The Long Crisis

Posts Tagged ‘long crisis’

While the headline news for the past few months has been about the worldwide economic crisis a crisis of another even more life threatening sort for millions of people is accelerating.

U.S. and British government researchers reported on Friday that one Antarctic ice shelf has quickly vanished, another is disappearing and glaciers are melting faster than anyone thought possible due to climate change.

Scientists say that the Wordie Ice Shelf, which had been disintegrating since the 1960s, is gone and the northern part of the Larsen Ice Shelf no longer exists. More than 3,200 square miles (8,300 square km) have broken off from the Larsen shelf since 1986.

“The rapid retreat of glaciers there demonstrates once again the profound effects our planet is already experiencing — more rapidly than previously known — as a consequence of climate change,” U.S. Interior Secretary Ken Salazar said in a statement.

“This continued and often significant glacier retreat is a wake up call that change is happening … and we need to be prepared,” USGS glaciologist Jane Ferrigno, who led the Antarctica study, said in a statement.

“Antarctica is of special interest because it holds an estimated 91 percent of the Earth’s glacier volume, and change anywhere in the ice sheet poses significant hazards to society,” she said.

In addition, scientists report that glaciers and ice sheets are melting in the Arctic at an unexpected fast rate. The process of climate change is now thought by some scientists as irreversible. Renowned British scientist James Lovelock states that “The Earth is about to catch a morbid fever that may last as long as 100,000 years”. Lovelock is certain that the positive feedback loop for an acceleration of climate change has already been established.

And what does that mean for you and me? Briefly the world is going to become a good bit warmer over the next 50 years or so. How we will be effected depends greatly upon our age. If you are 60 years old during your lifetime you probably will not notice too much difference except for increased drought in some parts of the world and increased flooding in other regions. If you live in regions that are subject to hurricanes, tornadoes, or typhoons you will probably witness increasingly powerful storms across many areas of the earth.

If you are now 25 years old during your lifetime you will likely witness entire coastal areas being abandoned due to raising sea levels. Low laying coastal areas will disappear beneath the sea. Almost certainly you will witness great increases in disease and starvation in what are now temperate climate zones as a temperature rise of only a degree or two will destroy crop yields and extend the range of tropical diseases.

As grim as the current financial crisis is and may become another challenge faces all of mankind that must be soon confronted with massive action if several billions of humans are going to avoid mass extinction. President Obama is most certainly right about one thing. He as well as the rest of us will have to be able to multi task and learn to deal with converging crisis or not many humans will be on this earth even one hundred years from now.

The long crisis is more than just a crisis in financial engineering. The sooner we realize this fact and start planning for ways to cope with climate change the better chance we and especially future generations will have for survival..

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Americans have always been an energetic and optimistic people. The vastness of the American landscape and the attraction of being able to make it big with a lot of hard work and a little luck attracted the restless and disenfranchised from around the world to America. Despite imperfections America was and remains an energetic mix of one ethic group after another in pursuit of their own personalized American dream.

That restless spirit imported to and bred in America likes and expects fast results, not only from their own efforts but from their politicians and government. Long term solutions to problems of any sort are not favored in America. Americas want, even demand, that problems no matter how complex be fixed fast. Like right now.

As evidence of the American fixation on fast results just look at the Obama government’s effort to fix the economy. An economic system that has imploded due to the use of excessive debt and financial leverage by the public as well as the private sector is being primed for a quick fix by adding even more debt and leverage. Probably some short term improvement will occur in some areas at the expense of a greater than necessary mess, pronounced disaster, in the future.

Most mainstream economics are still predicting a V recovery, others a U recovery. The prospect of a long crisis and a L shaped depression, similar to the path experienced by Japan, is a minority view. It is a view that few Americans can accept and certainly are not prepared for. After all, isn’t the US government on the case? Are they not spending trillions and trillions of dollars to “save” our economy and the American way of a consumer driven wasteful life?

