The Long Crisis

Posts Tagged ‘Financial Meltdown’

I’ve long been fascinated yet horrified about the conditions and processes that somehow transforms nations and the collective actions of highly civilized people into inhuman beings possessed by total madness. For example, Hitler’s Germany, Mao’s “Great Leap Forward”, and Pol Pot’s Cambodian killing fields are spot on examples of how evil can quickly be spread throughout a society by a powerful “leader” sociopath with a political agenda, as crazy as it may be.

An America under great stress could and probably will once again descend into madness. I say once again as we have been there before. Our Civil War is a good example of this as disagreements over States rights and the role of the federal government led to the unthinkable, a war between the States. The Senator McCarthy era of the 1950′s is another example of how a talented, if misguided, orator demigod gained control of the national dialogue, which led to the persecution of many people who just happened to disagree with the Sen. and his mad methods. Then in the 1960′s there were numerous riots and civil disturbances as one of the consequences of the unpopular war being fought in Vietnam.

The mass bombing of heavily populated civilian centers in Germany and Japan in World War Two is yet another example of how decent citizens can be manipulated by their leaders in government. The heavy bombing of German and Japanese population centers, occupied primarily by civilians, must have seemed horribly wrong to many American and British citizens, that is until their governments by control of the media were able to present the bombings as a necessary evil and a normal activity against a tough and entrenched enemy. Germans and Japanese citizens were presented by the American government to the American public as less than human as that made it easier to exterminate them. What is that other than leaders manipulating group think and tipping social mood into madness?

Some bombing runs against city centers were terrorist attacks in the sense that they were designed to terrorize the population for a political end, not to destroy military targets. Fighting evil by becoming evil may be effective but hardly keeps one on firm moral ground. The madness of killing hundreds of thousands of civilians was opposed by few Americans or Brits. The total fire storm destruction of major cities was celebrated by the allies. Throughout history, there are many such examples of how charismatic leaders who are media savvy can manipulate populations into a condition of madness.

Today the early stages of a financial melt down and the long term crises associated with the liquidation of unprecedented debt that most of the Western world, certainly America, faces sets up the possibility of yet another descent into madness. As unemployment remains at high levels and standards of living fall in America the hate filled dialog of even one media savvy sociopathic “leader”, probably not yet elected to public office, could tip America’s social mood into one of complete madness.

We are already experiencing early signs of this. The verbal and physical attacks against Congressman who voted for and even against the health reform act are an example of anger and rage felt by many American voters boiling to the surface. This anger has been fanned by politicians and talking heads in both the Republican and Democrat parties. People will become ever more angry and violent as their standard of living falls and then can be even more easily manipulated.

There is a real danger of a population where many people are living on the edge getting completely out of control. If the nation tips into a condition of national chaos and disorder it will be difficult for anyone living within the United States to escape the consequences. Those who think that a private horde of guns, ammo, water, and food will save them from national madness are dreaming unless they are completely hidden away far off the radar. In fact, anyone who is thought by the raving fired up mobs to possess anything of value or thought to be somehow “un-American” will soon come under repeated attack until the mob gets whatever it wants.

As resources become ever more scarce and the various media savvy “leader’s” voices becomes louder and more shrill the descent into madness may come faster than anyone now thinks. Who in the civilized Germany that existed prior to Hitler could envision the madness that would soon follow? In the early 1930′s Hitler was even admired and considered a great leader by many elite Americans and Brits.

Could America’s social mood tip into complete madness? What do you think? Is the process already underway? Could a greater depression take us over the edge of reason into madness?

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You might be wondering just how the United States lead the world into a financial crisis and depression that will probably turn out to be the “greatest” ever.

With the unemployment rate already over 10% in a number of states this depression is on track to set new records. Let’s hear it for the big banks, mortgage companies, hedge funds, AIG, the sleeping watchdog regulators, and the government who now wants to manage it all.

The video is the best explanation yet as to how this sorry state of affairs came about. Not only that but it shows how Tim Geithner and his team have put together a rocking system to deal with the challenges of an economy gone bad that was created and driven by the smartest people doing stupid things that you can possibly imagine.

This is one video that you must see if you care about the American economy and hope for a better future.

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In 1970 Jim Rogers was a young guy from Alabama hoping to make his fortune on Wall Street. Rogers, as he modestly tells it, by good luck, hooked up with George Soros to start what became the legendary Quantum Fund.

Ten years later Jim Rogers retired as a billionaire. Over the ensuing decades Rogers built an iconoclastic career as a private investor, author, adventurer, and creator of the Rogers International Commodities Index. Rogers, living and operating out of Singapore, has remained an outspoken global investor. He has harsh words for former Fed Chairman Alan Greenspan, suggests President Barack Obama and his economic team are hopelessly lost in la-la land, and thinks that tough love and multiple fat cat institutional bankruptcies are the answer for America’s financial woes.

Here is an interview between Maria Bartiromo, the anchor of CNBC’s Closing Bell,and Jim Rogers, which appeared in the February 26th issue of Business Week.

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MARIA BARTIROMO

What do you think of the government’s response to the economic crisis?
JIM ROGERS

Terrible. They’re making it worse. It’s pretty embarrassing for President Obama, who doesn’t seem to have a clue what’s going on—which would make sense from his background. And he has hired people who are part of the problem. [Treasury Secretary Tim] Geithner was head of the New York Fed, which was supposedly in charge of Wall Street and the banks more than anybody else. And as you remember, [Obama's chief economic adviser, Larry] Summers helped bail out Long-Term Capital Management years ago. These are people who think the only solution is to save their friends on Wall Street rather than to save 300 million Americans.

