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Prophet Motive

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From THE NEW REPUBLIC:

Is Nouriel Roubini Lucky or Just Good?

by Julia Ioffe

This year, Nouriel Roubini, the economist known to the general public as Dr. Doom, Prophet of the Financial Apocalypse, spent the early hours of Mardi Gras on the floor of the Frankfurt Stock Exchange. It was only 11 a.m., but the party was rollicking. Traders careened around the floor, hooting and honking, dressed as dragons and devils and convicts. Rock music roared overhead, and no one seemed to care that, by the bye, the market had tanked. Tickled, Roubini registered the flicker of amusement on his Twitter thread: “Nouriel is at the Frankfurt Stock Exchange,” he wrote, “where everyone is dressed in Mardi Gras costumes even if the market is down 2.5%.”

Roubini has always been a bon vivant–a trait that has mesmerized the tabloids ever since Facebook photos surfaced of him, the professional pessimist, partying … with women. But, today, there was no time to celebrate. First, he had to go see Axel Weber, head of the nearby German Central Bank, to discuss “how the German taxpayer is going to have to bail out the lazy Italians and the lazy Greeks,” who were up to their eyebrows in debt. Then there was a panel discussion with finance gurus Robert Merton and Stephen Ross; there were clients to counsel, a keynote address to deliver, and e-mails, hundreds of e-mails, slowly piling up in the BlackBerry on his belt. By the time he responded to the ones worth responding to and updated his blog, it was nearing 4 a.m., and he only had time to sneak in a few hours of sleep before another day of flights, meetings, conferences, and TV appearances.

When I caught up with Roubini three days later, he was draped over a booth in an Upper East Side diner, his hair rumpled, collar undone. The speckled blue tie he had worn on Maria Bartiromo’s show that afternoon was gone. His speech was still a rapid spit-out of facts and favored metaphors (the government “cannot be half-pregnant” with the banks), with modifiers in just the wrong places (“I was all day long giving talks”), but it was disembodied: Roubini was wiped and having a hard time propping himself up.

Now that his early prophesies of a “bloodbath” have come to pass, Roubini’s star is at its apex, and everyone wants a little ray of its gloomy light. This includes his editors at Forbes, The Wall Street Journal, and a growing number of other publications; his students at NYU, where he is a popular tenured professor; and his consultancy’s swelling portfolio of clients–the World Bank, IMF, 50 central banks, and 30-odd finance ministries among them. He also appears on CNBC almost every day. He is a curious presence on the network–the antipode to its yawping, fratty ethos–and he is trotted out to play the foil, delivering bad news with a dark and steady gaze, punctuated by the occasional impish smile. It’s good for business, Roubini admits, but he makes no secret of his contempt for the network’s roster of “perma-bulls who declare that this is the dramatic and cathartic event that signals the bottom of the crisis, and recovery is three months ahead.”

“What a delusion,” Roubini sniffs.

Though he hasn’t attacked the Obama administration’s policies with Paul Krugman’s fury, and though he is no longer the most bearish of the bears, his short-term outlook is still quite bleak: a 36-month downturn, double-digit unemployment, and sluggish, recessionary growth well into 2010. At best.

Roubini is widely seen as an incorrigible pessimist, and, in the years leading up to the crisis, this nose for doom pitted him against his more cautious colleagues in the academy and the regulatory agencies, as well as the ebullient in-house economists at banks and hedge funds. Even those who predicted a downturn didn’t recognize the extent of the problem. They homed in only on certain pet indicators–trade imbalances, say–and saw a temporary, contained recession in the works. Roubini, on the other hand, saw something else entirely. Like a good mechanic or internist, he understood the wiring. He knew, for instance, that current-account deficits were integral to the housing bubble, and that those two factors linked up to countless other factors at home and abroad. So he took what, back in 2004, was just a hunch–there is a foreign-financed bubble in the United States–and eventually pushed it, step by logical step, into a Socratic cul de sac: We are headed for an unmitigated financial disaster that will completely change the way the world does business and leave no one untouched. The theory seemed far-fetched, even hysterical–until it came true.

By calling the recession, Roubini has traveled from the Jeremiah wilderness to become one of the world’s central economic authorities. So, does he have a unique ability to penetrate data, or was he simply a relentless pessimist the business cycle was eventually bound to vindicate? Is he our great economic seer, or did he just get lucky?

Roubini can be a pleasantly phlegmatic man, but, whatever the topic, he almost always positions himself as a clear-eyed outsider battling against the half-wits. “Silly” is one of his favorite adjectives, as is “ridiculous.” When we met in New York, he wasted little time in dismantling the myth of his newfound stardom. “People sometimes write these articles saying, ‘He was an obscure academic professor and now he’s become a rock star,’” he said, one arm absently bumping an increasingly irritated man enjoying a club sandwich behind him.

Then there is the problem of Roubini’s pop-culture image: Dr. Doom, the partying pessimist. He hates both parts of the packaging. “In many ways the Dr. Doom moniker is inappropriate,” he punched into his BlackBerry, unprompted, one very early morning in New Delhi. “I turned out to be much more of a realist than a pessimist, grounded in reality rather than living in a bubble of delusions about how bad things would get.” And he flares at any mention of his reputation as a playboy, accusing Nick Denton, the publisher of Gawker Media and the main peddler of these allegations, of anti-Semitism (Denton’s mom is Jewish).

If Roubini slides easily into the role of victim, it’s a stance that his ancestral history may have predisposed him to. The Roubinis are from Mashad, a city on the eastern fringe of Iran and the resting place of the Imam Reza, the eighth of the twelve Shia imams. This made Mashad a major religious hub and, thus, a difficult place for its Jewish community, the Roubinis included, to live. The city’s Muslims and Jews, however, managed to maintain a tense equilibrium for centuries until, in 1839, a Jewish woman got a strange prescription for an abscess on her hand: cut open a puppy, stick your hand in its innards, hold for an hour. She carefully followed the Muslim doctor’s advice, but got the timing wrong, killing the dog on a major Muslim feast day. This was interpreted as a mockery of the holiday, and the town exploded in violence. When it was over, 36 Mashadi Jews were dead and the rest were forced to convert to Islam, an event that came to be called the Allahdad. For the next century, until the Iranian state slowly loosened its grip in the 1940s, the Jews had to secretly keep their faith while maintaining an elaborately Islamic facade.

The trauma of the Allahdad forged a strong insularity among the Mashadi Jews, one they maintain even in the exile of Long Island and Israel–and it gave them the sense that the unimaginably bad is nearly always possible. “It’s like a big tribe,” Roubini says. “They mate among each other; they don’t even mix with other Jews.”

Roubini himself was born in 1958, not in Mashad, but in Istanbul, where his parents had a short layover before moving on to Tehran, Tel Aviv, and, finally, Milan, where the family set up its Oriental rug business and lives to this day. Because they arrived in Italy when they were young, Nouriel and his two brothers, born one after the other in the span of 21 months, were able to duck right into Italian society (though they spoke Farsi at home) and, in the typical way of first-generation immigrant children, disappear. The Roubini boys came to immerse themselves in politics during the 1970s, when Italy was rocked by social unrest and domestic terrorism; according to his youngest brother David, Nouriel began leading student assemblies on the events of the day. “I was like everybody else, the son of a good upper-middle-class family, and like many of my generation, I was socially conscious,” Roubini says. “I wanted to make the world a better world. And, probably, my interest in economics came from my interest in politics.”

The interest was largely incomprehensible to Roubini’s parents. In the Mashadi community, a boy was expected to go into his father’s line of work; many didn’t finish high school. “Unlike Ashkenazi Jews, Middle Eastern Jews put less emphasis on education,” Nouriel explains. “They were more about business. There was no particular impetus to learn. So I’m a little bit like an outsider because I broke out of it.”

He has remained an outsider ever after, never fully inhabiting any role or place since his grad-school days at Harvard, when he was able to pursue a blend of academic economics with tangible questions of policy. After seven years of teaching at Yale, he was drawn south, to New York, to fill the cultural void that New Haven had opened in his life. (He missed the opera in particular. At one Yale party, an advisee’s wife walked in on Roubini and four other economists ripping through the Catalogue Aria from Don Giovanni, a list of the paramour’s conquests: “In Italy, six hundred and forty;/In Germany, two hundred and thirty-one;/A hundred in France; in Turkey, ninety-one;/But in Spain already one thousand and three.”)

But, at NYU in the mid-’90s, he wasn’t fully comfortable, either, and was drawn south again–this time to the policy battles of Washington, where he served briefly at the World Bank and the IMF, before deciding to abandon academia for a while and adopt the life of a bureaucrat at the White House and Treasury (where he was Timothy Geithner’s adviser). That, too, did not satisfy him for long. Two years later, he was back in New York, trying again to fuse economic policy with theory, and, in 2005, he added another element to the mix: RGE Monitor, a multimillion-dollar international consultancy.

The crisis has blessed Roubini with fame, wealth (mid-recession, RGE is still growing), and odes from his peers. Nassim Taleb, who also predicted a catastrophe in his book The Black Swan, calls Roubini “the best living economist”; heavyweights like Brad Setser, Simon Johnson, and Kenneth Rogoff were nearly as flattering in their appraisals. And yet, Roubini still sees himself as outnumbered and put-upon, the man no one will listen to until it is too late.

He also bristles at anything that smells remotely of constriction. When two people from the notoriously on-message Obama campaign approached Roubini and asked him to come onboard last year, he declined. Though Roubini had been happy doing policy in the late ’90s, he had chafed at working longer days for half the money, and his recommendations were being shorn of their Roubini-esque fullness. “When I was in government, every word I said in public, I had to clear it with general counsel,” Roubini says. “I prefer to be a free thinker and be able to write daily without having to worry about that.”

Before they left for Washington late last year, he told his old colleagues Geithner and Larry Summers that, though they were free to contact him, he was happy directing policy indirectly, on television or on his blog. “I cannot do everything,” he says. “You have to choose.”

Some economists–strict academics mostly–have long considered Roubini a quack. They sneer at his approach, which is wide, deep, and deeply unconventional. When he travels, for instance, he says his research includes talking to “everyone from the airport cab driver all the way to the finance minister.” One prominent economist who studies recession indicators recently slammed Roubini for his “subjective,” “wild man” predictions because they don’t always rely on econometric modeling. And Roubini certainly didn’t help his case at an IMF conference in September 2006, when he guesstimated the chances of a world recession at 70 percent before offering, by way of explanation, that he had pulled the number “just out of my nose.”

Anirvan Banerji, an economist with the Economic Cycle Research Institute, has been particularly dismissive of Roubini’s forecasting abilities: “The average time between recessions is about five years in the postwar period,” he says. “So, if you forecast a recession one year and it doesn’t happen, and you repeat your forecast year after year … at some point the recession will arrive.”

And Roubini has undeniably overshot. In 2004, he predicted that the oncoming recession would precipitate the crash of the dollar. The crisis has mainly buoyed it. On September 1, 2005, three days after Hurricane Katrina made landfall, Roubini told Reuters that economic disaster was imminent. What followed instead was a bump in financial activity that forestalled the recession for more than two years.

All the while, though, Roubini understood better than anyone just how weak the fundamentals of our economy were. The day after the now-famous 2006 IMF talk, he went on “Kudlow & Company,” on CNBC. Roubini was, as always, the foil to Kudlow’s chipperness. “All my friends are in a great mood, Nouriel. They’re in a terrific mood. They love America,” Kudlow sang. Roubini countered starkly: “Well, they’re all rich,” he said. “The average American actually is in debt”–a sign to Roubini that housing would only be the catalyst of something larger.

What sets Roubini apart from his fellow economists (and what occasionally gets him in trouble) is his willingness to intuit broad patterns and connect the dots, something that became apparent early in his career. While others spent years refining one econometric model or drilling down on one microsubject, Roubini gorged on a range of diverse topics that, to him, were all related: Japanese public debt, tax evasion, liquidity and exchange rates, monetary policy in the newly formed European Union, the effect of political cycles on industrial economies. As a graduate student, he attracted the attention of older, more established academics both for his ambitiously sweeping econometric analyses and his ability to synthesize vast swaths of seemingly unrelated information.

But the first real test of Roubini’s eclectic methodology didn’t come until 1997. That summer, the government of Thailand–highly in debt and over-leveraged after a long and poorly regulated real-estate boom–cut its currency from its peg to the dollar. Investors panicked, and Thailand’s surging economy froze, triggering massive layoffs in real estate, finance, and construction. The crisis, which quickly spread to the rest of the region, took most economists by surprise.

Roubini, by then a young professor at NYU, was trying to stay on top of the rapidly shifting situation in Asia for a class he was teaching. He found it nearly impossible until he hit on a relatively new technology: a website. He hired some students versed in HTML and set up the Asia Crisis Homepage. The bright yellow portal pooled news reports, academic work, and policy debates on the subject, filtering, organizing, and contextualizing the information in real time under no fewer than 32 headings.

Wading through the data on Thailand, Roubini found that corruption and bad policy created a vacuum that sucked in a flood of foreign capital. This skewed the country’s financial reality and accelerated an unsustainable boom. (Roubini later spotted this distinctive pattern in the United States when the Chinese, Russians, and Gulf states were hungrily snapping up U.S. debt and inundating the market with foreign cash.) But, at the height of the Asian financial crisis, Roubini was, again, in the minority. Many economists saw it as a simple comedy of errors: Misinformed investors panicked, they said, and pulled the rug out from under the Thais. Roubini, on the other hand, saw the crisis as a systemic failure rooted in Thailand’s policies. And he was right.

More than a decade later, Roubini-ism–sprawling, non-linear, and hypercaffeinated–looks pretty much the same. His prescient February 2008 blog post that predicted the Rube Goldbergian collapse of the world financial system, for example, was called “The Twelve Steps to Financial Disaster,” but, if you include all the sub-steps and sub-sub-steps, the real number is likely twice that. On television, his talking points are similarly pluralized, rushing out quickly, like a magician’s scarves, to a grand and logical finale. (At the diner, I clocked him: 295 words on the intricacies of the European monetary crisis in under 90 seconds.) This, of course, means that brevity goes out the window. Roubini’s weekly Web column for Forbes comes in at close to 3,000 words and runs at half that length. A recent Roubini academic paper tracks no less than 47 emerging countries over the course of 32 years using more than 50 variables. Giancarlo Corsetti, who was Roubini’s advisee at Yale and is now a frequent collaborator, presents with Roubini at conferences, and sometimes finds this expansive approach frustrating. “I go up, I present one or two points,” Corsetti says. “Nouriel goes up and gives you twenty-six points, three or four of which are contradictory.”

