Friday, March 27, 2009

Fear Itself 2: Fall of the Masters of the Universe

I'm not as smart as Paul Krugman.

I know, I know, it's hard to believe. Sometimes I don't believe it myself.

But then I do something like wash my cell phone because I forget I put it in my pocket and I get that face-palm moment of "Fuck, goddam, I'm an idiot..!" and I fall to earth.

So I could drone on and on about the Great Recession and how we, and the greedy, venal rat bastards we elected helped make it, smooth it's way and sell it to each other as the Bestest Most Wonderfullest Shiny Pretty Thing Evah. I could give you chapter and verse about how a nation, a people and an economy that deliberately warps itself away from growing and making things into spinning paper profits into more paper profits is in a mug's game and will, as surely as picking up skeevy people in sleazy bars, come to grief sooner or later.

But why? Paul Krugman (the guy who is smarter than me) has already done it. Just go and read his column for this Friday.

Here's his money graf, and the reason I'm increasingly unhopeful for and unimpressed with my country and the so-called "leaders" who run it by proxy for the Rich, the Well-Born and the Able:"But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules. As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good."

The bottom line on this entire debacle is that the point of the past 20 years has been to transfer wealth from the bulk of the population to the top 1% to 10% that have the ear of the congresscritters and the wealthy insiders who serve at the top of most of the executive agencies.

It's worked.

Despite the "populist rage" at things like the AIG bonuses, what odds what ANY of these malefactors of great wealth will lose so much as a nickel? Or that they will spend so much as a night in jail?

Watch. I'll bet that Madoff's family walks away with millions, that the very same Wall Street Masters of the Universe that engineered this immense derivative and securitization Ponzi scheme will still be beavering away, spinning money from nothing, years from now.

Nothing will change.

Except we just won't know about it because there, under the bridge where we'll be huddling out of the cold rain, we won't have CNBC, we'll be sleeping on the newspapers instead of reading them and, anyway, we'll be too fucking busy trying to eat bark to care.

14 comments:

sheerahkahn said...

As I've been telling my wife...I think we're being scammed by wall street, and by certain members of the Government.
And I'm more and more thinking, "no more money, in fact, what we've given you...we want back, now."

Lisa said...

Chief,

I believe Krugman is right -- it is a failure of an entire banking model. Why do we want to want to put that on life support?

"We'll be sleeping on the newspapers" -- actually, most papers will be defunct, I'm afraid. However, as in the photo, some lucky few will secure the old pallets they used to be stacked upon, to be used a box springs in their new homes under the freeway.

(Or maybe some of the pallets that came back after dumping their greenback payloads somewhere in the Iraqi desert. . .)

rangeragainstwar said...

Chief,
The Banks are too big to fail but does that also apply to the entire country? Is the USA too big to fail? I'll leave that un rhetorical.!?

The system is so corrupt that it needs broken down completely and rebuilt from the ground up. Why does the nation need supr sized banks anyway? The large banks lured the smaller banks into ruin with fairy tais and fairy dust.

The question begs- Will Obama back the people or the bankers? And that's a fools question. Obviously.
jim

Pluto said...

Sorry, I've been studying this situation obsessively for a long time so here I go again...

I need to break down my responses because you guys have touched on several different topics.

Topic A:
How did we get into this mess?

Krugman does a pretty good job of describing most of what happened.

But I have to disagree with the Chief, the rich were considerably more short-sighted than you think. They observed these huge flows of money between nations, particularly China and the US and wanted a piece of the action and that, combined with a faulty computer risk model, and lack of government regulation and foresight created the current crisis.

The rich weren't thinking so much about soaking all of America, they just wanted part of the action and were very effective in getting it.


Topic B:
Is the current financial system broken?

Hell yes! It has been increasingly broken for the last 15 years. I think Krugman goes a little overboard in tracing the breakdown to the Reagan years; many of the Reagan, Bush, and early Clinton era reforms really did make the banking industry more efficient and consumer-driven. But the government kept giving the banks more power throughout the late Clinton and early Bush era without any common sense.

The worst part was in the late Bush era when much of the bank regulation and government reform work that was being done was designed solely to hide the increasingly large problems from the government and the people. Obviously this didn't work out so well.


Topic C:
What can be done to fix the problem?

Here's where we get into the heart of the problem. The solution obviously has to be political in nature and politics are tricky. Anything is possible so long as you can get a compromise but nothing is possible without compromise.

Right now the Chief and Ranger are correct that the wealthy don't clearly understand the problem with the system and are spending their gains to keep themselves out of jail and to prevent meaningful reform. As Krugman comments, they are just attempting to wait out the crisis and assume it will be business as usual after that. THEY ARE DEAD WRONG!

