I contributed a piece to Suvudu yesterday on dystopias and “positive” science fiction and why the latter is one of the most dangerous things ever invented. Other than Pez Dispensers. Anyway, check it out.
And why not buy BURNING SKIES while you’re at it.
Matt Taibbi has published another of his great pieces in Rolling Stone; this one putting the AIG bailout in its proper context. Money excerpts:
The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers. . . .
In essence, Paulson used the bailout to transform the government into a giant bureaucracy of entitled assholedom, one that would socialize “toxic” risks but keep both the profits and the management of the bailed-out firms in private hands. Moreover, this whole process would be done in secret, away from the prying eyes of NASCAR dads, broke-ass liberals who read translations of French novels, subprime mortgage holders and other such financial losers. . .
As to how last fall’s money was allocated: “Another member of Congress, who asked not to be named, offers his own theory about the TARP process. “I think basically if you knew Hank Paulson, you got the money,” he says.
Taibbi concludes:
How much of what kinds of crap is actually on our balance sheet, and what did we pay for it? When exactly will the rent come due, when will the money run out? Does anyone know what the hell is going on? And on the linear spectrum of capitalism to socialism, where exactly are we now? Is there a dictionary word that even describes what we are now? It would be funny, if it weren’t such a nightmare.
I like his suggestion that the traditional left-right way of describing political views is rapidly becoming obsolete. Yet the games continue as though it was still politics-as-usual. It isn’t. Not anymore.
My novel The Mirrored Heavens is now available in mass-market paperback.
As the stock market returns of the last decade crumble into dust, and it becomes clear that the “growth” this country was experiencing was essentially a giant real estate Ponzi scheme, there was an interesting article in the FT re how the future gets ever more difficult to discern:
How do you frame a view of the long run from early 2009? The world has a ruptured financial system. . . The economic recession now encompasses the whole world. The speed of economic decline is without precedent. Government intervention is also without precedent, in its magnitude, depth, and complexity. Fiscal deficits are reaching numbers no one dreamed about even 12 months ago, yet they will have to be financed.
Juxtapose this with a Washington Post Outlook article by Joel Lovell:
It’s weird and disconcerting that after all that has happened there are still so many experts out there willing to dispense wisdom with utter assuredness, day after day, despite having been so spectacularly wrong in the past…..The more terrifying and destabilizing the news, the more the financial-news sages seem to commit themselves to dispensing advice with unblinking certitude.
It’s fascinating to reflect on how much of the political discourse right now presupposes a “rulebook” that—if it only it be interpreted correctly—will provide an infallible guide telling us What To Do, when the truth of the matter is that We Really Don’t Know For Sure. I suspect this is what Obama meant when (if?) he told Biden that “30 percent of what we do won’t work.” Though if it’s only 30 percent that doesn’t work, then we can count ourselves as fortunate indeed.
My novel The Mirrored Heavens is now available in mass-market at Amazon.
With another 800 billion tossed into the mix, the bailout(s) is reaching mindboggling proportions, and those in charge of it are pretty much making up the rules as they go, hoping to somehow borrow their way out of this mess. This latest move is aimed at consumer lending; it’s unclear to me how that’s really going to help, given that more consumer borrowing is precisely what we don’t need—and cash-strapped citizens are unlikely to step up and do their patriotic duty by continuing to Shop/Spend anyway. Meanwhile, the first, Wall Street-focused bailout (back when 700 billion seemed like a lot) trundles along pretty much immune to oversight. My predictions are as follows:
—Paulson’s friends are going to get even richer than they already are
—The giant sucking sound you’re about to hear will be the U.S. dollar once it turns out there are way too many of them
—We may have bought our way out of the last downturn (2001), but we’ll eventually realize that our efforts to do the same for this one have only stirred the shit up to unholy proportions
—Paulson may not realize he’s being set up as Number One Scapegoat, but a lot of us will laugh when it happens.
—Can’t we start spending money on shit that will actually be useful when all this fucking money’s worthless?
—Aren’t you glad that Bush 43 failed to privatize social security?
“It strikes me as unbelievably generous.” —former (unnamed) Fed official on the Citigroup bailout, cited in WP this morning.
Letting the Big Three go bankrupt would crater what’s left of the economy and reduce the midwest to a sea of rusted iron. Allowing them to continue to make cars is insane. Injunctions to retool the whole output to making green cars are going to lead to an awful lot of eco-friendly hybrids sitting around looking idle. No one’s got the money to buy anything anymore.
Except, of course, the government. So . . just as the automakers retooled during wartime to produce tanks and munitions, now they should be retooled to produce Shit We Actually Need, like high-speed rail infrastructure, shitloads of windmills, clean mass transit, etc. I’d also like to see Rick Wagoner run over by an SUV on pay-per-view TV, but you and I both know he’ll get a big bonus to fuck off instead. As long as he keeps the hell away from Detroit, that’s okay with me.
The failure of the bailout bill has set off all the usual recriminations, though as of this writing the market is regaining some of the ground it lost yesterday. The bill that went down to defeat yesterday was certainly rife with problems: as economist Nouriel Roubini (one of the few who saw the financial tsunami coming) points out, it lacked numerous safeguards and put far more of the public’s money at risk than is prudent. Nonetheless it seems virtually certain that some kind of bill will pass shortly.
