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What does a world without hope look like? Is it a bleak moonscape — black sky, cold sun, gray hills? Or is it the too perfect world of American suburbia, where the sun — and the smiles — shine a little too bright; where too-green, cultivated lawns lead to soothing interiors, painted in shades named “Ocean Side”, “Interactive Cream”, and “Moderate White”; where real freedom is banished to the gritty, marginal, blind spots of ubiquitous surveillance cameras?
The Realm, running from now until April 18th at The Wild Project in the East Village, is a futuristic dystopia in the tradition of American post-apocalyptic dystopias like Logan’s Run, A Boy and His Dog (remember that one? Don Johnson starred in the movie!), and, closer to our time, Urinetown. The time is the not-too-distant future. After an unnamed cataclysm, humanity has been forced underground. Natural resources are scarce — especially water. Human beings have learned how to live spare, lean lives, stripped of all superfluity — and fun. And, for that matter, freedom. Water is rationed, life is rationed, even words are rationed.
It seemed appropriate to be waiting on two self-described Southern belles to get into Streetcar at BAM last week. Nothing says “Southern” like being late to your own party. We were four, and at least three of us hail from south of the Mason-Dixon line, or as another of my Southern friends likes to call it the “Manson-Nixon” line. Ah the South! Home of pecan pie, obsessions with purity (mostly sexual), vowels longer than a summer sunset, religious revivals held in circus tents, Wal-Mart superstores, and — these days especially — widespread dependence on food stamps.
Who is laughing now?
Just five years ago some Americans were painting their Hummers in the stars and stripes, confident that the “liberation” of Iraq would bring global peace and low, low gas prices. The Hummer symbolized American strength, wealth, and frontier attitude. Now all those cowboys who thought they were starring in an Old West flick have been told “Go East young man!” as the Hummer brand is sold to a Chinese company.
It’s too easy to say that their jingoistic hubris is the root cause of this national humiliation. Instead I’ll point out that passing the baton of overweening douche-baggery to the Chinese might be exactly what saves our republic.
There’s plenty of uncertainty on what the future holds, but one thing is for sure, the 21st century will not be like the 20th.
While Obama and Gordron Brown try to convince the Europeans not to take away our capitalism toys, the Chinese are making exactly the kinds of massive public investments in the future that Krugman and others have argued the US must make in order to stay relevant. The money isn’t the problem. Excluding some rightwing nutters in Congress, our country has signed on to the idea that something must be done (other than cut taxes) to ameliorate this economic crisis. But why isn’t any of that money going to beef up Amtrak or the MTA? The answer: no one in power in America, either Democrat or Republican, has a 21st century vision.
But the Chinese have it.
What’s the news on NYC’s slice of the stimulus money? I hear complaints from conservatives that the money isn’t going to “shovel ready projects,” and then I hear complaints from liberals that the money that IS going to “shovel ready projects” is paying for thousands of miles of new highway in the fly-over. Ahem, but, NYC has billions of dollars of shovel ready projects ready to go. Second avenue subway anyone?
Paul Krugman hit the nail on the head today with his Op-Ed. It reminds me why I like him in the first place. For those of you too lazy to click through to the essay and read it, I’ll give you a summary. Krugman says that our policy makers continue to be blinded by the mythology developed by Milton Friedman and others and popularized by Reagan. They think the financial system is fundamentally sound, and the recent collapse is wholly due to public misperception. That is why the Summers/Geithner plan rings hollow in a progressive’s ears. A progressive knows we have to move past the culture of greed and bonus, of growing wealth disparity and opt-out attitudes, but Summers and Geithner don’t get it.
Jake Desantis’s (public) letter to Edward Liddy in today’s New York Times is just one more attempt by the the real media elites — the conservatives of both parties — to quash public outcry over the legacy and abuses of Reaganomics.
UPDATE AT THE BOTTOM OF THE PAGE!!!
