[R-G] [BillTottenWeblog] Going Going . . . .

[Bill Totten]

Clusterfuck Nation

by Jim Kunstler

Comment on current events by the author of
The Long Emergency (Atlantic Monthly Press, 2005)

www.kunstler.com (March 10 2008)


The feigned cluelessness in Paul Krugman's Sunday New York Times column
("The Face-Slap Theory") about the meltdown in finance is a good index
of the cringing mendacity now emanating from those in service to the
centers of power. I doubt an editor, or the publisher, Mr Sulzberger,
had to whisper in his ear to soft-pedal the situation. I don't even
believe anything like his job depends on it. Krugman's glossing-over the
truth is just social cowardice. He doesn't want to be called out dissing
fellow members of his club.

Krugman avers to the Federal Reserve's two previous big efforts since
August to bail out the insolvent banks, insurers, and hedge funds with
cheap loans as "slaps in the faces" of these wobbling corporations -
"yo, wake the fuck up!" - as if narcolepsy was their only problem. (Try
that with a wino on the sidewalk outside the Port Authority bus terminal
and see if he immediately signs up for rehab and a high school
equivalency program.) Krugman calls the club's latest plan - for the Fed
to just suck up their impaired and worthless collateral in exchange for
more cheap loans - as a "third slap", saying, with all the panache of a
midwestern Rotary Club secretary, that "the third time could be the
charm". Had the monkeys already flown out of his butt as he wrote that,
I wonder.

The line in Krugman's column I love best, though is this one: "Last
month another market you've never heard of, the $300 billion market for
auction-rate securities (don't ask), suffered the equivalent of a bank
run". His presumes that his readers go along with his pretense of
innocence. We've never heard of the municipal bond market and it's too
complicated to explain so "don't ask". Is he writing for the "newspaper
of record" or Highlights For Children? Maybe it would be a good thing if
readers of The New York Times asked what the fuck was going on in these
markets so they could yank their depreciating dollars out and deploy
them elsewhere or convert them into something of value.

Well it was a bad week on the money scene in what is sure to be a
worsening year. Paul Krugman and his fellow club members can pretend
that the hallucinated finance economy is not really flying to pieces.
After all, he / they are trying to avert panic. But, as noted previously
in this space, the only thing we have to fear is not fear itself. We
have to fear the consequences of actions by a banking leadership that
has shown the grossest irresponsibility (and an American public that has
been conditioned to expect a steady diet of getting something for nothing).

The US faces a pretty stark choice right now: it can let the losers take
their losses - both the big institutions who created and traded in
fraudulent securities, and all the "little guys" who borrowed too much
money trying to get rich quick, or trying to live like the millionaires
they see on TV. We can let them go down, and suffer the consequences of
their bad choices (and maybe prosecute some of the culpable bankers and
corporate executives), OR, in an effort to let these losers off the hook
we can wreck the whole machinery of capital by making our
medium-of-exchange worthless.

The people in charge - both in and out of government - can't face the
losses, so for now they've apparently decided to wreck the currency. The
dollar has lost two percent of its value against the Euro just in recent
weeks, as cheap loans from the Fed pour into the black hole on Wall
Street (never to be seen again). Other soft-pedalers in the media claim
that the financial markets have "already priced in" yet another expected
.75-point interest rate drop by the Fed this week, but I'm confident
that such a move will only accelerate the dollar's vanishing act.

I'll admit, it's hard to believe what's going on in the American finance
sector. But incredulity in the face of a rare catastrophe isn't the same
as pretending that it's not happening. A whole flock of black swans is
flying in front of the sun. Don't expect to work on your tan this month.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/

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