral in exchange for massive cheap loans to insolvent companies and institutions. The Fed has, in effect, made itself the world's largest financial shit-magnet. It has already taken in a few hundred billion in securities based on non-performing real estate loans, and has now opened the window to securities based on non-performing credit card debt, car loans, and other miscellaneous IOUs still drifting un-hedged in the banking ether.
It's a mark of our collective desperation to avoid the consequences of so much reckless behavior that no credible authorities have stepped up to denounce this racket -- no Fed governor, no politician of standing (including the candidates for president), no newspaper-of-record. The Attorney-general of New York, Andrew Cuomo, may be quietly cooking up some cases in the deep background, but the SEC and the federal banking regulators hung up their "out-to-lunch" signs on this long ago.
Meanwhile, the basic situation is this: the world is awash with bad investment paper. The standard of living in the US can't be supported on debt anymore. The people of the US don't produce enough real value to service their debts. Institutions can no longer be supported on debt gone bad. Something's got to give -- meaning something has to bring the US standard of living down to a level consistent with our declining actual wealth.
Everything else going on right now is a dodge. The Fed maneuvers, the "coordinated actions" of the western central banks, the postponements of default, the non-disclosure of contents in bank portfolios, the pretense that risk alone is a kind of fungible resource that can be endlessly traded to generate fees -- all this fucking nonsense will only make the eventual unwinding much worse.
Personally, I doubt that it can go on more than a few more months. The velocity of everything is going up past the "red line" where things really fly apart. The increased velocity of non-performing mortgages and deadbeat credit card accounts is one thing that can't be hidden or escaped. America will feel and see very vividly when the repossession teams rush families from their homes, when the pickup truck is taken away, and when the pink slip appears in the pay envelope. Meanwhile all the higher-end banking shenanigans will only debase the dollar and make it more difficult for people already in distress to buy gasoline and food.
If the bankers and treasury officials collude to prop up one more failing big bank a la Bear Stearns, the political fallout for Wall Street could be lethal. In any case, I think we will have a way different sense of ourselves as a society by the time the election comes.