I know the readers of Cultural Capitol are probably sick of hearing me rant on this subject, and for your sake this will be my last post on the topic. The Editor has counseled moderation, and I know in my heart of hearts he’s right. But I can’t leave it without saying just this one more thing about the “popular” reaction to A. I. G.’s bonuses.
The story in the Times today trying to defend Geitner puts the blame for his bad judgment (really, a complete lack of political common sense) on faceless “government lawyers” who told the Treasury secretary exactly what he wanted to hear:
On Tuesday last week, as he prepared for a meeting in London of the finance ministers of the Group of 20 nations, Mr. Geithner learned that A.I.G. by Sunday would send out the bonuses to employees at its financial products unit, which developed the risky derivatives now blamed for the global credit crisis.
With few senior political appointees on hand, the word came from one of the numerous career civil servants who keep the Treasury functioning through changes of administration, according to an official.
Mr. Geithner consulted lawyers. They told him the government could not override the contracts that the insurance conglomerate had signed in early 2008, when its financial products unit was fast losing money.
The Times piece tries hard to justify Geiter’s naivete, blaming his lapse on his “crushing workload,” and telling us he is “shouldering more crises on his slight frame than most Treasury secretaries ever have.” But that’s no excuse — either for him or for Obama. Geitner, whose instincts as the Times says “are that government should not dictate compensation issues to businesses,” suffers from the same free market fundamentalist dementia as a recent respondent to my earlier post. Let’s look at this pathology more closely in order to better understand it.
I was going to write an angry piece on the AIG bonuses, the kind that uses a flamethrower to incinerate the subjects of my wrath. Then I took a walk down to AIG headquarters on Pine St. in Lower Manhattan. Unlike the offices in Greenwich, CT where the financial products guys reportedly work, an office which was receiving death threats, the main office downtown didn’t have any gawkers or thrill seekers (other than me).
I find this surprising. After all, to hear the internets tell it, people are spitting mad over the legalized Madoff make-off with tax payer money. (MoveOn cites the NY Times to estimate the AIG bailout is $500 from every tax payer in the USA.) And yet no one was storming the castle in downtown Manhattan. If anything, the corner of Wall and Broad, the place where a statue of Washington looks out on the NYSE, was buzzing with happy tourists.
He looks so serene.
The New York Times is reporting that some banks are balking over the strings attached to their bailout cash.
Good! That is the right response, and it shows that the Obama policies are right on. This is not a Republican or a Democrat issue — it’s a good government issue. If the banks are willing to take on the risk of failure in order to maintain the possibility of future, outsized profits, let them do it. If they fail, they do so on their own merits. On the other hand, if a bank wants money to stay alive, they have to know they are entering a period of indentured servitude to the American people. They will not be free until they have paid their debt to society, and in this case that debt comes in an easily recognizable dollar amount.
Hypocrites like John Boehner and Richard Shelby argue that some banks should fail because that’s good fiscal discipline, confusing once again the role of markets and the role of government. Markets reflect the sentiment of its local population (i.e. whoever comes to the market). Government has the power to coerce or incentivize behavior when necessary. In times of crisis markets should not be allowed to make decisions because they will make panic driven, emotional decisions. In those cases it is the government’s job to set parameters for acceptible behavior. In this case it means righting financial malfeasance while containing the damage inflicted on the innocent by the crime. No-government Republicans would have the innocent pay along with the guilty. Strings on a bank bailout make sure that the innocent are protected while the guilty work off their guilt.
As any of you who are my consistent readers know, I think Paul Farrell over at Marketwatch.com is a hoot. His recent essay on the 13 tipping points that will lead to Great Depression II is a fun read.
When the economy was on the way up, up, up! we couldn’t get enough stories about how technology was going to change our lives for the better, and Utopia was finally just around the corner. Think of Francis Fukuyama’s neo-Hegelian “End of History” thesis, free market globalizers from Bill Clinton to George W. Bush, and lefty internet entrepreneurs who assured us hyperlinks would cure cancer. (Ok, I exaggerated that one a bit.) My favorite send up of this idealistic nonsense is from that gem of a movie Talladega Nights when Ricky Bobby (played by Will Farrell) is reprimanded by Lucius, his crew chief, for criminally reckless driving:
Lucius: Ricky Bobby! You can’t drive like that! You’re not going to live forever you know.
