Prozac IndigNation

What Engels failed to understand was advanced capitalism's deft wielding of complexity, the cloaking of risk, the originate-and-distribute 'hot potato' model, securitization as camouflage, the democratization of credit, the false hope of counter-parties and unanticipated concentration risk, etc. Heck, who beyond a select few people understood it even nine months ago? Even now, the rationale of post-bubble fervor is hard to reconstruct. My guess is Engels would resist the anomalous language of 'bubbles' and argue that the so-called anomaly is simply the business-as-usual, crisis-to-crisis nature inherent in capitalism. He might also marvel at the financial capitalist's ability to 'feed at the socialist trough' whenever it suits him. Should we be surprised? Greed observes the ideology of expedience. Or is it that capitalism is institutionalized greed and not an ideology at all?

Anyway as the elite stole from the top via stock options, ridiculous salaries, acquiescent boardrooms etc., they simultaneously (and ingeniously) created credit models that augmented stagnant wages and sustained the workers' consumption patterns against the Marxist cul de sac of overproduction. In short, cheap credit caused the worker to believe he was still keeping ahead and enjoying the fruits of his production. For a time it masked his real wage declines.

The Freddie/Fannie paper factory also benefited from an implied govermental (read: socialist) backstop which, as it turned out, was ultimately invoked; this aggressive credit creation relied upon the gumption of relatively less sophistocated and emergent capitalist markets (many prior Marxist-Leninist states ironically) that, for a variety of currency and developmental reasons, were happy to remain production-bound and vendor-oriented.

Like any Ponzi scheme, this dog-and-pony trick can only succeeed once. No one will be fooled again. Meanwhile the American worker is being unceremoniously dumped back into a classic Marxist overproduction trap as credit sources evaporate, home equity disappears, manufacturing jobs vanish and inflation looms. The new cars and houses are stacking up. Absent credit, no one can afford them. Which is to say, no one can afford them. When the deleveraging process completes itself, we will be back to 'merely' wages --and horrendous wage disparities-- a more classic Marxist playing field.

The question to me is, when will the American pot finally boil over into meaningful social unrest? Or are Americans so naturally docile (and/or medicated) that outrage is not an available response? Is Prozac Huxley's soma? If so, they sure as hell better find a way to keep the pills rolling.

The world economy seems in need of a world war that is 'well-crafted and geographically strategic' i.e. one that preserves the productive capacity of Asia (seems a waste to raze good factories) while destroying the consumption/demand centers such as N. America and Europe. Human need is easily replicable. If mindless consumption has in fact become the American Way, as it seems to have, what would Jefferson say of preserving 'the right to consume toasters and iPods'? The West inhabits a moral vacuum that nature will invade one way or another. Let it be a rapacious and well-conceived war.

A bout of good old fashioned destitution in the developed world would topple the Mazlow Hierarchy and bury the Rostow post-industrial pretensions once and for all. These were the self-actualization springboards that led the West into a narcissistic cul de sac. I'm thinking a collapse of first-world into third and third into first, rendering Martin Luther King's 'higher synthesis'.

The trouble is, the military industrial complex is on the wrong side of the conflict --unless China stops bankrolling it. Post-war, Asia can serve as the Marshall Planners. You need an untrammeled space (similar to post-World War II America) to serve as the launching point for renewed development.

Call it Pax Sino.

Achtung Baby!

I think there are times in history when an impending reality can be so eclipsing --so anathema to the status quo-- that denial is the only available psychological response, especially among those with the most to lose, the so-called elite, our feckless leaders.

I understand the theme of this year's Davos confab is 'Shaping the Post-Crisis World'. Post-crisis? Mid-crisis perhaps? The end-of-the-beginning-crisis? Even the bumper sticker is an exercise in denial. The crisis hasn't been navigated yet. How presumptuous to postulate a post-crisis world until we get there (God willing.) Then the ultimate hidden inference glossed by today's elite: shaped by whom? Of course we know who THEY think the shapers are going to be. Quite possibly we haven't met the shapers. Not yet. And more than likely it ain't Bono. Achtung baby!

"The U.S. is, in dollar terms, bankrupt. How did this happen? Well, there are $800 TRILLION dollars in over-the-counter derivatives floating around in the market. That’s 10 times the GDP of the WORLD. These dollar-denominated paper assets are likely worthless or close to it. Which means that the dollar is already...effectively worthless." --Richard Young

This may be the re-start button I've been pondering. The US dollar is worthless. So we HAVE been reset back to zero. It's the restart PROCESS that's being hindered. The reality is too horrific to be publicly acknowledged. So don't expect a ribbon-cutting ceremony or a Wall Street Journal headline. No one standing on a podium is going to come clean. Political instituions --governments and central banks-- will never openly acknowledge the obvious: "Dear America, due to an epic dereliction of duty we ground your currency down to nothing." Nah, they're going to sidestep the pomp and circumstance.

Even the markets, normally politically unbeholden, are still grappling with the almost-unimaginable implications. The financial engineers created so many dollar instruments that they soared beyond the intrinsic measure of global wealth (GDP) by an order of ten. That is, it would take ten years of the world's productivity to 'pay them down'. The whole world will not submit to a decade of debt peonage to bail out the banking elite. At least, not willingly.

Gold seems to be a no-brainer.

Eat the Rich

I had imagined a financial elite that, inordinately perhaps, enriches itself during periods of economic prosperity. This is a tax, if you will, on broad-scale prosperity, a necessary toll. As sure as taxes.

I had not considered an elite that turns to preserving its 'boom time' earnings during hard times by such unconscionable methods as nationalization and socialization of risk. Suddenly the rich look unvarnished, almost ridiculously in love with their mansions. They have no ideological purity. They are not capitalists --they just sport just vanity plates with 'laissez-faire' stamped on them. There is nothing to recommend the rich. They are craven. They are nakedly opportunisitc. They are greedy. Period.

Devil's Dictionary

We need a Devil's Dictionary for the New Economics...

Globalism: the consolidation of incompetency set atop massive complexity while awaiting epic catastrophe.

Cronyism is the greatest impediment to a rational prescription. The attempt to rescusitate Wall Street while Main Street burns is a huge tragedy. It makes you want to cry 'cause it ain't gonna happen. I think the economy is screaming for simplification. By supporting small regional banks, we reduce the network effect and break the risk into manageable bite-sized pieces. The food chain is tied to small-time, regional lines of credit. Who needs Manhattan?

Obama's no Huey Long. He's not even FDR. He's Clinton/Blair.

Bikini Sand Wrestling!!

Here it is. The video your mother warned you about --while your father surreptitiously slipped it under your arm. That's me an' the kid in the vid, and me covering vocals (D.L. Roth called in sick with an ingrown hair plug.)