Robert Shiller, who also worked with him at Yale and was one of the first people to warn of a housing bust, isn’t surprised that Roubini, of all the great minds staring down our financial future, emerged as the one to piece it together. “A financial crisis needs general thinking, and a team of specialists will have difficulty understanding the whole thing,” he says. “Nouriel’s approach has always been worldwide, which is not rewarded in academia. There’s an element of luck in everything, but it’s not random who he is.”

This is what the life of a prophet looks like: Two days after we met at the diner, Roubini is back at the airport. He’s off on another long jag–four continents, seven countries, eight cities, ten days.

He’s been thinking a lot not just about the way down but the way out. With the help of the Obama administration’s policies (not great, he says, but better than nothing), he sees “a light at the end of the tunnel.” To actually get to the end of it, though, the United States will have to get used to consuming less, which means China, Germany, and Japan will have to get used to producing less, which means that all the intermediaries–Chile, Australia, Brazil–will have to scale back and turn inward like everyone else. The world may curve and warp a bit, and it will be difficult, but Roubini sees good in this. Given the right changes, perhaps the United States can develop with the productive long view in mind, and maybe its human talent can be spread more equitably. “When you have more financial engineers than computer engineers, you know that the brightest minds have gone into something where, probably, the margin was excessive,” he had told me earlier. “Maybe some of these bright people are going to do something entrepreneurial, more creative, or go into government. I think that’s actually a good change. The transition is painful, but the result may be good.”

On the other end of the line, I can hear him fumbling with his luggage as he talks, and there’s a sense of noble resignation in his tone. He hasn’t had any rest since we met, but, he insists, “I cannot get sick. I can’t stop.” His is hard, life-shortening work, but someone has to tell the world that only its wholesale rewiring will get us out of this.

Julia Ioffe is a writer living in New York. 

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192 Responses to “Prophet Motive”

Guest • May 21st, 2009 at 10:06 am

In a country full of intellectual sycophants who bow down to the financial elite who pay them for their unintelligle dibble, the professor stands out for being even handed. The professor is not a radical,just an intellectual who is even-handed. Taleb is more along the lines of a true radical. I am in complete synchonicity with Taleb. Make banking a utility and set up equity risk takers to know they won’t be bailed out. The professor understands that politics is an arduos process that takes patience, but the financial powers that be have no intention in reforming anything. They might even hijack the word reform to strengthen the position of the Casino Financial Elite. They have giant co–nes in criticizing those who are trying to convince them to gradually make enlightened changes. There Stubborn persistence to capitalize on the investments they have made in literally buying Congress will lead them to burry us with them.

Guest • May 21st, 2009 at 10:23 am

Guest posted this petition just at the closing bell on the previous thread. I have added some of the petition signers, with titles, who agreed to have their names made public.”Do You Know Where Your $2 Trillion Has Gone?”Since 2008, the Federal Reserve has loaned trillions of dollars in bailout money but refuses to tell Congress where it went. Legislative action is needed.The Federal Reserve Transparency Act would give the GAO the authority to audit the Federal Reserve and report its findings to Congress. The bill was written by Rep. Ron Paul and has 165 cosponsors, mostly Republicans.Democratic Congressman Alan Grayson is now working to get Democratic cosponsors for this bill (see Grayson’s letter here).If you think that it’s time to bring some transparency to our financial system, please endorse the bill and Rep. Grayson’s letter by adding your name to the list.link to petitionhttp://action.firedoglake.com/page/s/Fed1207Among those who’ve signed the petition and made their names public, with title, so far are:Dean Baker, Center for Public Policy ResearchJane Hamsher, FiredoglakeYves Smith, Naked CapitalismThomas Ferguson, Professor of Political Science, University of Massachusetts, BostonMike Farrell, Actor & AuthorTyler Durden, Zero HedgeUS PIRGJames I. Sturgeon Professor & Department Chair of Economics, University of Missouri-Kansas CityNomi Prins, AuthorJames K. Galbraith, Lloyd M. Bentsen, Jr., Chair at the LBJ School of Public Affairs, University of Texas at AustinGlenn Greenwald, SalonDigbyRobert Borosage, Campaign for America’s FutureL. Randall Wray, Professor of Economics, University of Missouri-Kansas CityMarla Singer, Zero Hedge.Among those who’ve made their names public but did not list titles are Naomi Klein, William Greider, Stirling Newberry, Robert Alberti, Ward Wheeler, Clarice Andrews, John Westenberg, Richard Reynoso, Stephen Cottrell…

Guest • May 21st, 2009 at 10:26 am

http://www.thedailybell.com/bellPage.asp?nid=384&flBeginning of the end? Fed cannot account for $9 trillionWin McNamee/Getty ImagesThe Federal Reserve apparently can’t account for $9 trillion in off-balance sheet transactions. When Rep. Alan Grayson (D-Orlando) asked Inspector General Elizabeth Coleman of the Federal Reserve some very basic questions about where the trillions of dollars that have come from the Fed’s expanded balance sheet, the IG didn’t know. Worse, nobody at the Fed seems to have any idea what the losses on its $2 trillion portfolio really are. “I am shocked to find out that nobody at the Federal Reserve is keeping track of anything,” Grayson says. Grayson asked Coleman if her agency had done any research into the decision not to save Lehman Brothers, which “sent shockwaves through the entire financial system,” Coleman said it had not. “What about the $1 trillion plus expansion of the Federal reserve’s balance sheet since last September?” Grayson asked. “We have different connotations,” Coleman replied. “We’re actually conducting a fairly high-level review of the various lending facilities collectively.” Translation: Nobody at the Fed knows where the money went. – Money News

Guest • May 21st, 2009 at 10:34 am

I MISSED A BIGGIE:WILLIAM K. BLACK, Associate Professor of Economics and Law, University of Missouri-Kansas City

Anonymous • May 21st, 2009 at 10:42 am

The secret to Roubini’s unusual way of doing economic forecasting by looking at all variables, which is what gave him the ability to see the storm on the horizon, is in his very unique background, one he shares with Pres. Obama. They are both “third culture kids”, defined as someone who has spent a significant portion of their chidhood living outside of their passport country. Google it. Being a TCK gives you the emotional and intellectual abiity to think outside the box. TCK’s, also known as Global Nomads, are exactly the people we want leading policy in a crisis and in a globalized economy.

MA • May 21st, 2009 at 10:53 am

Hey Julia…Don’t forget the thousands of bloggers!!! They are part of the “pulse” and “temperature” that Nouriel takes.(Yes folks, Nouriel reads the blogs)Miss America

Guest • May 21st, 2009 at 10:55 am

The fool is the one who thinks globalization is just the American system extended.At the close of the Constitutional Convention of 1787, Benjamin Franklin was queried as he left Independence Hall on the final day of deliberation:“Well, Doctor, what have we got—a Republic or a Monarchy?”To which Franklin replied, “A Republic, if you can keep it.”That, my friend, is the question. The enemy is within the gates, wreaking financial and economic havoc. Who is keeping the Republic? Barack Obama?

FEDup • May 21st, 2009 at 10:59 am

Who is keeping the Republic? Great Q! It appears to be in the hands of the financial elite, lobbyists, the FED, Congress and finally, the President. Of course no where in this list do we see the American people!

Guest • May 21st, 2009 at 11:15 am

“Ford Motor Company, Goldman Sachs, the SEC, and the ‘New’ Wall Street” by Eric EnglundMay 21, 2009 — Wall Street wants to regain your trust. Mutual fund managers, stockbrokers, Wall Street executives, and the Securities and Exchange Commission (SEC) want Americans to keep the faith that buying and holding stocks, for the long term, is a key to building personal wealth. This is a tough sell considering Americans have watched their 401(k)s become 201(k)s. Not to worry says the laughable SEC, they’ve got your back covered. Here is what is stated in the SEC’s 2008 Annual Report: “Today, as more and more investors turn to the markets to help secure their futures, pay for homes, and send children to college, our investor protection mission is more important than ever. And as the nation’s securities exchanges mature into global for-profit competitors, there is even greater need for sound market regulation.” Of course, this is nothing but hot air from a worthless bureaucracy. If the SEC was going to help Wall Street turn over a new leaf, it would immediately investigate why Goldman Sachs recently issued a “buy” recommendation regarding Ford Motor Company’s common stock. I promise this investigation will not transpire as the Wall Street banksters are in control and will continue to rip off anybody foolish enough to trust them.Today, conventional wisdom asserts that Ford remains the only sound domestic automaker as Chrysler is in bankruptcy and GM will likely follow suit. Ford, moreover, has not taken any bailout funds, from the Federal government, and this is viewed positively by the buying public. Along these lines, there are Americans who refuse to purchase a car from GM or Chrysler due to their acceptance of bailout funds. Of the “Big 3″ U.S. automakers, Ford has the most positive imageSo why did Patrick Archambault, of Goldman Sachs, recommend buying Ford stock on April 22, 2009? Here are some key reasons conveyed in his recommendation:· Goldman Sachs does not foresee bankruptcy at Ford as the automaker has sufficient liquidity to make it through 2010 without additional funding.· Ford’s earnings will improve by $9.3 billion from this year through 2012.· It is estimated that Ford will pick up about 25 percent of the market share GM and Chrysler will lose as they reorganize in bankruptcy and shed brands.Based upon these factors, and others, Patrick Archambault predicts that Ford’s stock may climb by “…58% percent to $6 within six months.”Mr. Archambault, Goldman Sachs, and Wall Street are depending upon something very important. They are counting on the fact that business analysts on television and in the print media will not question this recommendation. These Wall Street charlatans also know Americans are financially illiterate and can’t read a balance sheet – I’m certain the same holds for members of the aforementioned mainstream media. For if someone actually analyzed Ford’s 12/31/08 fiscal year-end audited financial statement, it would be painfully obvious Goldman Sachs recommended the stock of a company that is insolvent…Why in the world did Goldman Sachs recommend buying Ford stock? The answer came nearly three weeks after Goldman’s recommendation. On May 12, 2009, Ford announced it had raised approximately $1.4 billion in a stock offering consisting of 300 million common shares. Shortly before Goldman made its buy recommendation, Ford’s common stock was selling for $3.80 per share. Immediately after Goldman’s recommendation, Ford’s stock zoomed up to $4.33 per share. By May 12th, Ford was able to price its 300 million share offering at $4.75 per share. I’d say Mr. Archambault’s recommendation netted Ford an additional $285 million in proceeds, from this stock offering, due to his recommendation (this is the difference between offering 300 million shares at $4.75 vs. $3.80). One could also argue this stock offering may not have transpired at all had a heavyweight, such as Goldman Sachs, not put out a prior buy recommendation on Ford. Is there, nevertheless, a more sinister motive behind this recommendation?In my opinion, Goldman Sachs was doing the bidding of the Obama administration. We know there is a cozy relationship between the White House and Wall Street; in which the Working Group on Financial Markets (aka: the Plunge Protection Team) exists specifically to serve the President of the United States. Members of the working group have close ties to Wall Street – and especially to Goldman Sachs…Rest assured, there will be no stock-manipulation investigation launched by the SEC. To be sure, there is no “new” Wall Street. It remains the same old playground for corrupt, wealthy elites to find ways to separate you from your money. Ford Motor Company’s successful stock offering is just another glaring example.http://lewrockwell.com/englund/englund53.html

Guest • May 21st, 2009 at 11:26 am

http://www.kitco.com/ind/Laird/may122009.html“USD gradual fall or crash?Our USD system is just about to collapse. Most people by far have absolutely no idea how imminent that is, which is a serious complication for us who do track this. Whether it is a gradual collapse, or a rapid one, is yet to be determined, but collapse is definitely the term to use. The rest of the world is rapidly following suit into bankrupting themselves fighting this relentless world financial deleveraging. Most people cannot imagine a USD collapse, and even we who research about it find it impossible to predict the many consequences.But it’s the general lack of knowledge in the general population that concerns me. They are sitting ducks. If you have a single gold coin, you will likely buy a nice house with it, I am totally serious. I made a prediction about 2005 that if you have ten ounces of gold only, you will probably survive the period of transition from the USD (with careful planning). Even two ounces would make all the difference in the world. Of course that prediction does not take care of the confiscation issue, but hell, no one strategy can cover all risks.In short, the world is right in the middle of total change and revolution in every way. Remember how things used to be 20 or 10 years ago? Well, take all that and put it out of your mind. Most of our usual things we take for granted in our ‘world’ are either gone already or the remnants rapidly going away before our eyes. As I am sure most of you already know, it is next to impossible to convince others of the dangers.Cocktail partiesI talk to people in cocktail parties and learned a lesson about that – that this story is scaring the hell out of people and is a party killer. From now on, I will only briefly bring up these issues, having seen the previous cocktail discussions rapidly end in gloom after we get done discussing all this-to the extent the discussion is even tolerated. I find that I can talk to doctors, airline pilots, millionaire businessmen etc, and basically they have nothing to counter my concerns THEY bring up at the party, when they ask me to comment. Then what seems to happen is they tune out. You can see a haunted look in their eyes. I never get over the fact that with all their hard earned money, they are acting like sitting ducks. Denial seems to work for them initially.Typically, one of these parties has a few doctors, a few rich businessmen, and such people, and your average 401k persons, and when they find out their world is ending, well, I can’t blame them for leaving the party. And me not being invited back. In fact, I’m not sure I even want to go to those parties either. Many of these people are hiding their heads in the sand, telling me they lost a lot of money and asking me what can they do, and then only having the stomach for a ten minute discussion before they wet their pants on what could happen if the USD fell– and cease discussing the situation. Maybe they are just giving in to fate. That is a very dangerous thing to do.”