Ricky Bobby: I know. But with the way medical science is going, and my level of income … I figure three, four hundred years.
The DJIA dropped perilously close to 7,000 this afternoon after Chris Dodd said the government might have to nationalize the banks. David Brooks wrote in his NY Times editorial today what is probably the Obama administration line, that we might have to bite the bullet and give the idiots who got us into this mess lots of money to get us out again. He says:
…sometimes you have to shower money upon those who have been foolish or self-indulgent. The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilize, then our lives don’t stabilize.
I suppose that’s all good and well, though if you happen to live in the same place as “the idiots” (i.e. New York City), and you see them holding their heads up high, riding in new cars with new wives who are wearing massive sparkly rocks on their fingers because the bankers got their bonuses in January, you might worry more about political stabilization than economic stabilization.
The markets took a dive because Dodd raised the specter of state control over the financial industry. But isn’t that exactly what’s called for in this situation? The culture of free markets failed, and now the culture of civic responsibility — which can only be manifested through the institution of government — has to pick up the slack.
Obama’s men — Geithner and Summers — are freemarketeers and have good reason to be scared out of their wits by populist posturing from Dodd and others. But is Obama a freemarketeer? Is he a populist?
My first instinct is to say he’s a savvy operator who knows the congressional Dems are right (and that the right needs to be ideologically disillusioned). The Obama of my imagination will play the aloof leader and let the Dems do the necessary dirty work that undoes the damage of anti-social freemarket puritanism inflicted on us since Reagan.
My fear is that he has no convictions outside of a personal messianic conviction, and that he thinks economic justice is no more or less important that religiously unfettered economic activity.
The markets bounced back because they think Obama’s a covert freemarketeer. I hope they’re wrong. I hope Obama is willing to split the issue with the congressional Dems, and let leaders like Dodd do the work of justice while Obama tells us all not to panic.
This was taken last week downtown. Where is the New Depression is headed?!
I kind of forgot how bad the bad old days of the late 80s / early 90s were until the DJIA hit 7750 and the unbroken chilly gloom of February made pedestrians look like frosty denizens of an Edward Hopper painting. Then I went for a walk in Battery Park and saw the Postive Brothers doing their show, and I remembered how good it was to see guys performing acrobatics in the old fountain at Washington Square Park, telling me my monetary contribution was keeping my home safe from burglary later that night.
The show is much the same as it was back then: witty chatter, tension-diffusing racial jokes, break dancing, and some crazy acrobatics, usually concluded with a spectacular leap over the heads of six or seven terrified audince members. But these guys make it new every time with their good humor and positive vibes. If you’re feeling down with the market, unemployment, and empty pockets, go down to Battery Park on a sunny day and check out their show. Throw a dollar in the hat if you have it. They also accept enthusiastic applause for payment.
Tim Geithner — Really? I mean, is it really possible to live in this country after 8 years of Bush, 6 months of financial apocalypse, and still not have the smallest clue? Macroeconomics as a discipline developed in the 30s because that global financial meltdown was precipitating a global political meltdown. Doesn’t anyone remember Nazis vs. Commies in the streets of Berlin and Munich? No, not in this country. If you want a perfect example of the triumphalist myopia of the free market fundamentalists take a look at the documentary The Commanding Heights by Greg Barker and William Cran. The one good observation made in the documentary is that both J. M. Keynes and Friedrich Von Hayek thought economic collapse would lead to political anarchy.
