The Long Crisis

Posts Tagged ‘green shoots’

With the stock market well about 9,200 on the Dow and the S&P Index above 1,000 the green shoots con men and cheerleaders are about to pee in their pants from excitement. The recession is over or nearly over they say.

Apparently, none of the team Obama guys who didn’t foresee the popping of the bubble economy and are now so pleased over a second wave recovery move have any knowledge of a third wave. We are probably near the end of the second recovery wave now and the mother of all third waves will soon sweep over the market, much to the surprise and destruction of those still bullish or newly bullish on American stocks and the revival of the consumer driven American dream world economy.

Our cyberspace friend James Howard Kunstler has a few observations of his own to make this week about the neverland dream like vision of the recovery. He and a few other insightful reporters on the true state of America, like Bill Bonner and Robert Prechter, are pretty darn certain that the American dream is about to become a frigging nightmare, one worse than we can now even imagine.

For now I’ll let James Kunstler tell his story in his unique mind bending style.

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Hunky Dory
By James Howard Kunstler
on August 3, 2009 7:36 AM

Whenever the herd mentality lines up along a compass point leading to “permanent prosperity,” or a yellow brick road lined with green shoots, or something like that, I tend to see the edge of a cliff up ahead. We are now completely in the grips of the deadly diminishing returns of information technology. The more information comes to us about How Things Are, especially from TV, the more confused or wrong the conventional view gets it.

A broad consensus has formed in the news media and among government mouthpieces and even some “bearish” investors on the street that “the worst is behind us” in this tortured economy. This view is completely crazy. It will only lead to massive disappointment a few weeks or months from now, and that disappointment might easily transmute to political trouble. One even might call the situation tragic, except a closer look at the sordid spectacle of what American culture has become — a non-stop circus of the seven deadly sins — suggests that we deserve to be punished by history.

The reason behind this mass delusion is not hard to find: it’s based on wishing, especially the wish to retain all the comforts, conveniences, luxuries, and leisure that had become normal in American life. These are now ebbing away in big gobs for most of the population — while a tiny fraction of the well-connected pile on ever larger heaps of swag, enjoying ever more privilege. Those in the broad bottom 95 percent were content as long as there was a chance that they, too, could become members of the top 5 percent — by dint of car-dealing, or house-building, or mortgage-selling, or some other venture enabled by easy credit and a smile. Those days and those ways are now gone. The bottom 95 percent are now left with de-laminating houses they can’t make payments on, no prospects for gainful work, re-po men hiding in the bushes to snatch the PT Cruiser, cut-off cable service, Kraft mac-and-cheese (if they’re lucky), and Larry Summers telling them their troubles are over. (If I were Larry, I’d start thinking about a move to some place like the Canary Islands.)

Too many disastrous things are lined up in the months ahead to insure that we’re entering a new phase of history: The Long Emergency.
Government at every level is worse than broke.
Our currency, the US dollar, is hemorrhaging legitimacy.
Inability to service old debt at all levels or incur new debt.
Bad (toxic) debt lurking off balance sheets everywhere.
The housing bubble fiasco is far from over.
Unemployment rising implaccably.
So-called “consumers” unable to consume consumables.
Crucial energy import supply lines fragile.
Food supply subject to energy problems and climate abnormalities.
A world full of other societies who would enjoy watching us fail and suffer.

When The Long Emergency was published in 2005, I said then that the greatest danger this society faced would be its inclination to gear up a campaign to sustain the unsustainable at all costs — rather than face the need to make new arrangements for daily life. That appears to be exactly what has happened, and it didn’t happen under the rule of some backward-facing, right-wing, Jesus-haunted crypto-fascist, but rather a “progressive” party led by a dynamically affable young man unburdened by deep cultural allegiance to Wall Street. Barack Obama has been sucked in and suckered. “Change you can believe in” has morphed into “a status quo you will bend heaven and earth to hold onto.”

Whatever else you might think or feel about Mr. Obama’s performance so far, this strategy on the broader question of where we go as a nation pulses with tragedy. What’s remarkable to me, to go a step further, is the absence of comprehensive vision — not just in the president, but in all the supposedly able and intelligent people around him, and even those leaders not in government but in business and education and science and the professions.