Guest • May 21st, 2009 at 11:56 am

Thank you Dr. Roubini for taking the time to write this blog for us, even though we cannot afford to pay as much for your advice as other can and do.It is a great public service and has been very helpful to me personally.-Mother of 4

Softwarengineer • May 21st, 2009 at 12:15 pm

I HAVE RESPECTED YOUR KEEN ADVICE FOR YEARS NOWWe have a fear in America to clarify a very serious dilemma, lest we really find out the horrifying complexity of the situation and its way out, that scares many of us. It may likely also be the psychological driven stock market that drives us into denial, or our truthful words could make the DOW go even lower. Another fear in America is blame, no one wants to be blamed for our failures; yet we all know there is clear blame and concurrent less clear indirect blame.Much of us would rather watch stupor bowl and American Idol, keeping our eyes off the ball and in a relaxing dream world of denial.

dan • May 21st, 2009 at 12:25 pm

I fully agree with Mother of 4 and I am also grateful to you for giving us a free access to your blog.Thanks

Guest • May 21st, 2009 at 12:45 pm

In the air these days there’s the talk of capitalism’s “failures” and, following closely, the praising of the overlooked “virtues” of socialism. Now comes the global awareness of China’s rising currency leverage and her increasing influence in capital markets.It’s a dangerous game to mislabel monopolies and banker-controlled government as capitalism.And it is dangerous indeed to forget why the American system produced the world’s most explosive economic growth or how collectivism, socialism and fascism and communism, have been proven failures.One concept describes the American system’s success: government protection of an individual’s right to pursue his own interests, to create and build his estate, to invent and reap the benefits of his ideas, to dream and work tirelessly to benefit himself and his family.Jefferson’s threat in 1776, in the Declaration of Independence, would draw the line against a world of despots:“He (King George the Third) has refused,” wrote Jefferson, “his assent to laws the most wholesome and necessary for the public good.”And with this declaration, and more, a handful of radicals would confront, insult and threaten the King of England, placing their lives on the line against one of the most powerful military powers in the world.Muscat fire would soon back up the ultimatum and in the two centuries that have followed much of the world has struggled to gain a government that, like America’s republic, would provide “for the public good.”And, now, many nations would claim the title “republic” but most do not allow sovereignty to rest with their citizens. The People’s Republic of China, for example, is not a republic and implication of any significant control by the people, of course, is complete fabrication.Collectivism, ie,socialism and fascism, puts citizens in the boat of reduced standards, punishes the achievers, rewards non-achievers, wastes massive resources on one-size-fits-all, promotes indolence and cheating as achievement is discouraged, and wherever it’s been tried it attracts bureaucrats or despots to pull the levers of powerPerhaps the strongest words the radical Thomas Jefferson wrote are contained in his “A Summary View of the Rights of British America.” Predating “The Declaration of Independence,” Jefferson urged that the Crown be put on notice that free Englishmen established their habitation here in America “at the expense of individuals” and that “no shilling was ever issued from the public treasures of his Majesty” to support that habitation until much later when the colonies became of commercial value to the mother country.“These states never supposed that by calling in her aid (for protection of commerce) they thereby submitted themselves to her sovereignty. Had such terms been proposed,” wrote Jefferson, “they would have rejected them with disdain, and trusted for better, to the moderation of their enemies, or to a vigorous exertion of their own force.”Our Founders gave us freedom. Now, as freedom and independence succumb to plutocracy and collectivist globalism, it would be wise to remember the words of Athenian leader Pericles in his funeral oration over Athenians fallen in the Peloponnesian War: “Remember that prosperity can be only for the free, and that freedom is the sure possession of those alone who have the courage to defend it.”

Bob Dobbs • May 21st, 2009 at 12:53 pm

If you can say only one thing, say this:”If there is a conspiracy of silence against me, then I had better join it”

Mark • May 21st, 2009 at 1:23 pm

And it is dangerous indeed to forget why the American system produced the world’s most explosive economic growthYour sentence has the right words, but it’s askew! “Dangerous” and “explosive growth” DO go together.I think that you need to watch this:Arithmetic, Population & EnergyMark

Guest • May 21st, 2009 at 1:38 pm

Sell in May, Indeedby: Alan Young May 21, 2009Last week, when the banks needed to raise capital, all was good and recovery was well underway. Now they’re done with that fairytale, Goldman (GS) and Da Boyz have gone short, and officials are at liberty to tell us the bad news.No, it cannot be coincidence that the day after BAC completes its equity offering (following an upgrade from GS), Greenspan comes out of the woodwork to say we’ve been had, and the banks are actually still underfunded, and Federal Reserve officials are now talking about how bad the economy is.At the same time, analysts now reporting that China’s stimulus package isn’t really working, and their economy will falter, too. This is just a couple of weeks after Goldman said the opposite, and you know what happened then. I guess it would be unseemly to panic the US markets and send too much money to China—better bar the exits first, so the suckers will still be here when the next Friend of Wall Street needs to raise some capital.How many times in one quarter are people going to let their chains be yanked this way? And why do we still have government officials aiding and abetting this blatant manipulation?Sell in May, indeed.http://seekingalpha.com/article/138915-sell-in-may-indeed?source=email

Toby • May 21st, 2009 at 1:40 pm

Mark, ever since I watch this lecture in september last year, my life has changed, I really view everything really now. We truely live in matrix.I for sure stuggle, not yet in real life, but intellectually./Toby

Guest • May 21st, 2009 at 1:44 pm

Sorry, fast writing…some spelling mistakes. should also be “I really view everything different now”/toby

Guest • May 21st, 2009 at 1:47 pm

Dear Mark, when you have finally persuaded them to thin the herd, I would keep my head down if I were you.

MA • May 21st, 2009 at 1:57 pm

Mish or Paul?I don’t know enough about Ron Paul… but I can tell you that Mike Shedlock really does his homework. You’re entitled to your own opinion, but for my money, Mish is one of the better guys out there.Miss America

Guest • May 21st, 2009 at 2:12 pm

Here is an interesting tid-bit.This is a link to Broad Agency Announcement (BAA) PDF. (Do not click it unless you want to wait for a 150 page download.) http://www.mvk.usace.army.mil/contract/docs/BAA.pdfI am posting this BAA link because 1) the Army has American Recovery and Reinvestment Act (ARRA) money and it has to quickly spend about $5 million. This is a small sample of how it spends our “stimulus” money. 2) The Army is looking for demonstrations of alternate electrical energy generation designs that will provide electrical power to a military base for up to six months without commercial power.So why would the Army think it needs an independent six-month power generation capability in its bases immediately? Because the Army thinks there will be periods of six months without commercial power that’s why!

Guest • May 21st, 2009 at 2:46 pm

Because just to be clear, I’d obviously rather believe that they need alternate power sources for other countries and obscure places. Not that I do believe that, just that I’d like to.

Guest • May 21st, 2009 at 2:54 pm

You can read it and get your own take, but this is definitely domestic. Key phrases include >5 megawatts, advanced generators, micro-turbines, fuel cells, energy storage, renewable energy technologies, smart load-shedding, decision architecture, micro-grid, and islanded operation.

Morbid • May 21st, 2009 at 3:03 pm

AP Stress Map

We all know the nation is under considerable economic stress, but how to quantify and show it? The Stress Map Team came up with a groundbreaking tool that allows AP and others to measure and examine how Americans are living, in good times and bad, for years to come.

I wish they would add an animated time-line to this graphic.

Guest • May 21st, 2009 at 3:18 pm

Never mind, RGE is adding its own URL to the links, which messes them up.Copy/paste the following into a browser window:www.guba.com/watch/3000053112

Guest • May 21st, 2009 at 3:24 pm

To clarify, the BAA has three parts totaling $10 million. 1)Design, develop, validate, & demo a micro-grid concept. Demo at the Field Artillery Training Center at Fort Sill, OK. 2)Energy security assessments and islanding methodologies. 3)Ultra low energy community systems…orderly approach to changing the typical Army installation…

Morbid • May 21st, 2009 at 3:26 pm

The Climate-Industrial Complex

Free speech is important. But these visions of catastrophe are a long way outside of mainstream scientific opinion, and they go much further than the careful findings of the United Nations panel of climate change scientists. When it comes to sea-level rise, for example, the United Nations expects a rise of between seven and 23 inches by 2100 — considerably less than a one-story building.There would be an outcry — and rightfully so — if big oil organized a climate change conference and invited only climate-change deniers.The partnership among self-interested businesses, grandstanding politicians and alarmist campaigners truly is an unholy alliance. The climate-industrial complex does not promote discussion on how to overcome this challenge in a way that will be best for everybody. We should not be surprised or impressed that those who stand to make a profit are among the loudest calling for politicians to act. Spending a fortune on global carbon regulations will benefit a few, but dearly cost everybody else.Mr. Lomborg is director of the Copenhagen Consensus, a think tank, and author of “Cool It: The Skeptical Environmentalist’s Guide to Global Warming” (Knopf, 2007).

PhilT • May 21st, 2009 at 3:50 pm

From On Point:

The British know something about rise and fall. Their Edward Gibbon wrote The Decline and Fall of the Roman Empire. Their own empire came and went.Now, two big British historians and thinkers who live in the United States are thinking hard about the American future. Simon Schama says he’s in love with America, and sees the makings of potential renewal emerging right now. Niall Ferguson admires America too, and sees — even so — the makings of disaster around us.

Listen to ==> Assessing the American Future from Thursday, May 21, 2009

Mark • May 21st, 2009 at 4:08 pm

If you take it to mean some intentional culling, then that’s YOUR take.I’m not proposing a “solution!” I’m just helping to point out the realities of growth. A reduction in population WILL occur, it’s just a matter of how and when.Right-wing types tend to not want to share, in which case it is they who would advocate population reductions (indirectly if not directly). Left-wing types would like things to be more egalitarian, which would likely support a greater population, but would, unless real sustainable practices were in place (read “no growth”), likely lead to a bigger population crash.BTW – Being an ex-Marine I assure you I that am quite capable of shooting back.Mark

Guest • May 21st, 2009 at 4:11 pm

Does anyone have a good suggestion?Let’s say you are selling a home and carrying back the loan. What would you tie the note too in order to protect yourself in the event of a dollar collapse or significant reduction in value resulting in inflation? Gold comes to mind, but not sure of any problematic legal issues that may exist or arise.Thanks OB/MA for your points on previous thread. When we talk inflation/deflation, seems to sometimes go in circles due to differences in how it’s referred to. Consider that LB owns gold and believes we are in for a severe bought of deflation.hlowe

Mark • May 21st, 2009 at 4:18 pm

Hard facts:A third piece of evidence is the debt monetization process itself. It always works at the beginning, as it is logical to expect that interest rates will decline as the inflows start. However, the debt monetization process also assumes that somebody will be there at the end to repurchase the debt. For some reason, Central Bankers always seem to forget that, historically, there have not been many buyers willing to assume the over-extended liabilities of fiscally irresponsible governments that apply debt monetization. This lack of refinancing always leads to much higher interest rates, inflation and lower currency value. (emphasis added)Mark

PhilT • May 21st, 2009 at 4:38 pm

From previous thread:@ Mark 2009-05-21 10:41:30@ OuterBeltway 2009-05-20 22:06:21It is very compelling reading – your exchange. At a minimum, it demonstrates on an individual level, a gap of some sort, that exists on the macro level as well and is worth paying attention to and learning about.I just posted a link below in this thread and in the Brain Trust blog to an On Point interview from this morning that demonstrates a similar gap between 2-very accomplished British historians (one of whom is Niall Ferguson) on the topic of America’s future.It would be interesting to read each of your opinions of this interview @ Current Brain Trust Blogbest

PeterJB • May 21st, 2009 at 4:46 pm

From Guest above ( I am not sure which one ;-) :”The Army is looking for demonstrations of alternate electrical energy generation designs that will provide electrical power to a military base for up to six months without commercial power.”I find it most difficult to bear the intense pain – sometimes, to see a country with such great resources, and advancements, etc., behaving like uneducated morons and uneducated idiots (sans savant).The technology that meets the above requirement was developed and successfully tested many years ago (in the last 20 years), and is still in full time functional operation, is low cost and most effective and actually belongs to the USA, and,… besides, there is also the geothermal source where I am sure that someone in America knows how to dig a hole; try @ Mt Helena /caldera /YosemiteMaybe there is just no hope for the USA at all?ps. No, I’m not going to do your research for you.Ho hum

Guest too • May 21st, 2009 at 5:23 pm

Credit where credit is due: We’re not out of the woods yetBy Mike WhitneyOnline Journal Contributing WriterMay 21, 2009, 00:16.http://onlinejournal.com/artman/publish/article_4723.shtml……From Tyler Durden at Zero Hedge: “In order to fully understand currency and price movements, one has to realize that the securitization of debt, and creation of derivatives amounted to a huge virtual printing press, primarily fueled by a massive increase in risk appetite which allowed for a huge expansion in the value of claims on financial assets and goods and services. It is worth pointing out that the Fed has little to no control over this ‘printing press’ at this point, which at last count was responsible for over 90% of the liquidity in the system.” (“The Exuberance Glut or the Dollar-Euro Short Squeeze Race” Tyler Durden, Zero Hedge)The faux prosperity of the last decade was largely the result of a wholesale credit system which created a humongous amount of credit via sketchy debt instruments, off-balance sheet operations, massive leverage and derivatives. (The Fed’s liquidity and conventional bank loans play a very small part in the modern credit system) Securitization — which is the conversion of pools of loans into securities — is at the center of the storm. It formed the asset-base upon which the investment banks and hedge funds stacked additional leverage, creating an unstable debt-pyramid that couldn’t withstand the battering of a slumping market. After two Bear Stearns funds defaulted 20 months ago, the securitization markets froze, credit dried up and the broader economy went into a tailspin. Now that investors know how risky securitized instruments really are, there’s little chance that assets will regain their original value or that the market for structured debt will stage a comeback……Putting credit back where it belongsDo people realize that the reason their home equity is vanishing, their 401ks have been slashed in half and their jobs are at risk is because Wall Street was gaming the system with leverage and financial innovation? The current downturn is not really a recession at all; it’s more like a self-inflicted wound perpetrated by avaricious speculators who put a gun to the economy’s head and blew its brains out. The banks and Wall Street have created a capital hole so vast that the entire economy is being sucked into the abyss. And it all could have been avoided.Credit production is too important and too lethal to entrust to profit-driven vipers whose only motivation is self-enrichment. The whole system needs rethinking and public input before Bernanke wastes trillions more trying to revive the same crisis-prone business model. If “credit is the economy’s life’s-blood,” as President Obama says, then it should be distributed through a government-controlled public utility. The real lesson of the financial crisis is that privatizing credit has been a disaster.

Morbid • May 21st, 2009 at 5:45 pm

Correction – there is a timeline feature on this graphic.

Under each data set, in the far right, you’ll see a block of text that says “October 2007 to present.” Click on that and then look at bottom of map. You’ll see the scroll bar that you can drag to see how the situation deteriorates over that time span.