Now these yahoos working from a mix of free market fundamentalist ideology and naked, corporate self-interest, are opening up a political firestorm by crippling a real fiscial stimulus package with useless tax breaks and spending cuts for states while at the same time handing over hefty cash gifts to their friends the oligarchs on Wall St. (For my personal experience of the humiliation of this see my earlier post.) In the words of Stephen Labaton and Edmund Andrews:
Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.
He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.
Obama is spending his good name out in America to enable a couple of bumbling, Ivy educated fools to destroy any trust Americans have left in their government.
I work downtown, near Wall Street. It’s cold today, somewhere in the mid-twenties, and I decided to get some soup from the Hale and Hearty Soup place over on Beaver. The soup place is close enough to the NYSE to hear the moans of traders still recovering from yesterday’s bloodletting.
Over the last week we have discovered that the banks are in worse shape than ever, and the government doesn’t have much of a clue about how to fix it. The New York Times is reporting that even the Obama people, who we hope are smarter than the newly ousted Bush people, aren’t sure about what to do. I think the market fell yesterday – led by bank stocks – because it knows banks are still hiding losses. If they’re hiding something it’s because they want to secure their own fortunes before the shareholders – and the country – figure out they’re bankrupt. Or as the last sentence in the times piece says, “Banks may not want that kind of openness, because accurately valuing the toxic assets could force many to book big losses, admit their insolvency and shut down.”
We all knew Obama was no Nader when we voted for him. But it still comes as a shock to this New Yorker to be reminded of exactly how conservative the traditional “Liberal” media is. And it is disappointing to see Obama waste his political capital and his mandate by falling into bad old Democrat habits. How many times do we have to say it? Do not pander to self-identifying conservatives!
From the CNN news desk:
“As a public official, I expect criticism and I expect to be held accountable for how I govern,” Palin said in a statement released by her office Friday. “But the personal, salacious nature of recent reporting, and often the refusal of the media to correct obvious mistakes, unfortunately discredits too many in journalism today, making it difficult for many Americans to believe what they see in the media” (emphasis mine). Yeah! Salacious! When did she pick that one up? Surely not studying for the SATs. I’m glad she’s gone to the trouble to hire a vocabulary coach. Sadly, she’s about twenty years too late.
Mama Grizzly also said she got up on her hind legs when Tina Fey made a crack on her daughter. I say amen. Tina Fey almost single-handedly saved the republic by exposing Palin’s idiocy — and in the process the idiocy of American conservatives.
Speaking of which, check out Sam’s comment on this CNN blog post: “Why do we need Congress anyway? When the Constitution was written, people needed others to represent them in making policy decisions. Now we have the technology to vote and represent ourselves directly.”
OMG. I know that some secretly bad stuff lurks in the hearts of men, but I didn’t think anyone would have the bad judgment to expose himself in public as a monarchist. That’s right people. If you enjoy your liberty, you better stand up with Harry Reid and the Congress, and say we want government of the people, for the people, and by the people. Congress — a legislature — is the only way to have such a government. If Sam’s plan were implemented, and we all voted individually for every piece of legislation that was proposed (by whom?) — as if government were like American Idol — first there would be deadlock, then there would be a breakdown of government, then the executive would assert him/herself to become a king.
I blame the miserable state of American education for comments like this. No one who has studied history, government, or politics would say such a perniciously stupid thing.
Dubai, unlike it’s neighbor Abu Dhabi, does not have oil riches. Though oil and gas were discovered in the 1960s, the Al Maktoum Emirs of Dubai knew early on they had to capitalize on oil money in the 80s, 90s, and 00s before the gravy train ran out of steam. Dubai creek was dredged several times over those decades so that today Dubai is the largest deep water port in the region.
Dubai’s rulers have also worked hard to make their town a financial center, giving sweetheart deals to major western financial houses to locate offices there. With finance comes real estate, which, according to Wikipedia, accounted for 22% of Dubai’s GDP before the housing bubble of started to inflate in 2004. It is difficult to find up-to-date figures on the financial situation in Dubai, probably for two reasons: first, if its economy was driven by a bubble, those interested in it do not want to spread the news it has popped and cause a panic; second, the government of Dubai and the UAE does not seem to be particularly transparent, at least if you are looking at the official website. (This article is indicative.) That said, my eyeball estimate of the economy in Dubai shows three salient categories of economic activity: commerce, service and tourism, and finance, under which I include real estate. (If you don’t like my categories, go talk to a professional economist.)