History is clearly presenting us with a new set of mandates: get local, get finer, downscale, and get going on it right away. Prepare for it now or nature will whack you upside the head with it not too long from now. Attempting to maintain anything on the gigantic scale will turn out to be a losing proposition, whether it is military control of people in Central Asia, or colossal bureaucracies run in the USA, or huge factory farms, or national chain store retail, or hypertrophied state universities, or global energy supply networks.

These imperatives are so outside-the-box of ordinary experience right now, that to drag them into the arena of politics can only evoke blank stares or nervous giggling. But whether we like it or not, these are the things that will really matter in the years ahead — not whether General Motors can ever make a profit again, or what Target Store’s sales figures are next quarter, or whether the latest high-rise condo-and-gambling complex in Las Vegas will be successfully marketed.

Here, in the dog days of summer, it seems to me that the situation in the USA is so fundamentally bad, so unpromising, so booby-trapped for failure, that I wonder if there has ever been a society so badly deluded as ours. We’re prisoners of our wishes, living in a strange dream-time, oblivious to the forces gathering at the margins of our vision, lost in a wilderness of our own making.

Anything can happen now. I certainly wouldn’t rule out international mischief as we arc around into fall. The air is so full of black swans that the white swan now seems like the exceptional thing. Whatever else happens, it sure will be interesting to see the public’s reaction to Wall Street’s announcement of Christmas bonuses. The folks at Rockefeller Center better be thinking about getting a fireproof tree.
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James Kunstler’s novel of America’s post-oil future, WORLD MADE BY HAND, is now available in paperback. He is at work on the sequel.

Honestly, until now for most of my life I’ve been an optimistic guy. I grew up in a rah, rah USA military family , was a boy scout, loved baseball and football, served in the US Navy Seabees, had a tour of duty in Vietnam, started my own business while going to college on the GI Bill, and in general have had an adventurous life while often being an expatriate American living in eight nations along the way. Until recently I thought America was a nation that could overcome any set of problems although the Vietnam War did give me reason to question the motives and judgement of our leadership.

No longer do I believe that we will emerge from our present circumstances as a stronger, better nation. The American Empire has peaked and we are on the slippery downhill slope. In order to solve a problem you have to identify the problem and take steps to fix the cause. I do not see that happening at any level of US government. The nation is flying off a cliff and as we have not hit bottom yet the green shooters and the cheerleaders are all saying no problem. They say as with one voice that we will soon fully recover and be in fine shape.

The real question should be “recover” to what? We are in the early stages of a depression with so many depressing factors involved (see Kunstler’s list above) the old American Dream way of life will not be recovered. Far from it. Read Kunstler’s essay again. Let what he is saying sink in. Then be smart and start working on your own survival plan. Don’t expect the same guys who brought you stage one and stage two to save you from the third wave and the long crisis. That is the stage of true destruction and it is not far away from descending upon us.

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Samah El-Shahat, Al Jazeera’s resident economist, has written a series of insightful articles about the ongoing worldwide financial crisis. Al Jazeera has become, believe it or not, one of the world’s leading hard news organizations, and has hired first class talent from around the world. Al Jazeera presents the news in an old fashioned way, the way the American major networks used to do before the age of spin set in.

Samah El-Shahat is astonished, as I am, that the goal of the Obama administration, and indeed the entire Western world governments, seems to be to turn back the clock to 2006 instead of actually fixing the structural problems that got us into this financial mess in the first place.

She also believes that much of the “green shoot” talk, at least at this stage, is just so much nonsense. The actions being taken by the US and other governments is actually setting the stage for another meltdown. How can anyone believe that problems caused by too much debt and leverage can be fixed by adding more debt and leverage to the system and raping the taxpayers along the way to the benefit of the bankers and elites?

Now for Ms Samah El-Shahat’s take on the issue.

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Business as Usual

So I am still astonished that that governments are still hell-bent on maintaining the status quo, the business as usual approach that got us into this mess in the first place.