I have been following the efforts of three world-class economists (who mostly tend to think outside the box): Krugman, Roubini, and Shiller. Roubini is the best of the lot because he has spent the most amount of time on research and solely concentrates on the economic effects so he has no political axes to grind. His colleagues call him "Dr. Doom" because he sees an enormous crisis slowly unfolding on the entire world.

The Obama administration (partly due to Treasury Secretary Geither's Bush-era rose-colored glasses and partly due to intense political pressure from the wealthy) don't agree yet. Their plans will fail by mid-May at the latest and then they will have to take stock.

Hopefully Obama will insist on a radically different course at that time. The longer he delays the harder the crisis will hit our country.


Topic D:
What are are the major impediments to progress in solving this mess?

1. The Obama administration's theory that this is a short-term crisis that will go away if you throw it a couple of trillion dollars.
2. Congress - As I said earlier, compromise is necessary. Don't look here for compromise especially if Rush Limbaugh wins the struggle for the heart and soul of the Republican party.
3. The wealthy - They are losing money fast and don't like it. They are using their remaining wealth poorly by forcing the government to replace their lost wealth. Instead they are dragging the government down with them.
4. The American people - This crisis is going to be every bit as large (although not as painful) as the Great Depression and will require lots of changes and sacrifice to get our economy to higher ground. Americans, in general, have not been trained to accept that willingly. Expect the average citizen to lay pressure on Congress to protect them until it is almost too late.
5. Where do we go from here? - Although the experts know we need to change, they don't agree on what we need to do to get out of the mess. Expect at least a few false starts that will shake people's confidence in the government.
6. Advertising - The wealthy believe their own highly-effective advertising about the nature of this crisis and they are still spending their wealth to promote this point of view


Topic E:
What is my long-term non sugar-coated prognosis?

Too early to tell. The possibilities range from a resurgent American economy that leads the world by example (highly unlikely) to the complete collapse of the US (even more unlikely).

The longer we wait to address the real problem the worse off we will be. If this crisis isn't reasonably well under control by the 2012 elections we could see some fairly severe violence marring the elections.

And just in case you're getting a little too comfortable, don't forget we've got huge looming Social Security and Medicare/Medicaid deficits coming soon...


Topic F:
What can you do to protect yourself?

Lots! I believe that the effects of this crisis will be extremely uneven, depending on local government and business leaders and on how well individuals adapt to their local economic environment.

So get out and start knocking on the doors of your city and state leadership. Make sure they understand the nature of this crisis and vote them out of office if you need to. The life you save may be your own.

If your local leadership can't be convinced to respond to the crisis, you might want to move to a region that is more responsive. Might as well beat the rush...

You can try this with your Federal level representatives but don't expect to get too far. The closer you are to Washington DC, the harder it is to see and hear what is really going on.

Other things that you can do is to build up a supply of cash if you think your job is threatened and to start figuring out how you can do more with less. Figure out how you can earn extra income, don't look at low-skill second jobs if you can help it, the competition for those is already cut-throat and getting worse fast.

Will people be forced to live in underpasses? Yes, it is happening on a small scale already. You'd know this if your local news outlets weren't crippled by the huge amounts of debt they are carrying. I've seen deeply buried stories from LA, Las Vegas, and Atlanta but they seem to think it is quaint or a local quirk (WTF?).

Will YOU be force to live in an underpass? Remember my comments on the four different types of people? The thinkers are likely to move out of the way of the crisis before it hits them too hard, their biggest opponent is bad luck. The rest of the groups are much more likely to experiment with the hobo lifestyle.

The last thing I have to suggest is that you donate cash and volunteer at food shelves and homeless centers. The old saying "What goes around comes around" is still true and being kind to people in crisis is probably becoming a survival skill. You never know when the next person who needs help will be yourself.

sheerahkahn said...

Pluto,
hence the reason I think we're being scammed.
The evidence is there, the money trail is easily traceable, and the perps are clearly confident in their position that the only thing they fear is the mob of the fleeced.

Look at how the money is flowing.
AGI is paying off the legit insurance claims on the failing banks, which should "deleverage" their risks giving their assets column a big "hoo-ahh!"
But it's not.
Why?
Because their also paying off the CDS's, and the side bets made on the shorts of those CDS's and CDO's.
So for example, Citibank, which has recieved even more outrageous cash from the gov, is also getting outrageous cash from AGI because of all those "insurance" claims.
And to add insult to injury, Citibank is now paying out the insurance it granted on other CDO's and CDS's with other investors.
Essentially, a round robin of money being doled out.
There is a reason why the bankers, CEO's, CFO's, and other financial types all stare at the congressional committee's like dead fish on the pier...because if they started listing out how the taxpayers money is being spent we, the taxpayers, would literally drag them all out of theirs offices and string them up on the lamp posts lining Wall Street with piano wire.
This is a total manufactured crisis that was allowed to achieve it's end purposes because they, the assholes on Wall Street, regardless of company name, all knew that their cohorts in government would not allow them to fail...because "they're too big to fail."
Essentially, then, this is the take home message that I got from all of them, both government, and from Wall Street,
"Hey, fuck you.
Fuck your hopes,
Fuck your dreams,
Fuck your future,
because you,
you little broke ass fuck,
are at my mercy,
and you will fucking do as I say. So shut the fuck up, and pay up bitch because I have everything of yours that you have earned and squirreled away
hostage."