Guest • May 21st, 2009 at 5:53 pm

“This puts America in a tough spot. The core of the loyal opposition has gone crazy. The Administration in power continues the policies of the old Administration. To whom do we turn if the economy fails to recover in the second half of 2009? To ourselves. It’s our government. It’s our nation. It’s our responsibility.”FABIUS MAXIMUS (SEE RGE POST)

PeteCA • May 21st, 2009 at 6:48 pm

Mark – yes I also noticed that great comment in bold. I, for one, cannot possibly imagine who is going to be standing in line to repurchase the debt – once the Fed ends monetization. I’m not even sure there is an end to the monetization effort, except through financial collapse of the US Gov’t.PeteCA

Guest • May 21st, 2009 at 7:09 pm

Doomsdayers such as Dr. Albert A. Bartlett show up like pied pipers every so often and mostly get college students to listen to them because everybody else sees through their argument. Exponential doubling stops when the capacity isn’t worth it or capacity is saturated.The arithmetic is correct; and Bartlett has a very good understanding of compound numbers, but he’s a little bit light on nature’s reaction to arithmetic, and people’s reaction to arithmetic.He’s trying to get people to choose abortion and euthanasia to reduce population. I did not see the “voluntary choice to have smaller families” on his list. That can drive the population growth down fairly easily as it drove America’s down before the current surge in immigration began, and pushed other countries such as Germany into negative population growth.I noticed while dealing with the increase in the use of electricity, Bartlett zipped through that fairly quickly when statistics began to show doubling leveling off. And that is exactly what the man from Boulder who wrote the letter to him was trying to tell him. Bartlett’s education is so vast that he missed what the man was trying to say. He missed why compounding doesn’t work in Boulder.Civilization doesn’t need to resort to abortion to reduce the population. It can do so voluntarily, which America did. American was adjusting naturally to population growth. And, then, for growth reasons, America allowed controlled immigration in so that the country could ease in expansion and brought in people to help. But then other forces began to doctor with immigration to the point where it was used for other reasons. Thus, immigration began to overcome the nation and got out of hand. Look at Bartlett’s example of the Los Angeles basin. He forgot to say its growth is an increase in immigration added to the normal growth of LA. As this continues to happen, and I’m sure it’s happening somewhat in Boulder right now, people become opposed to that kind of immigration and the exponential arithmetic. At the same time, people in Mexico will decide not to come here to live if there is no work, or if laws are enforced that don’t allow it. And then in Mexico people there will elect to have smaller families as that nation’s population growth becomes more unwieldy. And guess what? The birth rate in Mexico will go down.As for Bartlett’s example of the price of a lift ticket compounding in Vail over the years, after it doubles and compounds for several years, it comes to that point where there’s a more interesting way to spend $120.00 in recreational money than a Vail lift ticket. And the price of a Vail lift ticket drops, and arithmetic is worthless at that point because nature and human decisions are turning it back.Let’s get together and do something, Bartlett says. He says he just wants us to make the individual choices, but down deep what he really wants is group choices, and then finally, he’ll get around to the Jacque Cousteaus who say we can’t wait around any longer and we need to start killing people now. These are the people worrying about global warming, about running out of food, about population growth… These are the people talking about food supplies, who never take into account the quality of food that enables extreme nutrition on less.These are the people who are constantly making forecasts to new groups of young kids and an ex-marine they can convince who’ve had no experience seeing their predictions fail, made obsolete by discoveries and individual choices and, yes, nature.It doesn’t work in Boulder, because Boulder elected not to have a Los Angeles.Compounding ManureIronically, greater freedom not only is the solution for our political and policy problems, it’s also the fixer for our so-called “fixed” quantities of resources. Coal and oil are fixed resources, but not energy. Automobiles are becoming a fixed transportation resource, but not transportation. Because our future resources are unknown, it does not mean they don’t exist.New York City in 1800, population 30,000, began to double its population every 10 years. But as Columbia University’s David Rosner explains, the city was fast growing something else besides people. Horses. Between 100.000 and 200,000 horses (mostly draft horses at work on the streets every day) lived in New York at any given time. And each, writes Rosner, provided an average of 24 pounds of manure and several quarts of urine every day. Transportation problem? Yes, but try cholera, typhoid, typhus, yellow fever and more. Who, crossing through the steaming muck and dodging the teams on a busy Manhattan street in those days, could have forecast today’s whoosh of subways and flash of Yellow Cabs?How many field laborers a generation ago, swathing and stacking wheat by hand, could imagine their grandchildren driving self-propelled combines to produce flows of clean grain so fast that only large trucks could keep up with their speed in the field? Many combines would carry the name McCormick because young Cyrus McCormick had put skill and years of hard work and late nights into the invention of his machine, the harvester, because he knew his patent would be protected. His industry paid off and he became rich, famous and influential. It’s wrong to put a limit on what the future can bring if a man’s free activity is protected by government, and not managed by government.Man’s visit to the moon was forecast centuries ago. In the end it was accomplished as a government project with tremendous input and benefits for business. But it should be noted that while the ancients believed we might make it to the moon, not one suggested that the rest of us would be able to watch it on television from our living rooms.I sincerely believe that we put too much emphasis on the concept of “fixed resources,” but not enough on allowing man to reach his full potential by restricting government from sapping his energy and achievements.

Guest • May 21st, 2009 at 7:34 pm

.http://www.cnbc.com/id/30836189Jim Rogers sat down and shared with CNBC.com some of his thoughts…beginning with, buy renminbi if you get the chance.”I own the Chinese renminbi. It’s not that easy to buy and sell the renminbi because it’s a blocked currency. But I own it and every chance I get to get some more renminbi, I do so.” Rogers says.”The renminbi is eventually going to be the next reserve currency of the world. Twenty years from now, perhaps fifteen years from now, the Chinese are opening up there currency more and more every month, every year. And that’s going to continue … who knows how high it will go,” Rogers adds.With China, currently the largest creditor nation in the world, and with a balance of trade surplus to boot, Rogers would rather own the renminbi (also called the yuan) than many other currencies.But he adds that he doesn’t understand why China has a blocked currency. Currently, there are restrictions on money leaving or entering the country and as such, the renminbi is not fully convertible.”China has not made many serious mistakes in the past two to three decades but this is one of them. I don’t know why they still have a blocked currency. This is not 1979, it’s not even 1999. It’s 2009 and China doesn’t need to do that any more,” Rogers says.More of Jim Rogers’ Outlook on CNBC.com· Next Crisis Will Be in Currencies: Rogers· Another Bottom for Stocks Coming: Rogers

Hayes • May 21st, 2009 at 8:15 pm

posted abovethis is a legit initiative endorsed by many of our blogger favorites:” Since 2008, the Federal Reserve has loaned trillions of dollars in bailout money but refuses to tell Congress where it went. Legislative action is needed.The Federal Reserve Transparency Act would give the GAO the authority to audit the Federal Reserve and report its findings to Congress. The bill was written by Rep. Ron Paul and has 165 cosponsors, mostly Republicans.Democratic Congressman Alan Grayson is now working to get Democratic cosponsors for this bill (see Grayson’s letter here).If you think that it’s time to bring some transparency to our financial system, please endorse the bill and Rep. Grayson’s letter by adding your name to the list.”link to the actual petition

Rohelio • May 21st, 2009 at 8:21 pm

Even the haloed petrodollar is ebbing. China’s hydrocarbon binge will be fueled with Yuan in trade with Venezuela, Brazil, Kazakhstan, and Russia…Africa, OPEC? This in addition to the currency swaps already arranged with most of the rest of Asia.

Guest • May 21st, 2009 at 8:37 pm

@Mark @PeteCAAn ordinary layman like me is confused on the future of us economy/society. More i read different points of view more confused i become. Eventhough i dont have much to loose/gain which ever way things go from here but i still like to form an opinon/consensus for my own intelectual self :) .Since NR article is about prophecy I would like to know your take on the end game and the time scale involved.( Things over longer time scale are easier to pridict than shorter ones).

Guest • May 21st, 2009 at 8:43 pm

@Mark @PeteCAAn ordinary layman like me is confused on the future of us economy/society. More i read different points of view more confused i become. Eventhough i dont have much to loose/gain which ever way things go from here but i still like to form an opinon/consensus for my own intelectual self :) .Since NR article is about prophecy I would like to know your take on the end game and the time scale involved.( Things over longer time scale are easier to pridict than shorter ones).Every one is welcome to weigh in.

Chignos • May 21st, 2009 at 9:15 pm

Collapse is the correct word. Something unexpected will happen as the salient consequence of the corruption and nitwittery we see in the political-economic elites. The black swan event. Unpredictability–like how every year the weather is different (truly amazing if you stop and think about it)–that is why I can never get too excited about any particular ideology.

Morbid • May 21st, 2009 at 9:31 pm

Thanks Chignos – I was wondering if anybody noticed. Hang onto the link as they will keep adding data to it as time progresses.

Guest • May 21st, 2009 at 9:52 pm

Hi PeterJB,That post was to reveal the Army’s medium-term thinking on commercial electrical power; not as a serious question about alternative energy.Government contracting is a whole different animal from what we think of as business. (Think http://en.wikipedia.org/wiki/Schindler's_List) It is about who you know without getting stepped on by Lockheed Martin, Northrop Grumman, Raytheon, Boeing, General Dynamics, & BAE Systems.As a small example take Boeing’s Lead System Integrator (LSI) attempt to install a border control system along the Mexican border (http://www.corpwatch.org/article.php?id=14552). Billions and billions later we have nothing. Meanwhile small companies have fully functional fence-less systems in place and working! What does the Department of Homeland Security do? Why it backs Boeing and ignores the working systems.There is the same revolving door between government employees and contractors as there is among the Treasury, Federal Reserve, Goldman Sachs, and JP Morgan.

FEDup • May 21st, 2009 at 9:56 pm

Allow me to throw out some general points: The problems we face today have been building for many years since Clinton/Greenspan era: credit for individuals and businesses was handed out like candy on Halloween in the vein of stimulating economic growth. Individuals bought homes they really couldn’t afford and businesses expanded believing increasing demand would last forever. The largest banks, investment houses and insurance companies used highly leveraged financial instruments with “pie in sky” dreams of making gobs of money forever or passing the “hot potato risk” to the next investor. This was all done in the shadows without regulation or disclosure. We are now in a situation where no one knows how big the “financial black hole” really is (perhaps one of the main reasons for the bank stress tests) and what it will take to prevent our economy from getting sucked into it and disappearing forever. It is serious enough that trillions of dollars have been committed by our govt. The problem in specifically predicting what will happen to the dollar, the economy, the stock market and the rest of the financial system is that no one really knows; this is mainly because there is not full transparency or disclosure by our govt and financial institutions; there exists manipulation of the financial markets and all efforts are centered on RESTORING THE STATUS QUO! Additionally we are a debtor nation unlike China which is a creditor nation and each country will make it’s own moves to protect and benefit themself first. Ultimately, it will be up to the citizens of each country to first wake up to the reality of what has been perpetrated against them and their children and grandchildren (much higher taxes) and then demand full transparency, regulation and punishment to the offenders in order to draw a line in the sand and say enough is enough. This would open the door to serious discussions of how to construct a fairer and safer system. To those who write this crisis off as a blip or a natural occurrence in the ebb and flow of capitalism I pose this question: suppose you held 1 billion dollars of deposits from your banking customers and you leveraged that 30 times to 30 billion and then lost it in the Casino and then the govt just gave it all back to you and said start over. Do you think that would change your behavior in the future? I hope this brief overview was helpful.

Guest • May 21st, 2009 at 10:08 pm

Congratulations to Julia Ioffe (and her copyeditor). That was a beautifully done significant piece of work. The best general piece I’ve read on the Great Roubini.

Guest • May 21st, 2009 at 10:14 pm

The Humanitarian Face of the State, With Fangsby Llewellyn H. Rockwell, Jr.May 20, 2009 — The glorious Barack Obama, broad-minded humanitarian universalist that he is, promised to reverse the wickedness of the Bush administration, which ran a prison camp in Guantánamo Bay and kept pictures of ruthless abuse from public view to save the face of Bush.Bush the despot!Obama the savior!And sure enough, after taking office, Obama did something or other toward closing that prison camp just off our shores, along with its secret military trials and abuse. How the partisans cheered on one side and booed on the other.Except that just the other day, Obama quietly reversed himself. Now the camps must stay. After all, there are real enemies there, the “worst of the worst.” The trials will still be in secret. The military will still run them, because, you know, you just can’t trust those civilian courts to arrive at the right verdict.As for those pictures of abuse, Obama can’t allow those to be seen. What were they thinking? Why, for our Islamic enemies to have access to those will only give them a weapon to whip up their countries in some sort of anti-U.S. frenzy.Is the idea that if we do not release those pictures that the Islamic world will come to believe that the prisoners in Guantánamo and other venues are treated decently, with three square meals per day, awaiting trial by jury?Clearly the reason for blocking the photos is not to embarrass the U.S. state with its own people. No surprise here: the state’s interest is mainly in protecting itself. That’s why it does what it does.Of course the Republicans played their appointed role as guardians of the torture power and celebrated when Obama reversed his previous position and his campaign promise. Finally he is taking his responsibility as head of state.But how is it possible that the great humanitarian universalist reversed himself at all, even against his own promises and even to the point that the ACLU is protesting?Well, it is all about thinking like the state. It took his administration a bit to get the hang of it in international affairs but it was just a matter of applying the logic of his domestic program, which is all-controlling.Think of it this way. Even if Obama wanted to be another way, wanted to bring a new sense of things to government, it is not difficult to slip into the role of a despot. That is, after all, the job he campaigned for years to get and the job he now holds.Think of it this way. Let’s say you are a health geek who is dedicated to the proposition that Americans eat too much junk food. But then you are hired as the manager of the local doughnut shop. Your first day on the job you issue mild warnings to customers that they should go easy on the double-dozen purchases.Everyone around you thinks you are out of your mind. It only takes a few days to realize that you are in fact crazy to talk this way. The more doughnuts people buy, the better off you are and the better off your employees are. You are working against your own success by promoting other forms of eating.Of course you change your tune!And would that the state were like a doughnut shop. As Butler Shaffer points out in his new book Boundaries of Order – which argues that the state is unviable in our times – “every political system is nothing more than a mechanism that allows some to benefit at the expense of the many through violent takings of property…. Politics is unthinkable without property trespasses and takings.”This is why “there are no fundamental differences among major political parties: at their core, each embraces the authority of the state to regulate how property will be owned and used.”The state is driven by its own internal interests, which can only be fulfilled at the expense of society. The state operates according to the principle of violence. Violence is the ultimate bargaining tool of the state. This is true in domestic and foreign relations, whether running a health program or a prison camp.It is particularly telling that Obama cited the grave threat that these poor slobs – who are in Guantánamo because they dared fight against the interests of the Holy American Empire – represent to all of us. As Shaffer writes, “Because of our willingness to huddle at the feet of political officials whenever we feel ourselves threatened, the state will feed us an endless supply of fear-objects with which to assure our continuing submission. This is why the well-being of the state is dependent upon the war system.”This is how I can predict only muted protests from the left concerning Obama’s betrayal. So long as he continues to expand the state in the domestic area – inflating, taxing, regulating, nationalizing – they will put up with abuses of the human rights that they claim to champion.Guantánamo is a metaphor. How those prisoners are treated is a mere foreshadowing of how we will all be treated under the total state.http://lewrockwell.com/rockwell/humanitarian-face-fangs.html