1) Kelly McEvers of Marketplace reported a couple of months ago that confidence in the Dubai’s real estate market has evaporated. 2) If players like Morgan Stanley are in trouble here, then you can be sure they’re in trouble at the Dubai satellite office. 3) And news that China is rethinking its investment in USD bonds should make any country with its currency pegged to the dollar (like the UAE) think twice about its future purchasing power. That leaves us with the service and tourism sector.
It’s true, everyone loves kareoke. And in the Mall of the Emirates you can record yourself in sound and vision doing a cover of Bowie to send to your friends back home.
I was particularly thrilled to know I could leave cold, rainy New York to go to the warm, sunny desert, and not have to miss a day of skiing. Not that it was so cold in New York. On the day we left for Dubai a friend who lives near Whiteface ski resort upstate lamented in a Facebook status update that it was unnatural to have 60 degree days at the end of December. But that makes indoor skiing in the desert all the more desirable.
When they close down mountain resorts in the US for lack of snow all the ski bums will be able to get jobs at the Mall in Dubai. The Dubai Mall also has ice skating and hockey…
… and a massive indoor aquarium.
Cool huh?! Notice all the folks in Western dress. That’s because most of the people in the malls were either Indian/Pakistani or European. I saw a few Emiratis, but not enough to keep these massive emporia open. Most of the shops are Western too, from Hardee’s and KFC (the writing is Arabic)…
… to lingerie.
This may be what Emirati women wear under their black robes, but I wouldn’t know.
The malls all have a space for “local” stuff, either tourist kitch or jewelry that is dressed up in a faux souk.
If you have any problems shopping, any disgruntled counter help or problems with your credit card, you can appeal either to the mall management or to God.
In sum, as long as tourists can afford to spend money, as long as novelty and kitch can last, as long as a flower can grow in the desert, Dubai will have a future.
The Burj Dubai is the tallest building in the world and holds records for many “biggest” and “most” categories including tallest structure, tallest freestanding structure, building with the most floors, and highest vertical concrete pumping for any structure. The picture above was taken (by me) from the roof of Al Ghaya Residence on Sheik Zayed road, a pitiful 30+ story building. In the foreground you can see several other buildings in various stages of construction.
This is the building next door to Al Ghaya Residence, some 80+ stories tall. It has been under construction for more than a year, and it looks complete from the outside. It is empty, however, and the entrances are sealed. This building became emblematic, for me, of our unique historical moment.
The Baharain Tribune noted on October 2nd 2008 that Dubai’s growth is “founded to some extent on a burgeoning property market heavily dependent on borrowed money”, and Norton Rose, a corporate law firm specializing in investing, said on its “credit crisis blog” that “there are rumors that some large projects will be placed on hold.” The analyst at Norton Rose is optimistic, if not in the near term, at least in the medium term:
The “real” market, that is where construction has commenced (and therefore finance is in place to complete the project) or the property has been completed, is suffering a short term state of confusion although the medium term view is that the market will bounce back particularly in quality sectors in quality locations.
But this may be a species of optimism ridiculed by Paul Farrell (my new favorite Wall St. contrarian) in his Marketwatch.com editorial today. Norton Rose thinks the fundamentals of Dubai’s growth are strong, and that the financial problems of the last year will clear up soon, but one could also make the case that demand in Dubai has always been artificial, and that its incredible ten (really five) year growth spurt is an effect of the global bubble that has driven over-production in all sectors to astonishing, never-before-seen levels. As the New York Times reported recently, globalization led to global growth, and now it is leading to a global contraction. Is it implausible to postulate that globalization, growth, and blowing bubbles were interconnected, self-reinforcing phenomena?