But the underlying damage has already been done. Future historians are likely to mark 2000 as the apogee of the American Empire; the decline since then has been as swift as it was unnecessary. Wed to their belief in American exceptionalism, the country’s leaders ran up huge debts to support wars that (as enemies like Bin Laden anticipated) undermined the state’s finances. And the people showed even greater myopia, spending like there was no tomorrow even as they lapsed into endless blue state/red state culture strife. The world economy has depended for way too long on the ability of the U.S. consumer to place him/herself in ever greater debt. We’ve now reached the limits of that ability, and we’ve got a long way to fall. We may or may not be heading for a second great depression, but we are certainly heading for a multipolar world (at first financially, but ultimately politically). And the transition to it will be anything but pretty.
Lehman’s roadkill. Merrill Lynch has run for cover. And it looks like Washington Mutual is probably next, along with God knows who else. The best analogy I can think of to describe what’s happening involves a really big set of cookie jars, hundreds of hungry monkeys, and a complicated light system that only incrementally reveals who has their hand in which jar, and just how many cookies they’ve already consumed. The point being that we still don’t know how deep this goes, and if that isn’t an argument for a total reform of the entire joke that our financial system has become, I have no idea what is.
It will also be interesting to see if the disaster that the economy is becoming finally makes its way into the presidential campaign. Both candidates have talked a lot about the economy, sure, but neither has even begun to level with the American people about just how bad this is getting. The New Model McCain is unlikely to venture anywhere near THAT discussion, of course, but Obama is going to have to. Explaining in precise terms how this is all part of the mess the GOP has created while avoiding pointing out to the average citizen how his/her own spendthrift habits is also part of the problem . . . that’s the fine line that Obama is going to have to walk. As for McCain, he can only hope the attacks on Palin intensify while everybody forgets about all those pesky issues that actually matter.
In my post of yesterday, I made the statement that “[Fed chairman] Bernanke is clearly floundering amidst the crisis that [former chairman] Greenspan spent his career postponing.” At least one commenter has wondered why Greenspan did this, given his focus should have been on the overall economic health of the country. And I’m here to tell you why:
Because he was a chickenshit.
Oh, it wasn’t entirely his fault. As the commenter in question points out, there’s no doubt that Alan Greenspan succumbed to pressure from the Prez, thereby turning what should have been the culmination of a great career into a mockery of everything that career stood for. But Greenspan was just doing his utmost to prevent an economic downturn at all costs. Costs that included the risk of an even greater economic downturn in the future. Thus the lowering of interest rates to rock-bottom levels across the early part of this decade. Thus the ignition of a housing boom that rapidly got out of hand.
But that nonetheless did what it was supposed to: propel us out of the recession of 01/02. And something that’s worth noting about that recession is this: it was the first in American history where our leadership denied its existence throughout its existence. It was only after it was safely in the rearview that the dreaded R word could be pronounced at the highest levels of state. And I would argue that there’s a sense that we never truly recovered from it: that the housing boom constituted, essentially, a false recovery. All we did was create a mountain of debt that’s now threatening to suffocate us.
Yet before we rush to blame Bush and Greenspan, we should take a good, hard look in the mirror. Because that’s where the ultimate culprit resides. Because lately the American public’s relationship with that thing called Reality has been getting pretty dysfunctional. Something our leaders are smart enough to see . . and cowardly enough to accommodate (and, I might add, greedy enough to exploit). The American people don’t want to be in a recession. So . . presto . . no recession! It’s easy, see? We just hit the magic button and keep printing more money and your homes keep increasing in value and you can keep on fucking borrowing and borrowing and keep on buying SUVs because we know the only thing that’s as unlimited as dollars is oil and besides daddy I mean Dick Cheney said the american way of life is non-negotiable and you wouldn’t want to see what kind of electoral temper tantrum I’m gonna unleash on any goddamn commie who tells me that it’s NOT . . .
But let’s not get carried away here. Because Dick also said use your last ten bucks to buy THE MIRRORED HEAVENS. There’s no better way to spend it. Trust me on this.
Grim day yesterday, as oil rose into the stratosphere and stocks took it on the nose. Just to put things in perspective, we are now on track for the worst June on Wall Street since the Great Depression. What’s really scary here is that it’s not just oil prices that are driving this; the market was also reacting to clear signals that the credit crisis (which bankers were so eager to assure us was now behind us) remains in its early stages. Worse, Fed chairman Bernanke is clearly floundering amidst the crisis that Greenspan spent his entire career postponing. Barclays Capital warned its clients yesterday that central banks have flunked their “first major test in 30 years”, and that their pumping of money into the economy has given them “zero credibility . . .and the Fed has negative credibility, if that’s even possible.”
Harsh words. Maybe too harsh, given that it’s not just the Fed’s fault. The stupidity of the much-vaunted stimulus packages passed by Congress and signed by the Prez this past spring is now manifest: at best that stimulus had no impact; at worst, it persuaded just a few more debt-stricken consumers to stagger to their local Circuit City for a TV they couldn’t afford. We’ve been sleepwalking for so long; what’s ten more minutes after you’ve already hit the snooze button fifty times? But unfortunately the scene now is like that at Arthur Dent’s house in Hitchhiker’s Guide: the bulldozer is right outside the window, and it’s about to come crashing through. Royal Bank of Scotland just issued a warning that the “chickens are about to come home to roost”, and that by September the markets will be in full, devastating retreat. It’s hard to see how that scenario can be avoided now.
Meaning that the Fed will be confronted with the dilemma they’ve been so desperate to avoid for so long. Raising interest rates offers the only hope of stemming the runaway inflation that rising oil and commodity prices are threatening to unleash. But the impact on the long-deluded American consumer will be nothing short of catastrophic . . and that’s a word that I fear we’re going to hear a lot more of in the weeks and months to come.