Has a single bank management been made to change despite being the source of the mess? Has a single bank been truly nationalised in the real sense of the word? Has any real clean audit of a bank happened? And please let’s not bring up stress tests that were made to make sure everyone passes…

For every one of those questions the answer is a loud and resounding NO.

Some of the banks are now being allowed to payback some bailout money – banks such State Street and JP Morgan Chase. But they are being allowed to do so without revealing the extent of the toxic assets on their balance sheets.

“I fear these banks are walking time bombs… freed from any noose or hold the government had over them because they have paid back their bailout”
We are none the wiser than we were at the start of this crisis as to how truly ‘insolvent’ they are.

Yes, I hate to bring up that word but just because they are paying back some Treasury Asset Relief Program money doesn’t make them healthy. Remember, they are using taxpayer money to pay the taxpayer back.

The Obama administration had a plan to get rid of these toxic assets called the Public Private Partnership Investment Partnership – the PPIP.

And even though the PPIP gave investors and Wall Street incredible inducements, and huge taxpayer subsidies to buy and sell these toxic assets, the banks did not play ball.

The plan was laid to rest last week, which is extraordinary because it was the central plank of the Obama administration’s plan to rescue the banks.

I think this is disastrous. Not because I liked the PPIP, I thought it was grossly unfair and I agree with the economists Paul Krugman and Joseph Stiglitz when they said it transferred taxpayers money to the banks.

But at least the PPIP tried to deal with the toxic assets that got us into this mess in the first place.

Now I fear that these banks are walking time bombs, which are now walking away, freed from any noose or hold the government had over them because they have paid back their bailout.

And if we do not get an economic recovery soon, the toxic assets on the banks’ balance sheets will detonate and bring us all down with them.

The banks are gambling on the green shoots of a miraculous economic recovery, which I think is delusional and shame on those in power for allowing them yet another chance to gamble with our economic futures.
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For the complete article visit the Al Jazeera website.

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The green shoots believers seem to be firmly in control this morning as General Motors files for a chapter 11 bankruptcy and the Dow skyrockets up by over 200 points as I write. Humans are a hopeful lot aren’t they?

The rally from the March lows of 666 on the S and P index has carried the S&P to above 940 and the Dow from 6517 to above 8700. Anyway you look at it that is an impressive rally. Still, it is a rally that doesn’t smell right as evidenced by the last two minute surge last Friday that took the averages straight up on a high volume surge going into the close. That surge was far from normal activity on an otherwise lackluster trading day.

Could it be that taxpayer money given to Goldman and others is finding its way back into the stock markets? Could it be that the government is busy fueling yet another bubble with trillions of dollars in fiat money?

The green shoots that the Obama administration and their very much under control TV talking heads love to gush about are the sort of green shoots that are of the less bad sort. For example, housing prices are still falling but falling at a slower pace than at the end of 2008. Unemployment is still increasing and will likely continue to increase for some time but is not increasing as fast as during the last quarter of 2008. Car sales are horrible and foreclosures continue but maybe, just maybe, they will pick up some fine day.

In a few words the economic fundamentals are still pretty terrible for the United States but Obama has done a masterful snow job on the American people and consumer confidence has soared. After all, GM will be a better company after it emerges from bankruptcy, right? Certainly, the US government will run GM better than automotive executives. Well, maybe better than the auto executives at GM for the past 50 years. How could it be any worse? Still in all of the world the history for government run auto companies is not good.

How long can the con continue? Given the trillions that the Obama administration is throwing at the economy, trillions that, since the treasury is broke, the government has to borrow or to create out of thin air, probably longer than you would reasonably think.

But who can say that creating green shoots with borrowed and with fiat money or that attacking problems of excessive leverage and debt levels by increasing leverage and debt levels is reasonable. The policies being implemented by the government may be increasing the American people’s confidence now but I have a sinking feeling that they will increase their misery later. Running 2 trillion
dollar deficits and even larger can not go unpunished forever.

When the next decline gets under way you will want to be out of the way. Better take advantage of the rally, as the big elite boys at Goldman Sacks and across elite land are doing, and raise cash while you can. Green shoots are fragile things. They can whither away and be no more in a New York minute. Still, at least for awhile the trillion of dollars in funny money seems to be in control.

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