Guest • May 21st, 2009 at 10:38 pm

Sit back and start the popcorn, relax and watch. Go back in time and read previous posts to understand various opinions. Read read and read. Some are correct short term but not consistently! Some are correct on macro scale but can’t identify with the crowd and therefore miss the ups and downs (stock market); this is where you stumbled into IMO. Always look for a counter to any opinion or belief. Start here (http://www.dollarcollapse.com/) and find many of the links that provide much of the popular information we obtain. This does not mean that everyone on this blog agrees with the theses of said link, but they link to some of the best sites. Read the links posted on this blog and learn which economists have been correct over time, and read them.hlowe

Guessed also • May 21st, 2009 at 10:50 pm

g,i would love to weigh in! thank you for the cordial invitation.but first…g,i would change the term “end game” to just”game” and go with eternity for time frame.now….”profit from doom” could have been an alternatetitle for the piece, nothing against the host,it is just the nature of illusions, horror stories,deflation and global power grab credit crimes.modern day free market survival stuff, actuallyrelatively admirable, respectable and enviable.systemically essential yet socially destructive..hmmm?why not? “bell tolls for thee” and all that…soprophesy i see in the realmof speculation and projection based on analysisof existing “dynamics”, etc..sans the b.s.when the existing dynamics become destructive andor static the only projection that remains possibleis systemic failure as the existing identifieddynamic has been deemed failure and the agent ofdirection of the dynamic force refuses to acceptthis fate and continues to support the system thatis unsupportable…and time waits for no man.if the failure cannot be exported collapse ensues.boom and bust, emphasis on the second beat. iwould say by design as it is the back BEAT of thestreet.but, i hold, it all depends on good nutrition andchoices, neither of which are we desirous of toany significant degree.ps.. 175 lbs.psss. the weight, the band.. remember this ?I pulled into Nazareth, I was feelin’ about half past dead;I just need some place where I can lay my head.”Hey, mister, can you tell me where a man might find a bed?”He just grinned and shook my hand, and “No!”, was all he said.(Chorus:)Take a load off Fannie, take a load for free;Take a load off Fannie, And (and) (and) you can put the load right on me..I picked up my bag, I went lookin’ for a place to hide;When I saw Carmen and the Devil walkin’ side by side.I said, “Hey, Carmen, come on, let’s go downtown.”She said, “I gotta go, but m’friend can stick around.”(Chorus)Go down, Miss Moses, there’s nothin’ you can sayIt’s just ol’ Luke, and Luke’s waitin’ on the Judgement Day.”Well, Luke, my friend, what about young Anna Lee?”He said, “Do me a favor, son, woncha stay an’ keep Anna Lee company?”(Chorus)Crazy Chester followed me, and he caught me in the fog.He said, “I will fix your rags, if you’ll take Jack, my dog.”I said, “Wait a minute, Chester, you know I’m a peaceful man.”He said, “That’s okay, boy, won’t you feed him when you can.”(Chorus)Catch a Cannonball, now, t’take me down the lineMy bag is sinkin’ low and I do believe it’s time.To get back to Miss Annie, you know she’s the only one.Who sent me here with her regards for everyone.(Chorus)…psssssss. to the person up top who wants to hold the loan on his real estate. trade your propertyfor property and live with it. or trade it for amule, or a good horse. or shares of google ora blank iou or tons of pyrite or baseball cards ora nice old piano or ……..shares of monsanto orcalves or lots of hemp rope….

Anonymous • May 22nd, 2009 at 12:47 am

EMP weapons, anyone? Use of EMP would knock out electrical grids, disable all communications networks, etc. If used in Asia or Europe, it would restore the American dominance at a stroke – and create a huge market for American-made goods while their societies and economies take decades to recover.Just an idea . . .

Guest • May 22nd, 2009 at 3:24 am

Blame the germans.Guility for saving and lending.from http://www.ft.com/cms/s/0/284122bc-4669-11de-803f-00144feabdc0.html?nclick_check=1Germany fuelled global imbalancesPublished: May 22 2009 03:00 | Last updated: May 22 2009 03:00From Mr Dominic Bryant.Sir, Bertrand Benoit’s analysis (“Short work of it”, May 19) talks of the prudent German attitude to spending.It notes Chancellor Merkel’s comment that anyone wanting to know how the west had got itself into such a mess should ask the Swabian housewife: “In her simple and true wisdom, she would have told you that nobody can live above their means forever.” In other words, countries like the US and UK have borrowed excessively.However, it takes two to tango and for every excessive borrower there has to be an excessive lender/saver. Yet at a country level, it is the borrowers, not the lenders who have taken most of the blame for the current crisis.This approach allows the likes of Germany to avoid taking responsibility for its role in global imbalances that have built up. Excessive saving is just as much to blame for this crisis as excessive borrowing. They are two sides of the same coin.Germany’s export-dependent, high-saving economic model only worked because others were prepared to consume and borrow.Therefore, its position was as unsustainable as that in the US and UK.Dominic Bryant,Senior European Economist,BNP Paribas,London NW1, UK

Guest • May 22nd, 2009 at 6:51 am

“It’s a dangerous game to mislabel monopolies and banker-controlled government as capitalism.”That’s the real existing capitalism. (by the way:it is the same in all known econ. systems, if you make the analysis; “free maket” ist the same wrong label for the real market as “free press” for the media or “free opinion” for the real opinion of the citizen; just fictions instead of reality; we live all in fictiousstania)Do you want to talk about wishes?Who cares about wishes?After finishing to understand the rality, then may be, there will be some time left.globumedes

Guest • May 22nd, 2009 at 7:01 am

Nice article but it didn’t address the issues that people really want to know about, like:How the Obama family’s new pet is adapting to life as first dog?The status of the White House vegetable garden.President Obama’s basketball and bowling skills.If the President and first lady ever have an opportunity for some private time together. http://www.msnbc.msn.com/id/30548300/besides everyone knows that President Obama is against the misguided tactics of the last eight years and wants to close Gitmo.

RPT • May 22nd, 2009 at 7:03 am

@guest”The Virtue of Selfishness;” more Ayn Rand crap.People could not possibly be motivated by altruism or a common sense of purpose….could they? Only greedy self-interest.Guest, everyone is not like you.

RTP • May 22nd, 2009 at 7:50 am

@Guest”Excessive saving is just as much to blame for this crisis as excessive borrowing.”As PJ O’Rourke said: “Economics is an entire scientific discipline of not knowing what you are talking about.”

DueLiLowMould height • May 22nd, 2009 at 8:22 am

美佛州最大銀行倒閉接管2009年5月22日 星期五 20:10美國地區銀行聯合銀行（Bank United）被接管，是今年在美國最大間銀行倒閉，今年已有34間當地銀行被接管。聯邦存款保險機構向Bank United發出接管令，指銀行財務狀況不安全和嚴重資金不足。Bank United是佛羅里達州最大的銀行，共有86間分行。當局將銀行出售予凱雷及百仕通等基金，他們將注資9億美元，預計聯邦存款保險機構將因銀行損失49億美元。(路透社)

kilgores • May 22nd, 2009 at 8:36 am

It wouldn’t be a crisis if the government were perfectly prescient and knew exactly the right steps to take to ameliorate conditions. Of course, if the government had that sort of foresight, we might not be in the crisis in the first place. Things are the way they are, and not always as we’d prefer them to be.SWK

Vladimir • May 22nd, 2009 at 9:15 am

In a country of Lilliputs–modern “economics”–even a man of average height will look like a giant. I guess Roubini had a brush with political economy during his radical days in the 1970s. Too bad this sleek article is too vague about that period of his life.

Mark • May 22nd, 2009 at 9:30 am

Dr. Albert Bartlett has been around a LONG time. Besides, longevity or brevity of the messenger has NOTHING to do with the message.What FACTS do you disagree with?Funny you mention horses and horse manure. It was stated (FACT) back then that the automobile was environmentally good (for it effectively displacing horse manure). LOL! Yeah, look where we’re at now! Addicted to killing people so that we can get oil to hurl ourselves in 3,000 lb pieces of metal: all this illusion created to maintain the eliltes.Those columbines will, in the not-to-distant future, cease to be running around in those fields. Cuba (post U.S.S.R.) presents an excellent example of what happens to a modern agricultural civilization when it loses oil.And that moon story, was it you that tried this horrible argument before? That was what, 1969, 40 years ago? Put this in perspective, the oil era has spanned roughly 100 years (it’s been around a bit longer, not much, but any significant use is roughly 100 years), which means that in our oil era the moon landing occurred about 40% of this time ago! And how many people have been able to step foot on the moon?Mark

Mark • May 22nd, 2009 at 9:38 am

Chignos pretty much says it all.But… It’s not really all that scary, only, that is, if you’re really sucking hard at the teat of this great illusion: if you’re here then you’re not likely hopelessly stuck.Food, Shelter, Water. Make sure that you’ve got modest means to these.As to when there’s economic collapse? It could keep being yoyo’d around for some time (I think that the world’s powers are going to get together and cast away their differences and form some pact to keep themselves aloft for yet another period of time, but it’ll be the last time).Technological collapse will occur within about 20 years. I’ll greatly miss the Internet (and all the great people that I’ve been able to connect with). But… we’ve got to focus more closely on those around us, for they will be the ones in our boats.Mark

Mark • May 22nd, 2009 at 9:50 am

Yeah, I’m sure that Cramer is still screaming “buy!”Can you catch a falling train…Mark

amacfly • May 22nd, 2009 at 10:02 am

ditto that SWK, it amazes me that no one looks beyond the puppet to see the puppet masters, who at this point are obviously the Fed, GS and the banking lobby. Everyone gets all hot and bothered about the fall guy, but then I guess thats why they put him there now, to be their fall guy when this autumn’s collapse unfolds.

Guest • May 22nd, 2009 at 10:06 am

As the one-party solution to America’s economic crisis gathers steam, the too-big-to-fails bailed out by taxpayers money will continue with more of exactly the same policies that created the crisis: expanded power to the Federal Reserve, more government control over the economy, more subsidies and benefits, and more international commitment. “Emergency reforms” will become law and finances will concentrate in fewer and fewer hands. As Frenchman Alexis de Toqueville said in 1831, after touring the United States: “Above this race of men stands an immense and tutelary power…to keep them in perpetual childhood… Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals…they want to be led, and they wish to remain free… They devise…an all-powerful form of government, but elected by the people. They combine the principle of centralization and that of popular sovereignty… Every man allows himself to be put in leading-strings…because he sees that it is…the people at large who hold the end of his chain.”Such was Toqueville’s prescience, his prophecy…of man’s adaptability to an advanced form of slavery…of his destiny to be sheeple on Orwell’s animal farm. And the human engineers’, the privileged pigs, Orwell’s too-big-to-fails, destiny to take all…BankUnited Fails, Will Cost FDIC $4.9 BILLIONhttp://www.businessinsider.com/banku…billion-2009-5After several tense days, during which Florida bank BankUnited scrambled to raise capital or sell itself, it has been shut down, put into receivership and sold to investors that include Wilbur Ross and the Carlyle Group.It is the biggest bank failure of 2009 and it will cost the stretched FDIC $4.9 billion.The FDIC’s full announcement is here.So how does the biggest bank failure since IndyMac square with what’s putatively a stabilizing or “healing” banking sector, with a LIBOR rate that’s returned to pre-crisis levels? Easy. The government is backing the entire thing up, and even with this failure (which the FDIC calls the “least costly” approach), bank investors are being ring-fenced and backstopped to all get out.When the training wheels come off the sector, then we can get some clue about what’s stabilizing, but in the meantime, events like these aren’t very promising.

Guest • May 22nd, 2009 at 10:14 am

TARP Warrant Sale Shows Banks May Reap ‘Ruthless Bargain’May 22 (Bloomberg) — Banks negotiating to reclaim stock warrants they granted in return for Troubled Asset Relief Program money may shortchange taxpayers by almost $10 billion if Treasury Secretary Timothy Geithner’s first sale sets the pace, data compiled by Bloomberg show.While 17 financial institutions have repaid TARP funds, only one has come to terms with the U.S. on the value of the rights to buy stock that taxpayers received for the risk of recapitalizing the industry. That was Old National Bancorp in Evansville, Indiana, which gave the Treasury Department $1.2 million for warrants that may have been worth $5.81 million, according to the data.If Geithner makes the same deal for all companies in the rescue program, lenders may walk away with 80 percent of profits taxpayers might have claimed.http://www.bloomberg.com/apps/news?pid=20601109&sid=aOQPmbrh1ZrA&refer=home

PeteCA • May 22nd, 2009 at 10:36 am

Guest – I get as worked up about this scenario as much as the next guy. And if you think that I’m somewhat emotional, you should look at some of the recent articles by James Quinn (try looking on financialsense.com and dollarcollapse.com). They are well researched and very well written. Mr Quinn is within a hairs breadth of leading a new American Revolution at this stage :-) I try to remember that the USA is like a large ocean liner. The ship of state does not turn quickly from its current course. So although we discuss major changes in our economy – it all takes time to happen. But slowly and surely, it is really happening. There is plenty of rough water ahead.The ocean liner effect is also working against the Gov’t right now. It is very hard for them to turn things around – against a mountain of bad financial policies that built up over the last two decades. Just like the Titanic, by the time you see the iceberg close to the bow of the ship, it is too late to stop the inevitable disaster. In our case, the “iceberg” are the enormous deficits that the Gov’t and Congress have built into our financial system.It is worth thinking about what the Russians have been saying. We tend to dismiss their comments, partly because they were our former enemies (Soviet Union), and more recently because they have been our competitors. But the Russians went through superpower status, followed by an economic collapse. They understand the process – because they have been there. Their own projections are that we will experience our own collapse in 2010. They might not be that far off the mark.This last week was significant because the markets have just started to factor in the possibility that the US may really drown in its own debts. Of course, we have all known this for a long time. But it takes a long while sometimes before you actually see the financial markets deal with reality. This past week we saw the credit status of the UK Government downgraded. Not an unexpected move. They are in a lot of trouble. But clearly a move like that also precedes a similar judgment against the USA. This year Uncle Sam is trying to sell a whopping 3 $trillion in debt – to whoever will buy it. But it is already becoming very apparent that not that many buyers are eager to accept US bonds and treasuries any more. At least … not without much better incentives (i.e. much higher interest rates).So, you can watch the drama play out. It’s very much like a high stakes poker game. Imagine that you are at Las Vegas and you’re holding a bunch of cards that are all duds. You’ve got nothing – but you are still in the game and trying to bluff your way to a winning outcome. Trouble is … each round the pot on the middle of the table gets higher and higher. This forces you to kick in more money, keep bluffing, and try not to show your perspiration. But needless to say, your sweat glands are working overtime.This is the game that the Fed is now playing. They are being forced to buy back US debt that no-one wants. And since the world is getting more and more reluctant to accept US treasuries and bonds at low interest rates, the Fed has to buy more of it back. EXCEPT – that Ben Bernanke is plenty smart enough to know that this is a fool’s game and can only lead to an explosion in the US money supply. So he’d like to hedge, by buying as little debt as he possibly can. Only he can’t really do this. Unless the Fed is willing to go “all in” in this poker game, then interest rates on US debt will start to soar. That will force mortgage rates in the USA to climb – and hence the housing market will take a further big knock (with more trouble to the assets of Wall St banks). Worse still, I suspect that the folks at Fannie Mae and Freddie Mac are not having any joy right now. They cannot withstand soaring mortgage rates (and hence much higher mortgage delinquencies) either.So the Fed can’t blink. They will be forced to buy back a lot more US debt. And the market is just starting to factor all of this in right now. So we are looking at a potential plunge in the US dollar … and the $64,000 question is just how fast the dollar will go down. In other words, do a lot of global investors start dumping US debts (and cause a dollar crash), or is Ben Bernanke going to be a very lucky guy and make it to the end of this poker game (i.e. a controlled descent in the value of the dollar)?Time will tell. I think you’ll see a lot happen in the next two years. I don’t think the outcome looks that pretty for us … high interest rates, soaring monetary inflation, the US economy in a quagmire, collapsing Social Security and health care. There will be a lot of angst amongst Americans.The tough challenge for us – as regular Americans – will be to keep a positive mental attitude and try to fight our way out of this hole.PeteCA