Sorry for the harsh language Chief, but that is what I'm hearing from the government and from wall street, and I'm so lividly pissed right now because of my powerlessness.

rangeragainstwar said...

sheer and pluto,
Plug this fact into your equations.
Brownells inc reports that they are having difficulty keeping up with the demand for BLACK RIFLE parts and accessories.
Yesterday at Walmarts I could not find bricks of 22 rimfire let alone 9 or 556.This is an intelligence indicator of something.
jim

Pluto said...

Sheera,

Short version: You're right.

Longer version: Is a crime if there isn't a law against it?

Unvarnished version: They've got the whole financial system rigged to implode if you try to take them down.

There's a reason Warren Buffet calls CDS's the financial Weapons of Mass Destruction.

The two things that get to me about this situation:
1) They are SO smug about their bonuses. Very similar, IMO, to Nazi concentration camp guards being proud of keeping people from escaping.
2) They think that this is the way the financial system SHOULD be. Even after all of the blow-ups and melt-downs, the bankers expect the situation to snap back to normal and that everything will magically be good again.

As I mentioned before, the bankers unflinching self-confidence is a major impediment in the search for a solution to this mess.

It appears to me that AIG is in great danger of needing more money in the near future and having the government stiff them.

This would literally blow up the entire financial system and cause incredible hardships across the world. And yet I think it is now the best course of action.

Pluto said...

Jim,

I had heard this before but am glad (sort of) for the confirmation from a trusted source.

People are rightly scared but hopefully bullets will not be that useful when things start getting worse later this year.

rangeragainstwar said...

Pluto,
We are on the same page but the facts are out there to see.
I believe there are 40 years of repressed rage out there.
RUGER FIREARMS STOCK HAS SOARED SINCE O'Ss election as has Smith and Wessons stock.This rides atop the gains from the PWOT arms sales. This is domestic spending of citizens laying in supplies.
I'm never in favor of violence- I'm just observing the facts.
jim

FDChief said...

FWIW, there's a good discussion of this issue over at JD and Al's blog buggieboy here: http://buggieboy.blogspot.com/2009/03/gwbs-ownership-society.html

My thoughts on what Jim has brought to the table is that I really wonder. Granted, there may be a lot of rage out there, but I wonder how much of this Class V resupply is related to militia types worried about the rampage of the nigras and/or beaners "sure to come" after the economic meltdown, versus the "villagers storm the mad doctor's castle" scenario...

rangeragainstwar said...

FDChief,
I don't think it's militia that we're discussing here. I think it's mainstream America.
Here in Fl there was a lot of militia activity in the 90's but there is none evident now. A lot of them migrated to the Mex border area to serve with the vigilante groups.

Talk to people and you'll hear it.Also check at Walmart and other places that sell black rifles and related ammo and items.The stuff is sold out.
jim

FDChief said...

Jim: I should clarify by saying I don't mean actual "militia" black-helicopter-type people. Just a shorthand way of referring to very nativist, pretty redneck Amurrica-fer-Amurricans. If you listen to Ruch or Mike Savage or Malkin or any of the other radio shouters it doesn't take long to hear the notion that America is doomed, that the lib'ruls and nigras and spics are coming for your rifles and your daughters (or sons, the homos are comin', too).

So I'm not sure how much of this preparing-for-the-apocalypse is populist rage at the Guvmint and how much is paranoid fear of the dusky hordes. Not that the armed mobs will discriminate, if they turn out. Just sayin'.

sheerahkahn said...

when people don't have confidence in the in their government, or their future they assume the worst.
In this case, I think I know whats going on...the same thing that was happening in the early eighties...gun sales up, confidence down, and the economy...not so hot.
Not bad, but not great either.
Then...then came Ronnie...and the Defense budget...oh yeah, Ronnie let down the defense dollars, and the economy responded like a dozen piglets bum rushing the sow for a prime spot.
History is cyclic..., kinda like a Karma wheel that keeps hitting the ticker as it spins, and we're on the wheel...me, I just want off this ride.
This mess tires me out.

Lisa said...

sheerahkahn,

As Lennon wrote,

I'm just sitting here watching the wheels go round and round/
I really love to watch them roll/
No longer riding on the merry-go-round/
I just had to let it go