So what should they be doing?

What would I like to see happen? I’d like to see them let these people go bankrupt, let the bankrupt go bankrupt, stop bailing them out. There are plenty of banks in America that saw this coming, that kept their powder dry and have been waiting for the opportunity to go in and take over the assets of the incompetent. Likewise, many, many homeowners didn’t go out and buy five homes with no income. Many homeowners have been waiting for this, and now all of a sudden the government is saying: “Well, too bad for you. We don’t care if you did it right or not, we’re going to bail out the 100,000 or 200,000 who did it wrong.” I mean, this is outrageous economics, and it’s terrible morality.

You have said Bear Stearns and Lehman (LEHMQ) would still be around if Greenspan hadn’t bailed out Long-Term Capital Management in 1998. Can you explain?

Well, if Long-Term Capital Management had been allowed to fail, Lehman and the rest of them would’ve lost a huge amount of money, their capital would’ve been impaired, and it would’ve put a terrible crimp on Wall Street. It would’ve slowed them down for years. Instead of losing capital, losing assets, and losing incompetent people, they hired more incompetent people.

Stan O’Neal?

Right, Stan O’Neal. He got $150 million for leaving, even though he ruined the company. Look at the guy at Fannie Mae (FNM), Franklin Raines. He did worse accounting than Enron. Fannie Mae and Freddie Mac (FRE) alone did nothing but pure fraudulent accounting year after year, and yet that guy’s walking around with millions of dollars. What the hell kind of system is this?

Are you worried the economic crisis will lead to political turmoil in China and elsewhere?

I absolutely am. We’re going to have social unrest in much of the world. America won’t be immune.

What does all this mean from an investment standpoint?

Always in the past, when people have printed huge amounts of money or spent money they didn’t have, it has led to higher inflation and higher prices. In my view, that’s certainly going to happen again this time. Oil prices are down at the moment, but that’s temporary. And you’re going to see higher prices, especially of commodities, because the fundamentals of commodities are enhanced by what’s happening.

Which commodities are worth buying or holding on to?

I recently bought more of all of them. But I really think agriculture is going to be the best place to be. Agriculture’s been a horrible business for 30 years. For decades the money shufflers, the paper shufflers, have been the captains of the universe. That is now changing. The people who produce real things [will be on top]. You’re going to see stockbrokers driving taxis. The smart ones will learn to drive tractors, because they’ll be working for the farmers. It’s going to be the 29-year-old farmers who have the Lamborghinis. So you should find yourself a nice farmer and hook up with him or her, because that’s where the money’s going to be in the next couple of decades.

Should AIG (AIG) have been allowed to fail, too?

First of all, banks and investment banks and insurance companies have been failing for hundreds of years. Yes, we would’ve had a terrible two years. But you’re dragging out the pain. We had 10 years of the worst credit excesses in world history. You don’t wipe out something like that in six months or a year by saying: “Oh, now let’s wake up and start over again.”

What about Citigroup (C)? What about the car companies?

They should be allowed to go bankrupt. Why should American taxpayers put up billions to save a few car companies? They made the mistakes! We didn’t make the mistakes! I’m sure they’ll give them the money, but I’m telling you, it’s a mistake. It’s a horrible mistake.

I totally understand what you’re saying, but the banks are under massive pressure.

They all took huge, huge profits. Who was the head of Citigroup? Chuck Prince? I mean, how many hundreds of millions of dollars did Prince take out of the company? How many hundreds of millions of dollars did other Citibank execs take out of the company? Wall Street has paid something like $40 billion or $50 billion in bonuses in the past decade. Who was that guy who was the head of Merrill Lynch

Stan O’Neal?

Right, Stan O’Neal. He got $150 million for leaving, even though he ruined the company. Look at the guy at Fannie Mae (FNM), Franklin Raines. He did worse accounting than Enron. Fannie Mae and Freddie Mac (FRE) alone did nothing but pure fraudulent accounting year after year, and yet that guy’s walking around with millions of dollars. What the hell kind of system is this?

Are you worried the economic crisis will lead to political turmoil in China and elsewhere?

I absolutely am. We’re going to have social unrest in much of the world. America won’t be immune.

What does all this mean from an investment standpoint?

Always in the past, when people have printed huge amounts of money or spent money they didn’t have, it has led to higher inflation and higher prices. In my view, that’s certainly going to happen again this time. Oil prices are down at the moment, but that’s temporary. And you’re going to see higher prices, especially of commodities, because the fundamentals of commodities are enhanced by what’s happening.

Which commodities are worth buying or holding on to?

I recently bought more of all of them. But I really think agriculture is going to be the best place to be. Agriculture’s been a horrible business for 30 years. For decades the money shufflers, the paper shufflers, have been the captains of the universe. That is now changing. The people who produce real things [will be on top]. You’re going to see stockbrokers driving taxis. The smart ones will learn to drive tractors, because they’ll be working for the farmers. It’s going to be the 29-year-old farmers who have the Lamborghinis. So you should find yourself a nice farmer and hook up with him or her, because that’s where the money’s going to be in the next couple of decades.
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To put it simply Jim Rogers thinks that conditions are being established now for the greatest agricultural commodities boom of all time. Rogers is sometimes off a little bit with the timing of a major move but he is seldom wrong about the underlying concept.

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