TfT • May 22nd, 2009 at 10:37 am

Excepts (emphasis mine) from Michael Hudson’s The Toll Booth Economy:

Another trend that cannot continue is “the miracle of compound interest.” It is called a “miracle” because it seems too good to be true, and it is – it cannot really go on for long. Heavily leveraged debts go bad in the end, because they accrue interest charges faster than the economy’s ability to pay. Basing national policy on dreams of paying the interest by borrowing money against steadily inflated asset prices has been a nightmare for homebuyers and consumers, as well as for companies targeted by financial raiders who use debt leverage to strip assets for themselves. This policy is now being applied to public infrastructure into the hands of absentee owners, who will build interest charges into the new service prices they charge, and be allowed to treat these charges as a tax-deductible expense. Banking lobbyists have shaped the tax system in a way that steers new absentee investment into debt rather than equity financing.The cheerleaders applauding a bubble economy as “wealth creation” (to use one of Alan Greenspan’s favorite phrases) would like us, their audience, to believe that they knew that there was a problem all along, but simply could not restrain the economy’s “irrational exuberance” and “animal spirits.” The idea is to blame the victims – homeowners forced into debt to afford access to housing, pension-fund savers forced to consign their wage set-asides to money managers for the large Wall Street firms, and companies seeking to stave off corporate raiders by taking “poison pills” in the form of debts large enough to block their being taken over. One looks in vain for an honest acknowledgement of how the financial sector turned into a Mafia-style gang more akin to post-Soviet kleptocrat insiders than to Schumpeterian innovators.The post-bubble tomes assumes that we have reached “the end of history” as far as big problems are concerned. What is missing is a critique of the big picture – how Wall Street has financialized the public domain to inaugurate a neo-feudal tollbooth economy while privatizing the government itself, headed by the Treasury and Federal Reserve. Left untouched is the story how industrial capitalism has succumbed to an insatiable and unsustainable finance capitalism, whose newest “final stage” seems to be a zero-sum game of casino capitalism based on derivative swaps and kindred hedge fund gambling innovations.

Notes:1. If you are interested, please read the whole article since the excerpts are personally opined.2. No intent to argue about ‘growth’ mentioned in the excerpts.

Mark • May 22nd, 2009 at 10:39 am

Phil, it’s all based on growth!One can always find nice tiddy and impressive looking production cores, but their scope is dwarfed by the surrounding reality of the opposite, the “non-impressive.” I was in Manila not too long ago, in the areas presented in the following web page, and I can tell you that had I only been in Makati I’d have thought that this model would work, that everything was great.Poverty and the Fancy Corporate Headquarters in ManilaNothing here says sustainability! Out in the countryside, however, I DID see sustainability; not because I want to, but because it has a proven track record, whereas the span of existence of Makati and its surrounding slums has been, so far, only a blip in time.Getting back to the article, I find this heading quite telling:The Economic Crisis Was Caused by Reduced Labor IncomeWhat? Income is what, fiat currencies? based on this reasoning all we’d have to do to make things work is to give everyone more of it!This article is fundamentally flawed.Mark

TfT • May 22nd, 2009 at 10:39 am

Another excepts (emphasis mine) from Michael Hudson’s The Toll Booth Economy:

Unfortunately for us – and for reformers trying to rescue our post-bubble economy – the history of economic thought has been rewritten in infantile caricature, to give an impression that today’s stripped-down, largely trivialized junk economics is the apex of Western social history. One would not realize from the present discussion that for the past few centuries a different canon of logic existed. Classical economists distinguished between earned income (wages and profits) and unearned income (land rent, monopoly rent and interest). The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth stemming from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains. But even the Progressive Era did not go much beyond seeking to purify industrial capitalism from the carry-overs of feudalism: land rent and monopoly rent stemming from military conquest, and financial exploitation by banks and (in America) Wall Street as the “mother of trusts.”What makes the latest bubble different from previous ones is that instead of being organized by governments as a stratagem to dispose of their public debt by creating or privatizing monopolies to sell off for payment in government bonds, the United States and other nations today are going deeply into debt simply to pay bankers for bad loans. The economy is being sacrificed to reward finance, instead of finance subordinating and channeling finance to promote economic growth and lower the economy-wide cost structure to remain viable. Interest-bearing debt is weighing down the economy and causing debt deflation by diverting saving into debt payments instead of capital investment. Under this condition “saving” is not the solution to today’s economic shrinkage; it is part of the problem. In contrast to the personal hoarding of Keynes’s day, the problem is the financial sector’s extractive power as creditor instead of clearing the slate by wiping out the economy’s bad-debt overhang in the historically normal way, by a wave of bankruptcy.

Notes:1. If you are interested, please read the whole article since the excerpts are personally opined.2. No intent to argue about ‘growth’ mentioned in the excerpts.

Softwarengineer • May 22nd, 2009 at 10:41 am

FIXED RERSOURCES AND NO RECENT INVENTIONSI’m a younger baby boomer, yet my dad’s and grandad’s generation invented all of the following:personal computersplasma TVsultrasoundmicrochipsinternal combustion enginesLCDthe fastest jets in the worldinternetetc, etc, etcWhat has man invented since the 1960s and 1970s? What has America invented since the 1960s and the 1970s?smaller reversed engineering of the pastnanotechnology with no application yetDid I miss anything important? I hear PhDs aren’t publishing near as much in the last couple decades too.Nope, it clearly appears as the earth and America get more crowded, the hope, drive and time for imagination to invent new technology has gone down the toilet. Thank God for my dad’s generation living in an America of 150-200 million citizens with land to stretch out on and dream. Do we depend on the rest of the earth now for inventions, now that America has made engineering/science an outsource/insource wage chopping block and/or a scary Frankenstein threatening the banksters’ old invention world economy? Ironically though, a dinky country like Denmark is #1 in technology innovation compared to America’s dropped down status to #7 [Japan and China are even more subpar and even worse than Mexico]. Europe has done much to control its population and this clearly appears to encourage technoloy growth and new inventiveness, but God forbid we encourage low fertility rates stealing customers from the banksters. LOLNope, I don’t see inventions in technology getting us out of this overpopulation mess we’re in; the recent actuals to date clearly prove my point. Hades, the space shuttle was invented in the 70s too and we act like its our invention today…LOL.

Guest • May 22nd, 2009 at 11:14 am

What gobbledygook the market uses just to say the Fed’s giving money to its friends and the money it’s giving is our money. What enterprise has the Fed done for the taxpayer since 1913? None. Not one single thing, but perhaps to lie that it did something. Can anyone deny that the Federal Reserve Act was created to transfer money to private investment banks? No!MSN Money Market Report: Stock Ticker [BRIEFING.COM] The Fed announced today that bank holding companies will be allowed to include senior perpetual preferred stock issued to the Treasury under TARP in banks’ Tier 1 capital calculations, without restriction.http://news.moneycentral.msn.com/briefing/StockTicker.aspx

Mark • May 22nd, 2009 at 12:21 pm

Look at the top of any US bill:FEDERAL RESERVE NOTEHello people, it’s THEIR money! If you don’t like them (and count me in this camp), then quit using these things!Mark

kilgores • May 22nd, 2009 at 12:32 pm

You have this backwards, Guest @ 11:14:02. The Federal Reserve Act was created by President Woodrow Wilson and the Democrats as a populist, anti-bank reform measure to decentralize power from money trusts. It won out over the Republican Aldrich Plan which would have vested control of regional banks individually and nationally by private bankers.While you may have grounds to argue that it has been ineffective in serving that purpose, I don’t think it is accurate historically to suggest that it was some sort of conspiracy to effectuate the transfer of money to private investment banks.SWK

kilgores • May 22nd, 2009 at 12:52 pm

That’s pretty funny, Mark, but I don’t think identification of the source of the note is any claim to ownership or authorship. The trouble is, value is an intangible concept, and any tangible symbol for value (e.g., the value of our work, the value of our investments) is incapable of ensuring a fixed, objective equivalency over time. Even commodities, such as gold, fluctuate in value. The advantage of fiat money in a recession lies in the very fact that there is not a finite supply, so that the money supply can be increased to head off or mitigate against deep downturns and stabilize the economic system. The reason the gold standard got us into trouble in the Great Depression is because the Fed was concerned about defending the stability of the dollar, and had no choice but to raise interest rates because folks were liquidating dollars for gold, over the supply of which the Fed had no control. As a result, the downturn was exacerbated, since money for businesses dried up, leading to more bankruptcies and unemployment.SWK

kilgores • May 22nd, 2009 at 1:09 pm

Candidly, amacfly, as I’ve opined on this blog many times before, the greatest challenge we face is to recapture control of our democratic republic from the grips of corporatism and the pernicious influence of concentrated wealth in the hands of a few. Free enterprise is great, but it doesn’t necessarily imply or lead to political freedom. Just ask the Chinese. With all its flaws, our system of elected government is the only aegis citizens (natural persons, not so-called “good corporate citizens”) have against the otherwise unbridled control of our lives by financially powerful industries and individuals. Unfortunately, we often seem to be outgunned.SWK

Guest • May 22nd, 2009 at 2:54 pm

The credit card reform bill without caps on rates is another batch of bull excrement. The banks are laughing at us!!! Why do we let the henchmen of the bankers pass off “reforms” and “modernizations” that serve to put us in debt peonage. Are we all marginalmorons! Why are the national banks exempt from state usury laws? There is a good reason why the historicalchurches were opposed to usury. They saw its destructive power over time. We are so being squeezed by the banking interests, it is pitiful!!!

Softwarengineer • May 22nd, 2009 at 3:00 pm

HI ALBERTOI hear you. I live in Washington State and although its $9B deficit isn’t on the news like California’s $19B deficit, its 7 million population is about 1/3 of California’s. Its very clear that Wash St’s budget crisis is about 50% worse than California’s.The whole west coast is shafted, as Oregon’s unemployment rate is worse than California’s too; its over 12%. I think its a party/news media bias thing, if your governor is other than Democrat, you’re the likely scapegoat….LOLPoor Terminator….LOL

Mark • May 22nd, 2009 at 3:05 pm

GM is going to hack salaried employees wages, and now Ford is looking is offering ALL US hourly employees a buyout package!Ford Extends UAW Buyout Offers Until June 26 to Get More TakersFord, which lost a record $14.7 billion last year, is giving workers an extra five weeks to consider the buyouts valued at as much as $75,000 each. Ford is offering buyouts to all 42,000 of its U.S. hourly employees as it tries to slash labor costs to remain off government aid. (emphasis added)Mark

Pecos Banker • May 22nd, 2009 at 3:20 pm

Great post PeteCA! Thank god you are a contributor here. Can’t you point us in the right direction to read about those Russian predictions you mentioned? I like to read Dmitri Orlov, by the way, over at cluborlov.com. Another fun person to read is Jim Kunstler, mostly because he’s a good writer.

Anonymous • May 22nd, 2009 at 3:40 pm

A desperate attempt to climb out of the hole by pulling your bootstraps, that’s what I see. The only certitude is death, it appears easier to avoid taxes.

Softwarengineer • May 22nd, 2009 at 3:41 pm

AND SOME FOLKS SHOULD BE CAREFUL WHAT YOU WISH FORUnion bashing, “Asian company” type pension cuts, interest cuts on savings accounts to theoretically lower mortgage interest and outsourcing/insourcing technical positions may cut wages, encourage short-term debt [until interest rates spike up to attract the very debt needed] and satisfy a short-sighted attempt to restore a floundering American industrial base in America; but what good does it do for our tax base [local and federal] with collapsed wages, social security wage base with a bunch of like minimum wage earners, dollar value (and the subsequent longterm interest rates spikes) and a reliable retirement spending boltstering the air travel, automobile sales, etc., when you can’t afford to retire, send your kids to college and/or buy a house anymore?