Indeed they are and that is adding to the breakdown of the world’s financial system. A system built on the premise that debt is money does not function very well when the debt burden becomes so large that it can no longer be repaid. The implosion of debt is destroying a lot of money. Or what passed for money.

The typical American is hopeful that any crisis will be short lived but they are not stupid. They realize that their personal finances have reached the point where savings and paying down debt is a far wiser course than continuing to spend money they don’t have. For many the revelation has come too late.

The deflationary forces of the depression that we are in now are so great that for many Americans the reduction in wealth caused by tanking real estate values, a stock market that even with a fantastic March rally is still 40% plus off its highs, and an end to easy credit, is leading to record bankruptcy rates. And to record rates of foreclosed homes.

Most Americans are still not willing to believe that the crisis could and probably will go on for many years. Their natural optimistic leads them to believe that by the end of this year, certainly in early 2010, happy motoring and shopping days will be here again.

Even those who believe that we will have to rebuild our financial system from the ground up and that the process will take many years before the economy will fully recover can not imagine an America where living standards are reduced by up to 50%. Americans are not prepared for a long crisis even when it is becoming increasingly obvious that a long crisis is what we are faced with. It is not possible in a highly competitive world to return to the cheap energy days upon which American wealth was build.

The collapse of the commercial real estate market and the closing of large regional malls will be a horrible shock to Americans. The spread of shanty towns across the nation and the sad plight of former middle class people who are now homeless will be poison to the American mindset. The frustration that will follow will be a danger to every politician. And to every banker and high profile executive. The private protection business is one business that is already booming.

The long crisis will bring many changes within America that we are absolutely not prepared for. In future articles I’ll discuss some of the changes that will be forced upon us and how Americans may react.

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As I write this the Dow Jones averages are up over 250 points after the G20 communicate gave gullible investors a warm fuzzy bullish feeling by announcing a $trillion pledge to beef up the world’s financial system.

The gold market took a quick hit, dropping from about $928 to $894 after G20 asked the IMF to bring forward sales from its gold reserves, raising funds to help the poorest countries, Gordon Brown said. Gordon Brown, the British Prime Minster, of course, is an expert on gold as under his leadership as Britain’s finance minister he sold off most of the British government’s stockpile of gold holdings at about $300 an oz. Gold has gone nowhere but up ever since. Brown is typical of a smart world class meddling politician who wants to do good but often makes a mess of things.

Another factor driving the stock market higher today is that in the United States an industry body announced a major change to accounting rules that would give banks more flexibility on how they value toxic assets. This would relieve pressure on banks with impaired balance sheets, which has been a major driver in financial market distress.

This change in accounting rules would allow the banks to mark their boat loads of largely worthless toxic assets to “model” rather than mark to market. That means the banks will be able to hide worthless assets until such time as they mature. This is a sure fire way to let the banks postpone the losses on trash assets for years and years. It is irrational for the market to rally on this type of news but who says the stock market is rational? The move will extend the depression, probably by many years, as insolvent banks suddenly appear to be solvent.

The move also sinks Tim Geithner’s bailout plans as few banks will want to sell assets at anywhere near what they are actually worth when they can just mark them to model and show them on their balance sheets as being perfectly fine.

In this long crisis we are seeing an incredible amount of stupidity emerge from the US government, banks, and world do gooders. No doubt their collective actions are going to make the crisis much worse than if capitalism were given the opportunity to work as it is supposed to work. Rather than let insolvent banks and businesses fail G20 nations are committing another trillion dollars to bail them out. Har! Since there are nearly 600 Trillion dollars in questionable derivative instruments floating around the world just waiting to blow up that measley trillion will not go very far.

The real problem with G20 is that they are trying to do the impossible. The great G20 dream is to take us back to the world that existed before the financial bubbles started popping. In a world moving towards scarcity and the fact that the US economy, the economic “engine” for the world, was build on the quicksand of consumerism and rampant unwise debt creation neither G20 nor any other entity can rebuild the bubble sand castle.

In time the stock markets of the world will figure this out and the big bad bear will return. But not today, dear investors, not today. The markets think that G20 has saved the world. For now.

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