But beyond a global contraction, Dubai has other worries. Norton Rose again spins the situation in positive terms:
Dubai has built itself as a trading hub, financial centre, tourist resort and is an attractive and exciting place to live. The number of expatriates moving to Dubai from throughout the world is staggering; all of these people will need a home. Office space still remains in very short supply with heavy demand. Rents in all sectors have continued to increase and demand remains strong, however owner occupiers are struggling to find lenders to accommodate them.
On one hand, many of the immigrants to Dubai are from India and Pakistan, and those people are definitely not the people Dubai wants filling up its empty towers. Certainly, Dubai’s planners have gone to great lengths to lure Western investment. Investment banks are able to run by Western laws — within the walls of their own buildings.
But outside the walls Dubai is still a theocratic state run under Sharia law. The world chuckles at Vince Acors and Michelle Palmer who were caught having sex on the beach and sentenced to three months in prison. The situation is made human and poignant, however, by the case of Marnie Pearce who was accused of adultery by her estranged husband and consequently convicted and sentenced to six months in prison. As a result she may lose custody of her two children entirely. In the print version of the article from January 5th, Ms. Pearce tells the reporter for the Telegraph with obvious passion that Westerners need to remember that Dubai is not a liberal state. A woman — any woman — can be punished for being alone in the company of a man who is not her husband or kinsman. And that is a kink in Norton Rose’s projection of continued demand for Dubai properties.
I guess the Big 3 were too big to fail. That is, our venal leaders were torn between fearing we’d revolt if they bailed out their buddies and fearing we’d revolt if they let a million more jobs go down the tubes. In the end I think it’s a good thing that they gave these pompous losers three more months to get their house in order before the day of reckoning comes. Once again strange political bedfellows made for a weird ideological tension behind the resolution. Conservatives want to break the back of organized labor forever, and in their view they’re not so much saving jobs as making sure manual laborers get paid no more than service industry employees. True liberals want the market to do its magic — even if that means losing a million jobs. Bleeding heart liberals want us to think of the children — of the soon to be impoverished northern states. The best possible outcome here, is for entrepreneurs of small companies that make small, incredibly efficient cars to spring up like mushrooms on the rotting dung heap of the big 20th century American auto industry. Even better, companies from Detroit and Milwaukee that make high speed light rail trains, tracks, services, and all the rest. But I’m not holding my breath.
The clamor is coming from all sides: extend the bailout to the car companies.
The rationale for doing so is that it is responsible fiscal policy: only by saving automobile manufacturing jobs will we be able to save Michigan. And as Michigan goes, so goes the country.
The holes in this argument are big enough to drive a Hummer through.
In the first place, whatever happened to the jobless recovery of 2003? I thought all the manufacturing jobs were already gone?
In the second place, as I have argued before, bailing out failing industry is a mistake. A firm line must be drawn between what is public capital and what is private capital. We have worshipped in the temple of private capital for two and a half centuries, while the idea of public capital has never been adequately articulated. The agopee of “privitization”, that is making what was public capital private, came with Reagan.
The end of that privitization happened when Henry Paulson was handed the keys to the Treasury and used them to write checks to his former pals in the financial industry. “Don’t worry boys — you’ll get your Christmas bonus this year!” The same is about to happen to the Big Three if they get their “bailout”: Executives will get to save their houses, while the workers’ jobs are eliminated and shipped overseas, and their retirement is left to a non-existing public dole. GM will not be able to build giant inefficient machines in the future. The market will not allow it. To prop them up will not save jobs for workers, it will only hold open the fire escape doors long enough for the rich to get out while their house is burning down.
Real fiscal stimulus has to do what the New Deal did: guarantee the future of the Re – Public by funding public capital.
The LIBOR is down and the market is up — hooray!!! I spoke too soon yet again. It looks like the VIX is considerably down too. That means less volatility in the markets and more sustained movement. Could we see DJIA 10,000 by election day? Just soon enough to reverse McCain’s electoral fortunes!