Mark • May 22nd, 2009 at 3:57 pm

Yeah, I saw the full death spiral picture last year when the UAW negotiated a contract to protect their retirement benefits at the expense of new workers’ wages (reduction). If new workers were going to earn less, then who did the retirees think they are going to sell their homes to?But his is all just mental masturbation. The Great Bubble, of which all the auto manufacturers were part of, will NEVER again occur.I’d say that switching over to bike manufacturing would be wise except that there’s already a glut of used bikes out there (just open up most garages).Mark

generalKurtz • May 22nd, 2009 at 4:03 pm

I think the biggest crisis the world will face is very near. It will be as a result of depletion of the planet! Before the climate warming, which can be controlled, ruins life, depletion of natural resources will suffocate the life as we know it.Increased economic activity in emerging markets, will suck oil, gas, copper, steel etc. out of world. The commodity prices will sky-rocket and certain commodities will not be available at any price. Then as a result, the inflation will make life unlivable for the poor and the lower middle class. This will in turn cause political unrest in poorer parts of the world which eventually will bring years of political instability. The world won’t be able to increase its food production by 50% by 2030 to the needed minimum level. The fight for last remaining resources will cause wars probably. Especially if the climate warming can’t be stopped, geographic changes will make things even worse. Mass movements of populations will cause turmoil in many corners of the world. The population growth itself will bring the world to its knees since it will hit 9 billion by 2050.* just a brainstorming session… or may be not… :-)

mark • May 22nd, 2009 at 4:09 pm

Hey Pecos, you might be interested in this by Jason Godesky (Anthropik.com):The Thirty ThesesIt’s a TON of reading, but for anyone who really wants to get a good feel for the BIG picture, this is IT! It’s THE Red Pill.Mark

Mark • May 22nd, 2009 at 4:24 pm

No argument from me on what is likely going to happen if we continue with the status quo.Food production is going to take a HUGE hit as fossil fuels become more scarce.Mark

Hayes • May 22nd, 2009 at 4:32 pm

and this via Jesse – great commentary on currency and the marketshttp://www.youtube.com/watch?v=DDlc33hSDjA

kilgores • May 22nd, 2009 at 4:39 pm

That’s actually a very scary thought. Even from a transportation perspective alone, it wouldn’t take long for a serious shortage in refined petroleum to impact store shelves. I don’t know about you, but the nearest real farm is probably about 30 or 40 miles away from me at best. I’d have to resort to eating swamp cabbage and shooting rats and squirrels to feed the wife and young’uns.SWK

Morbid • May 22nd, 2009 at 4:44 pm

Perhaps Mother Nature will help us out with some dark event like the 1918 Swine flu pandemic but even more lethal.If not that then the slow increasingly violent death picture you suggest in your comments.

kilgores • May 22nd, 2009 at 4:50 pm

As I noted on a previous thread some ago, in Marquette National Bank of Minneapolis v. First of Omaha Service Corp., 439 U.S. 299 (1978), the United States Supreme Court held that the National Bank Act (ch. 58, 12 Stat. 665, February 25, 1863), which established our national system of chartering banks, preempted state usury laws. Congress could and should have stepped in to amend the law, but it never did, and since that case was decided, the financial sector has grown from about 5% of GDP to about 30% of GDP, while manufacturing has shrunk from about 25% of GDP to around 10% of GDP. These circumstances allowed the nearly unbridled growth of credit card and other debt-based “growth” that culminated in the predicament in which we now find ourselves.SWK

generalKurtz • May 22nd, 2009 at 4:55 pm

and the worse thing is that all these problems are interlinked:increased economic activitiy leads to increased greenhouse gas emission which warms the climate even more and that leads to drop in agricultural output which makes life more expensive causing political issues and creating economic crisis.and if you remember the early days of this crisis, we have seen the sign of all of these…

Morbid • May 22nd, 2009 at 4:55 pm

A voice crying out in the wilderness…I have always liked Ron Paul – maybe he will run again if there is anything left to salvage after the ObamaNation of Desolation wet dream trial period ends.

Guest • May 22nd, 2009 at 5:08 pm

Dude you’re completely fanatical and delusional you act as if resources are gone already, completely as in yesterday and everyone’s going to starve in this country any minute. Every post you make uses the same scare tactics to prove your religion or ideology. Yes you have a point but we are no where near where you wish we were! Could you please admit you flat out lie in your posts with over zealotry to prove your point it’s lying as in no better than Bush or the neo-cons and frankly I find it repulsive. I’m tired of being preached to by you, you have zero credibility with me, you’re posts are pure ego and very condescending as in they way over exaggerate to prove your point. Yes I believe your point is the obvious mid to long term conclusion (though not 100% inevitable) but your using this crisis to further your ideals in a very condescending matter meaning you’re a ego-maniac! You care more about being right and proving yourself right than you actually do about the issue otherwise you wouldn’t talk down to people.

PeterJB • May 22nd, 2009 at 5:40 pm

La main: noun. The terminal part of the human arm located below the forearm, used for grasping and holding and …. An aptitude or ability. artificial sexual gateway. an expression of intelligence. a technologyhttp://economistsview.typepad.com/economistsview/2009/05/sachs-obamas-military-conundrum.htmlThe ancient ones nominated the hand to be of feminine gender; not by mistake.Due to a complete lack of resources, “Leadership” has resorted to running the World, er, by hand.Note the crossed eyes and drooling mouths’ …Ho hum

GSM • May 22nd, 2009 at 7:20 pm

This is from an article by the SF Fed, posted at ZH;http://zerohedge.blogspot.com/2009/05/san-francisco-fed-concerned-about.htmlHere is that “c” word again; collateral.When the population really wakes up that it no longer exists, the reaction will be akin to cardiac arrest. Nothing short of a complete, permanent and immediate lifestyle change to a simpler and thriftier way of life. Does anyone think those lost jobs are coming back? How is that for an economy killer?“More than 20 years ago, economist Hyman Minsky (1986) proposed a “financial instability hypothesis.” He argued that prosperous times can often induce borrowers to accumulate debt beyond their ability to repay out of current income, thus leading to financial crises and severe economic contractions.Until recently, U.S. households were accumulating debt at a rapid pace, allowing consumption to grow faster than income. An environment of easy credit facilitated this process, fueled further by rising prices of stocks and housing, which provided collateral for even more borrowing.The value of that *collateral* has since dropped dramatically, leaving many households in a precarious financial position, particularly in light of economic uncertainty that threatens their jobs.Going forward, it seems probable that many U.S. households will reduce their debt. If accomplished through increased saving, the deleveraging process could result in a substantial and prolonged slowdown in consumer spending relative to pre-recession growth rates. Alternatively, if accomplished through some form of default on existing debt, such as real estate short sales, foreclosures, or bankruptcy, deleveraging could involve significant costs for consumers, including tax liabilities on forgiven debt, legal fees, and lower credit scores. Moreover, this form of deleveraging would simply shift the problem onto banks that hold these loans as assets on their balance sheets. Either way, the process of household deleveraging will not be painless.”

Guest • May 22nd, 2009 at 7:58 pm

It seems that the US govt is in limbo because of throwing around money here and there. Now it doesn’t seem like another stimulus bill or a fancy bail-out of the wall street is a possibility, or it will definitely lead to a collapse of the dollar.If Roubini’s, and IMF’s, forecast come true, then there is obviously a lot more to be writtern down in terms of losses and a greater shortfall of capital. How hard will be the sell, and what will be the consequences, of another fancy bail-out with the rationale that the taxpayer might eventually make a profit. The rationale is tantamout to saying that the US govt is playing blackjack at Las Vegas with a 45 percent chance that the taxpayer will make a profit and 55 percent chance that it will make a loss. In other words, there is a good chance that the taxpayer will emerge with a profit. At least they should quit with this rationale…or the empire will go bankrupt trying to save its banks which have an inevitable collapse, orderly or disorderly, written all over them…The people will be happy to know that the banks aren’t too big to fail…and the quicker this notion is thrown into the dustbin of history, the better…

Rohelio • May 22nd, 2009 at 8:14 pm

No doubt about it. The Green Revolution is going to look like the same aberrant blip that fossil fuels represent in history. It is totally dependent on fossil fuels.Add to that the experimentation and corporatization of food by Monsanto and Syngenta etc. and we have an accident waiting to happen.Monoculture and GMO’s are a huge step backwards in biodiversity which represents the real intelligence of nature. These monster corporations prevent world farmers from saving seeds by which man has preserved and refined a valuable heritage for survival in a whole range of climate anddisease possibilities. Think about the Potato Famine, 1845, in Ireland. It was the immense biodiversity resources of S. America that provided variants to replace the monoculture which succumbed to blight.Now we have monoculture and GMO’s crammed down by World Bank and IMF mandate (bankers). Let’s see how these genetic mutants and terminator seeds fare in the next drought or influx of pest.

Guest • May 22nd, 2009 at 10:35 pm

Snap out of your emotional response and Think for a few minutes. This is about the simple mathematics of doubling. Divide any given growth rate into 70 and you get the next interval in which all the resources that have been consumed, must be doubled. Okay you say you understand but it is not a problem now. So when is it a problem? For your children? For your grandchildren? For your great grandchildren?Oh, you don’t have children and it does not concern you. Well, Guest, you will go down in history as part of the most reviled generation of civilisation!

go,..... Guest • May 23rd, 2009 at 1:39 am

go, …..while this material is compelling it suffers froma common flaw and that is it is mostly based on theunfiltered perceptions of many eye witnesses.this type of testimony or account is frequentlybiased by,in an event such as this, shock and a degree oftrauma that renders the memory of perception andcomprehension erroneous and misleading. coolerheads with an understanding of proper historicalnarrative and context have explained, or couldexplain if needed, the systemically mistakenperceptions documented here..we should remember to be very careful whenwe encounter what appears to be obvious, simpleand straightforward as the truth can have/hascomplex and staggering implications. i would thinkthat if there was anything to these assertionseither the media or the government would havetaken the appropriate actions nearly immediatelyas they imply a critical threat to the motherhomeland, fatherland or whatever the appropriateterm should be today..surely the government would not dishonor itself,the fallen and the troops by neglecting tothoroughly investigate the events, evidence andwitnesses of this tragedy..”you can always count on america to do the rightthing…after all other possibilities have beenexhausted.” winston churchill

generalKurtz • May 23rd, 2009 at 4:10 am

he might not realize it but it is a problem for his generation. It is a problem now. I wrote this because I still remember what happened to corn prices just before this crisis started in 2007. It sky-rocketed. You know why it was… Also remember the scarcity of rice at the same time. This is from a web site* I found:”The rising cost of rice is affecting consumers differently across Asia, but, as always, it is the poor, who often spend 30-40% of their incomes on rice alone, that are most severely hit. Not only in importing countries such as the Philippines, Bangladesh and Malaysia (and of course in Africa where the consumption and import of rice has increased rapidly during past decades) does the soaring price cause hardship. Also in exporting countries such as India and Vietnam, the price hike implies prospects of increasing rates of malnutrition for the poorest. Government budgets are being stretched to pay for food subsidies and food inflation is causing political concern. As was the case in the 1960s and 1970s, many Asian governments are keeping a close watch on the rice price as a measure of potential unrest. Between December 2007 and April 2008, the world price of Thai rice, 5% broken, – a popular export grade – almost tripled from approximately USD 360 per ton to USD 1000.”also from another site**:”THE world’s most vulnerable who spend 60% of their income on food have been priced out of the food market,” is the alarming warning from Josette Sheeran, head of the United Nations’ World Food Programme (WFP). As the price of wheat, maize, corn and other commodities that make up the world’s basic foodstuffs is soaring the poorest people in the poorest countries are the hardest hit. And as prices shoot up helping them is getting tougher too. The WFP’s food costs increased by more than 50% over the past five years. Ms Sheeran predicts that they will increase by another 35% in the next couple of years too.”Keep in mind, as soon as some kind of recovery happens in the global economy, the oil will hit $100. This is Roubini’s prediction. I guess no need to tell what will be the consequences of that..* http://www.asiaportal.info/infocusblog/?cat=23** http://www.economist.com/world/international/displaystory.cfm?story_id=10085859

Flowers on Her grave • May 23rd, 2009 at 8:13 am

Now that Obama has in fact scrapped that annoying old rule of law and claimed Official Supreme Dictator powers for himself, will Roubini and company emphatically denounce him?Indefinite preventive detention = your precious Republic is deader than dead. Oh, look! Here comes your funeral procession, America!

Guest • May 23rd, 2009 at 8:34 am

On the one hand, most posters on this blog seems to point the The-Powers-That-Be (TPTB) as the root intermediary of our economic difficulties.Yet, at the same time most posters on this blog looks to the president for leadership.We now have a president who has been a law professor specialising constitutional law and a president who has upheld warrant-less wiretaps, government secrecy, illegal war in two countries, extraordinary rendition, and now indefinite preventive detention.We know Obama the “man” does not believe this stuff, but he “has to” do it. I say stop asking for presidential leadership and realize that he is a figurehead much like the Queen of England.It was also interesting that George W. Bush was quoted as saying “a great weight has lifted off his shoulders” since leaving the presidency. If your truly the man that gets to call the shots and be the “decider,” then why would one say such a thing; unless there was someone else in the room telling him what to do.

11B40, formerly Guest, also • May 23rd, 2009 at 9:10 am

Yo, FEDup! You might back up your time line to 1980 when Corporate America, the Defense Industry, and the Financial Community pretty much siezed absolute control with the beginning of the Reagan era. You know, greed is good and all that jazz – such as bailing out the Savings & Loan industry when the organized looting of the Treasury began in earnest. Or, maybe they pulled all the strings all along, but exercised a little self control over their greed and avarice. Or, maybe the age of computers allowed them to steal so more so much faster. It’s hard put your finger on the turning point, but things have changed quite dramatically over the course of my 62 years. I really never thought this would happen in America, at least until chicken littles in the Bush/Cheney administration took over and ushered in George Orwell’s pre-mature playbook.Other than the timeline, you pretty well laid it out. Third World – here we come (are?).

Guest • May 23rd, 2009 at 9:39 am

what are you talking about? Official Supreme Dictator powers were claimed by Bush and his sidekick Dick already years ago.

Guest • May 23rd, 2009 at 9:40 am

We must realized that our two party political system is now at its most disfunctional stage in the history of the United States. Both parties will do ANYTHING to get elected. Obama is exercising the first rule of job preservation.If you are going to keep your job, always act orthodox and you can always say it was bad advice from Summers and Geithner. This way after his second administration he can get 400,000 per speech. Does he not understand that he was elected to REFORM? There is no reform in a stance of bipartisan compromise. Bipartisan compromise means that both set of LOBBYISTS FOR BOTH PARTIES approve. For that to happen, there has to be GREAT CRONY BENEFITS FOR THEIR CLIENTS. Democracy requires a truly active and independent press and courageous reformers!!There are CONSERVATIVE REFORMS AND PROGRESSIVE REFORMS THAT MUST BE INSTITUTED. THE PROBLEM IS THAT THESE REFORMS DON’T HAVE LOBBYISTS ATTACHED TO THEM.Mr. President! Wake up! We knew Bush was a Cronyand he would literally tell us! However, you espoused CHANGE, and you are turning out to be a Con Man. Take a look at the edges of the parties and take advice from both Ron Paul and Bernie Sanders. They have no lobbyists supporting them. We need the NO LOBBYIST SOLUTION. THE SOLUTIONS THAT HAVE NO LOBBYISTPRESSURE ARE THE GOOD ONES!!!BOTH PARTIES ARE CAPTURED!!!!

Guest • May 23rd, 2009 at 9:47 am

The lobbyists are the de-facto government. The Congress and the President are there to talk pretty. The lobbyists will draft all the legislation, just like they did with Bush.THE WHITE HOUSE SHOULD BE ON K STREET FOR EASY ACCESS! THIS CRONY DEMOCRACY HAS TO STOP!!!WE ARE HEADING FOR A DISASTER FOR THE ECONOMY,BUT NOT FOR THE CRONIES. THE CRONIES WHO HIRE THE LOBBYISTS WILL MAKE MONEY REGARDLESS OF THE ECONOMIC SITUATION. THEY WILL BE ABLE TO CONSOLIDATE MONOPOLY RENTS AND BUY AT FIRE SALE PRICES.

