The New Depression Officially Arrives!

my head’s still too full of flu pud to know syntax from estate tax, but I’m gonna let some wags tell you the story…

Knees knocked last week from sea to shining sea as the shape-shifting monster of economic reality cut a swathe of destruction through the markets and financial ranks. The exact nature of this giant beast still remained largely concealed in a fog of accounting gambits, policy blusters, and reporting dodges, but a few intrepid scouts who glimpsed the behemoth up close said it looked like Godzilla with Herbert Hoover’s face.

George W. Bush, tried to appease the beast by offering each American adult the dollar equivalent of half a month’s mortgage payment — with the exhortation to drive forthwith to the nearest WalMart and blow it on salad shooters and plasma TV’s — but Hooverzilla just laughed at the offering and pounded the equity markets further into the dust of loss, while the “bank-like” guardians of wealth lay in the drainage ditches bleeding from their ears and eyes.

My favorite moment was seeing Treasury Secretary Paulson and one of his fellow shaved-head deputies at a press conference rostrum frantically trying to calm the news media rabble like a couple of extraplanetary high priests from a Star Trek episode — the batteries having run down in their laser wands, and their incantations (“liquidity! liquidity!) veering into mystifying glossolalia.

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The United States is so broke, its people at every level from the Federal Reserve on down don’t know whether to shit or go blind. The homeowners cringing in the media rooms of their 5000-square-foot personal family resorts don’t know how long they can stay put microwaving pepperoni hot pockets with the default clock ticking. The mortgage “servicers” don’t know how they will persuade interested parties like, say, the Illinois State Cafeteria Workers’ Pension Fund (holder of X-amount of mortgage-backed securities underwritten by, say, Merrill Lynch or Deutsche Bank) to foreclose on properties scattered everywhere from Key West to Bainbridge Island — or if there is actually any legal mechanism known to man that would make it possible to “work out” the sliced-and-diced collateral. The millions of maxed-out credit card holders and the issuers of their plastic are stuck together paddling a leaky tub in a sea of troubles every bit as wide, deep, and polluted as the one the mortgage junkies and their enablers are sinking in. The developers of malls, office parks, and power centers are weeping into their filing cabinets as the harsh daylight of insolvency stops the orgy of “consumption” and the retail tenants pack up their unsellable goodies for the liquidators, and the rent checks stop arriving in the mail, and the notes on this mall and that mall enter the eerie realm of “non-performance.” And, of course, there are the genius wonder boyz and Wall Street playerz whose algorithms and turpitudes underwrote the script of this horror show — for all I know they’ll end up laughing into sugary skull drinks on a beach in the Cayman Islands, or doing Chinese fire drills in federal prison …  James Kunstler 1/21/08

Even the Bush Cabal has suffered unintended consequences through the practice of its economic policies, namely the enormous accrual of debt and the cost of servicing that debt under the current regime has forced the United States to become dependent on the money of China, Japan, Saudi Arabia and Russia, the principal purchasers of U.S. debt, for its continuing existence as a nation state. However, what we have seen more recently is the trickle-down effect of Bushonian economic policies, in that even corporate America is becoming increasingly dependent on foreign monies to stay in business.

What’s important, however, is that not only has corporate America become dependent on de facto bailouts by foreign capital, but it is foreign capital from the same countries that the United States government is also dependent on.

 Al Martin 1/14/08 (subscription)

China tries to stop global inflation but fails because the US, Japan and Europe all want global inflation. Time to discuss the Horns of Dilemma again and to use the analogy of water flow and dams. World stock markets are collapsing rapidly alongside real estate markets. This is classic and very much like the timeline for the Great Depression. Only in this case, the US is more like Germany or England back then. We are the debtor nation causing this collapse. But we have a lot of help from our ‘allies’, all of whom have trade surpluses with the US. And the US Congress just got a report about how China is buying a lot of our government debt. No mention of #1 buyer, Japan, of course.

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China is doing the opposite of what the US is doing right now. China has increased bank reserves so they are now much higher than the US, Europe and Japan have today. This is very significant. It changes the flow of the red ink. In other words, China has tried to drain the ocean-sized lake for they figured out [I have to take a laugh here for they heard me rant about all this during the Reagan years] the first sign of an impending dam collapse is the sudden rise in the price of necessities like energy and food.

The US, being run by criminals and traitors, won’t do what China is doing because the dam operators have unilaterally announced, they don’t think the waves of red ink spilling over the top of the dam means anything at all. Indeed, the value of manufactured goods isn’t rising so why worry about it? They don’t want to gage the inflation of things people must have to stay alive as important, only the things we want when we are flush are counted.   Elaine Supkis

Just for a sampling.  In other words, the past 50 years of putatively fighting communism have resolved with huge public debt for same “fight,” millions dead worldwide (including Viet Nam), and the current sick excuse for leadership having turned to the very “enemies” (e.g. communist China who, BTW, are still bullish on communism) we “fought” for huge loans to pay off said commie-fighting debts.  Got that?  Talk about traitors.

Yeah.  We’ve sold the US mortgage industry to the “commies.”  Meaning that 50 years was for nothing.  Guess the US owes one huge apology to the whole world for slaughtering millions for nothing, eh?

For you and others who seek to read about finance but get snarled up in WallStreetese, the ever-readable James Kunstler is a find.  I can’t resist quoting from another column here, his forecast for 2008:

For the tiny fraction of people who actually pay attention to real events — those, for instance, who know the difference between Narnia and Kandahar — the final hours of 2007 leading into the fog-shrouded abyss of 2008 must induce great racking shudders of nausea. Has there ever been a society so exquisitely rigged for implosion? The whole listing, creaking, reeking edifice stands like one of those obsolete Las Vegas pleasure palaces awaiting a mere pulse of electrons to ignite a thousand explosive charges perfectly placed to blow away the structural supports.

The inertia holding everything together that I described in last year’s forecast finally melted away at mid-summer and events began spooling out of control. Specifically, the massive tonnage of debt-backed securities circulating through the financial sector stood revealed for the mostly worthless bales of paper they truly are, and the investment community was left suspended in mid-air, grinning unconvincingly, like Wile E. Coyote thirteen yards beyond the edge of the mesa, with a sputtering grenade in each hand and an anvil tied to his ankles.

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One thing the public doesn’t get about the housing debacle is that it is not just the low point in a regular cycle — it is the end of the suburban phase of US history. We won’t be building anymore of it, and those employed in its development will have to find something else to do. Now, unfortunately the whole point of the housing bubble was not really to put X-million people in so many vinyl and chipboard boxes, but rather to ramp up a suburban sprawl-building industry as a replacement for America’s dwindling manufacturing economy. This stratagem ran into the implacable force of Peak Oil, which not only puts the schnitz on America’s whole Happy Motoring / suburban nexus, but implies a pervasive trend for contraction in everything from the daily distances we can travel to the the very core idea of regular economic growth per se — at least in the way we have understood it through the age of industrial capital.  James Kunstler “Forecast for 2008”