The Fed chief said today that if we spend another $300 billion on direct financial stimulus (e.g. in the form of a WPA style infrastructure build out) we might avoid the worst of this meltdown. Sounds good to me!
I only see one problem (and this is why I’m a conservative douche bag at heart): without a little financial pain d-bags like the ones at AIG who went quail hunting after the government (that is, US) gave them $85 billion will continue to go quail hunting — and I will continue to pay more than a quarter of my income in taxes. Where is the congressional bill to make financial shenanegans illegal?
The other problem I see is the massive federal debt. When is too much debt too much? When will the chickens laid by all the coke snorting, whore banging d-bags on Wall Street come home to roost? Because all debts must be paid, one way or another. Who is going to pay for feckless wastes of skin to go on hunting junkets in Europe? You and me obviously. But so far we haven’t felt like we’re paying it. What will it feel like?
Massive inflation is my guess. Maybe even hyper inflation. Because all debts must be paid in one way or another. It’s as good as the law of gravity.
It looks like the bank rescue plan is going to work! Yay! Happy days are here again! This was the shortest Great Depression on record, lasting only three days, from Black Friday (October 10th, 2008) to Happy Mondays! (October 13th, 2008). After the DJIA lost over 50% of its value from its peak over the summer, it gained back 11% on Monday, and if the DJIA follows other world wide indexes today it stands to be back at 14,000 by Christmas.
Some Debby Downers are already saying this looks like a classic “Bear Market Bounce”. They say that — markets be damned — until Americans feel enough pain to make them give up their profligate, spendthrift ways the same mindset that brought us the problem will create new and unforseen problems.
But one thing is for sure, government intervention in global capital has never been this big in the entire history of the world. Whatever the new problems are, they won’t look like your grandparents’ problems. There probably won’t be bread lines in Manhattan (thank God!), nor will there be runs on the banks as frightened citizens desperately try to get greenbacks out of battered ATMs.
I’m gonna play Nostradamus here, and predict that the new problems will have less to do with the money supply (a problem the government has found an elegant solution for) and more to do with inflation. Bad debts are inescapable, as is the hangover they produce. It’s just a feature of overproduction and speculation. They must still work their way through global economies. But people won’t lose their cash. Instead the brand new, guaranteed bills governments all over the world are creating to make sure there is still money in your purse will loose their value when it becomes apparent that they aren’t redeemable for real work. (That’s what happens when people default on their debts — you can’t get the work they promised out of them.) How they deal with 2009′s inflation will be something to see.
Right now — today, October 5th, 2008 — the world is deciding to quit believing in a brighter future and start hoarding white rice and gasoline. The Dow Jones is down 700 points at the time of this writing, and European shares had their biggest one day drop ever.
If you want to see how bad it can be, check out this web lecture by Chris Martenson. If we contract to pre-bubble levels, we’re looking at Dow 6,000 — and the way things are going today that might not be too far off.
They won’t be able to just admit they were wrong.
They won’t be able to admit that took the idea of a self-regulating free market on faith. Or that a misplaced faith in their intellectual powers was all they ever had. They won’t be able to admit that reality is more complex than their simple, moralistic ideologies can handle. And yet it looks like the Freemarket Fundamentalists might actually score some political points from the financial crisis.
Who is responsible for the credit crisis that is ripping through American and foreign financial markets like a spasms through an epileptic? It’s like asking who is responsible for the torture at Gitmo or Abu Ghraib. If you’re still one of the faithful, it was all the work of a few bad apples and not a massive systemic failure that is bound to happen cyclicly until the end of time — or until real reforms are implemented. But conservatives don’t believe in reform. They believe in human nature. They believe the eschaton is coming. They know Evil will be with us until it’s final, apocalyptic showdown with Good.
In the meantime, Democrats only got about 55% of their due political realigment out of this once-in-a-lifetime political opportunity.