Guest • May 23rd, 2009 at 9:56 am

I need co-counsel on a theory! I think that the Fed announced their plan for quantitative easing to intentionally lower the dollar and create an energy and commodities updraft that TPTB could use to use other people’s money to speculate and then when another round of deleveraging comes they can make tons of money on the short end. This synchronized manipulation to create profits for the propietary trading desks of the alpha-banks has been done before. We all saw the bubble in commodities last year being brought down by deleveraging. I have seen this movie before. I would appreciate criticism of my admittedly wild theory! No invectives please!!

Guest • May 23rd, 2009 at 10:08 am

This is a link to Broad Agency Announcement (BAA) PDF. (Do not click it unless you want to wait for a 150 page download.) http://www.mvk.usace.army.mil/contract/docs/BAA.pdfI am posting this BAA link because 1) the Army has American Recovery and Reinvestment Act (ARRA) money and it has to quickly spend about $5 million. This is a small sample of how it spends our “stimulus” money. 2) The Army is looking for demonstrations of alternate electrical energy generation designs that will provide electrical power to a military base for up to six months without commercial power.By Guest on 2009-05-21 14:12:25

I am sure that request has something in common with other things currently planned.

As a small example take Boeing’s Lead System Integrator (LSI) attempt to install a border control system along the Mexican border (http://www.corpwatch.org/article.php?id=14552). Billions and billions later we have nothing.By Guest on 2009-05-21 21:52:13

This could in fact be incorrect but perhaps the money went to building something else that has not been made public.

I think the biggest crisis the world will face is very near. It will be as a result of depletion of the planet! Before the climate warming, which can be controlled, ruins life, depletion of natural resources will suffocate the life as we know it.By generalKurtz on 2009-05-22 16:03:23

About this I am sure generalKurtz already has his favored solution to this crisis.In fact all of these things seems to come together at about the same time:1. claims of urgent need to reduce the greenhouse gases (ENVIRONMENTAL EXCUSE)2. claims of inability of economy to support the population (ECONOMICAL EXCUSE)3. consequent claims of human overpopulation (although #1 and #2 are due to mismanagement)4. technological ability (gathering sufficient data, monitoring, preparation, etc) and military preparation to do something about #3.The only thing missing is the “fall guy” (which won’t be any single “guy” but a group of organizations). After all the military has, under the guise of protecting US from terrorists, since 2001 prepared to fight an enemy composed of small groups scattered around the nation. They have furthermore been able to battlefield test new weapons in an ongoing ‘urban warfare’ setting in Iraq.

the Mortician • May 23rd, 2009 at 10:14 am

Wolves in wolf clothing versus wolf in sheep’s clothing. Which is more dangerous?

Anonymous • May 23rd, 2009 at 10:18 am

Ah, the sound of hammer hitting nail squarely on the head. You should be President, Guest.

Guest • May 23rd, 2009 at 10:20 am

Guantánamo Closure Delayed (May 22)By a margin of 90-6, the Senate voted down funding to relocate the 240 inmates being held at Guantánamo Bay to facilities on American soil. What do you think?Martha DePrima,Systems Analyst”Maybe if we leave it open just one more week, we’ll find out if they did it.”http://www.theonion.com/content/amvo/guantanamo_closure_delayed

so sorry, grampa • May 23rd, 2009 at 10:31 am

If we let this happen, don’t renounce this evil, then every dead American soldier has died in vain.Happy Memorial Day.

Guest • May 23rd, 2009 at 11:37 am

Stamp was a director of the Bank of England. Although the cited quotation has been attributed to him, it has never been verified, and doesn’t make any sense in light of who he was and what he did with his life.SWK

Morbid • May 23rd, 2009 at 11:51 am

California’s Troubles

“I don’t want single mothers with children begging on the streets. I don’t want schools closing. I don’t want a state where only the wealthy can go to college,” said Evans, chairwoman of the joint legislative panel.”That’s what we’re really debating right now: Which California do we really want?”Across the aisle, state Sen. Bob Dutton (R-Rancho Cucamonga) said California has dragged its feet too long in making cuts and that Democrats need to stop talking about tax increases.

It’s pay, always pay – time in CA.I wonder when the bill comes due for the Obamaneans?

11B40, formerly Guest, also • May 23rd, 2009 at 12:23 pm

The Americans Winston Churchill referred are dead. I, for one, do not believe the replacements can be counted on the same way.

Anonymous • May 23rd, 2009 at 12:41 pm

According to p. 469 in the book “The Creature from Jekyll Island”, By G. Edward Griffin, the Aldrich Bill was virtually identical to the bill {Glass-Owen} that created the Fed. Also, the Federal Reserve is a Privately owned Government sanctioned central bank

Morbid • May 23rd, 2009 at 1:46 pm

Yes Brett, some honesty.I wonder who sat Obi down and talked a little reality with him. Probably the S&P wanting to reduce the AAA rating put the fear of another GOD in him, i.e., hyperinflation.What I can’t understand is his ongoing mantra of trying to save Social Security and Medicare. They were always bogus unsustainable Ponzi scheme social programs that spent and continue to spend our childrens future. My grandparents never had this cradle to grave handhold these programs promise. Sure, they died younger than those today but at least they didn’t drag down everything around them when they passed away.Our children are the future. We need to teach them how to live in a sustainable manner – Mark’s favorite mantra and I quite agree. I am more than willing to role model by accepting degraded SS & Medicare benefits – the latter needs to have priorities establish. Let’s get rid of all the extraordinary stuff like organ transplants, chemotherapy, etc. and learn to live with the hand that fate has dealt you and that doesn’t cost too much to mitigate reasonable maladies – deal with those.

Guest o • May 23rd, 2009 at 2:48 pm

swk,it would not be the first nor would it be the lasttime that a mythological based historical narrativeappeared to contradict or be inconsistent witha simple utterance of truth. i’m sure we would beshocked to hear the plain private thoughts andconversation of those we perceive as captains ofindustry, institutional representatives etc….i would say it has to do with the symbolicand abstract nature of the foundation of languageand it’s importance in the development of”culture”, perception and social organization.as has been said “trust no man”. i think this isan example of the truth of that statement on atleast one level..have you ever known any living person well andfound them to be entirely consistent? we experience life, it changes, we change, and so on..

Guest o • May 23rd, 2009 at 3:27 pm

1,w.c. said “america”, not “americans”. thedifferencebeing principle aspiring to spirit vs. mentalityaspiring to principle. there is a distinctionwith a difference and it points to a functionof leadership; to be founded in principle aspiringto spirit and universal, say, compassion.and if we have yet to comprehend the distinctionsand relationships, or embraced thementality, principles and spirit of ourselves,it will be forced upon us. natural law.and then “america” will do the right thing.ps.i really don’t know what w.c. was implying, thisis just my interpretation.

Medic • May 23rd, 2009 at 3:44 pm

So a reasonable, thoughful, realistic approach to medicine. Hmmmm…..I’ve heard that somewhere before…….but where?

Upchuck • May 23rd, 2009 at 5:07 pm

Yes yes! Money is scarce! Scarce, do you hear me? Money is scarce! So by all means let’s continue totally screwing over the working classes who paid and pay for all while we continue shoving free money to the private insurance profiteers, the crony corporados and their crooked congress, the banksters, the tax cheats, and the military indistrialists and call all this inevitable reality and ourselves realists.Cowardly eagerness to have us all enslaved makes me sick.

Guest • May 23rd, 2009 at 5:41 pm

This is a must read/watchMay 23, C-Span exclusive interview with Obamahttp://cspan.org/pdf/obamainterview.pdfportion of interview transcript:”SCULLY: Yet, it all takes money. You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we’ve made on health care so far. This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.”_____________video versionhttp://www.c-span.org/cspanFLVPop.aspx?src=project/politics/politics052309_obama.flv&s=28.395&e=0&live=N&popup=Y

generalKurtz • May 23rd, 2009 at 6:38 pm

I don’t have a solution. I didn’t claim I had. I just wrote something I observed…There isn’t any political motivation behind what I wrote either! I am from Europe, I am not involved with Obama vs Bush thing.I am trying to keep my perspective global without containing, defining, limiting myself with the boundaries of politics. I set my motives based on a few simple principals like respect for human rights and respect for planet and everything on it. I thought this might be a better idea for avoiding prejudices but now I see that it is not that easy :-) If you want to be useful please, next time, write why our ideas are wrong. Let’s stick to the point and not waste precious time with personal issues.

Guest • May 23rd, 2009 at 7:29 pm

David Brooks on charlie rose said that US have bipartisan foriegn policy. If you know Dvid brooks and who he is you can understand the implications.

kilgores • May 23rd, 2009 at 7:39 pm

You can’t believe everything you read. Griffin is flat out wrong. Glass Owen was materially different from the bill proposed by Aldrich in several respects.Under the Aldrich scheme, the central bank (the ‘National Reserve Association’) would have had 15 branches CONTROLLED by the member banks. Liability for the issuance of currency would have been the liability of the bank, not the government (no full faith and credit backing the currency). In essence, then, Aldrich wanted a private monopoly with only token government representation on the board of directors. William Jennings Bryan criticized the Aldrich currency plan as being backed by “big financiers” and “big bankers” who would “be in complete control of everything through the control of our national finances” if it became law. Nationally chartered banks were not obliged to join the system.Glass Owen, by contrast, put control in the Federal Reserve Board. It provided that Federal Reserve notes would be obligations of the U.S. Treasury. Membership by nationally chartered banks was made mandatory. Glass Owen, then, took important steps to ensure that the government retained control over the currency and the banking system.As for ownership of the Fed, the following is from the FAQ section of its web site:”Who owns the Federal Reserve?”The Federal Reserve System is not “owned” by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.As the nation’s central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as “independent within the government.”The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations–possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.”One must be wary of authors who gloss over complex historical facts to justify their political predispositions (in Griffin’s case, extreme libertarianism).SWK

kilgores • May 23rd, 2009 at 7:47 pm

While it may be true that by nature, we all display some inconsistency in thought, word, and deed from time to time, I would argue that one should not hold up one of those inconsistencies allegedly displayed by an individual as representing a view seriously held by that individual (if it came from the individual at all, which in this case remains doubtful). Who we really are must be measured by a comprehensive assessment of how we live our mortal lives, and not by any single act or utterance made between birth and death.SWK

Guest o • May 23rd, 2009 at 9:04 pm

swk,well said. but, it does not interest me muchwho said it, what is of importance to me isthe truth of the statement. is it true?, and if itis, is it important enough to discuss?, and if itis, is it important enough to establish a consensusamong conscious thinking people to have it changed,corrected and improved? the name is almost irrelevant.

kilgores • May 23rd, 2009 at 11:26 pm

Fair enough. From my point of view, the U.S. government creates money through the Federal Reserve Banks. Private banks do not create money, nor should they be allowed to. As for control of the nation’s credit, while the Fed may make monetary policy and control interest rates (at least above the zero bound), I think Congress has let everyone down since the 1978 Supreme Court decision in Marquette by not amending the National Banking Act to control usury.SWK

Guest • May 24th, 2009 at 9:07 am

Here a hint – never argue with a lawyer – its their job to make facts fit theories, not to make theories that fit the facts

11B40, formerly Guest, also • May 24th, 2009 at 12:58 pm

Yes, of course you are right and I concede the point. There are differences between ‘America’ and ‘Americans’. Let me just say that it seems America has changed and Americans are the reason. Our traditional instituions are failing us. We no longer trust business, government, the financial community, the education system, healthcare providers and insurance companies. Corruption is everywhere and the sense of community I grew up with is vanishing. Once there was a shared generoisty of spirit that was commonplace. There was a widespread willingness to sacrifice for the common good. Now, well let’s just say it seems less widespread. We have fragmented into special interest groups – willing to throw outsiders overboard. I felt there was a more general understanding what America was all about and acceptance of subordinating the individual self for the health of the Constitution and Bill of Rights.On this Memorial Day wekend, I can’t help but reflect on the relationship between ending the draft, privatizing the military, and the sense that our country is so much more fragmented than once was. I am not a militarist, and keep President (General) Eisenhour’s admonition to beware the military industrial complex close at heart. But, I also know that a military defense is required, and truly believe conscripted citizens with a universal obligation is the best way to staff the needed forces. This is one more part of the lost commonality that I lament.Can we again become the America known by Churchill? I don’t know. I do agree that ‘natural law’ will bring about changes, but there is no guarantee what those changes will be, or that we will like them very much.

11B40, formerly Guest, also • May 24th, 2009 at 1:18 pm

There is a fundamentl idea that needs to reach critical mass in the general population to force politicians to change. What we have now is a system of ‘legalized’ bribery; of our leadership selling votes for campaign contributions. The average american must learn that “special interests” are by definition aligned AGAINST the common interests. If that idea can sink in with enough angry voters, perhaps we could get this idea passed into law:ONLY REGISTERED VOTERS SHOULD BE ALLOWED TO MAKE CAMPAIGN CONTRIBUTIONS!This would immeiately change America. No more corporate money, union money, PAC money, or foreign money (yes, I know foreign money is already banned). We would get a different class of politician, and they would spend a lot more time in their districts and pay a lot more atention to the voters. Campaigns would be vastly less costly. Without all this bundled special interst money, our airways would not be flooded with vile and negative advertising during election season.This is our country. We need to take it back. It is the reason I am here, and hopefully the reason many of you are here as well.

Softwarengineer • May 24th, 2009 at 7:01 pm

UPDATE TO BLOG ABOVEI believe California’s population is actually about 40 million now. So make Wash St’s budget deficit crisis 200% worse than California’s.

Chignos • May 24th, 2009 at 11:15 pm

Ed Schultz is pathetic, much like many of the lefty wingnuts who just shout down their guests (it didn’t work that well with Ron Paul this time, though) and repeat themselves over and over, like we didn’t hear them the first time. If you can’t answer the argument just talk over the opposition louder and louder hoping your viewers won’t realize you’re an inferior intellect. There’s a reason why Limbaugh and other conservatives dominate the intellectual discussion; their arguments are superior. They don’t have to shout down the opposition–the opposition is already yelling just how foolish they already are. Conservatives like Hannity would be wise to listen more to Ron Paul and more carefully consider the power of his argument. Maybe the rip-off publicans will quit nominating nitwits like McCain (and losing).

Softwarengineer • May 25th, 2009 at 2:13 pm

DON’T BLAME BOEINGImplementation of the Boeing virtual fence has been held up by Bush’s/Obama’s Homeland Security(?) and is a clear ripoff to the taxpayer who paid for it but our government brainlessly and/or purposely blocks the contract’s delivery to the American voters.Please don’t blame Boeing this time. Blame a bankster world of uncontrolled borderless growth allowing the Mexican drug cartel war to spread horrifyingly into America [while we watch American Idol in total denial?]. Ask LA about their recent/horrifying drug gang violence growth and their mayor will probably say, “smile and be happy and where’s my bailout money”.{

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