[R-G] [BillTottenWeblog] Welcome to Fuffland!

[Bill Totten]

by Dmitry Orlov

Club Orlov (March 22 2009)


In the unfolding global financial collapse, it is not just our accounts
and balance sheets that come up short, but our language as well. What do
you call a bunch of liar loans packaged into toxic assets and placed on
the balance sheet of the Federal Reserve as collateral for rescue loans?
J K Galbraith has proposed the term "Bezzle", taking it to mean the
eternal ebb and flow of questionable transactions within an economic
cycle. Rational actors cut corners during easy times when they know
no-one is looking, and then play nice again when the times change and
someone starts paying attention again.

But I believe that the phenomenon we are observing is something
different: we need a word that describes the artifacts generated in
response to irrational actors who demand to be fooled. As the old saying
goes, "A fool and his money are soon parted" - at the fool's own
insistence, no less! If the deer comes out of the forest and walks up to
the hunter, it is not proper hunting, and this is not proper con
artistry or grift or embezzlement or any other term we use to describe
proper works of evil. If the victim, at the sight of the economic
predator, goes into doggie submission, we must stop discussing the
phenomenon in terms of conflict and consider whether what we are
observing might be some strange instance of symbiosis.

I am Russian, and so I tend to use my Russian background to look for
answers to questions big and small. Sometimes this works rather well for
me. It seems that the Russians are better equipped to survive financial
collapse than just about anyone else. They have formidable reserves of
gold and foreign currency to soften the downward slide. They have a
dwindling but still sizable endowment of things the world still wants,
even if at temporarily reduced prices. They have plenty of timber and
farmland and other natural resources, and can become self-sufficient and
decouple themselves economically should they choose to do so. They have
high-tech weaponry and a nuclear deterrent in case other nations get any
crazy ideas. After all the upheavals, they have ended up with a
centrally-managed, natural resource-based, geographically contiguous
realm that is not overly dependent on global finance. Yes, the Russian
consumer sector is crashing hard, and many Russians are in the process
of losing their savings yet again, but they have managed to survive
without a consumer sector before, and no doubt will again.

Be that as it may, because as far as our own welfare is concerned the
subject of Russian economic survival will be little more than academic.
Perhaps Russia will thrive, all the way on the other side of the globe,
just like it did while we wallowed in the Great Depression; how could
that be helpful to us, in our predicament? Well, it turns out that
Russia has something to offer that should be to our great advantage in
coming to terms with financial collapse, and it is something that it is
perfectly willing to share with us, because it is just a matter of
learning some new vocabulary. All we need to do is borrow a single word,
and learn to understand the concept it signifies.

Yes, the Russians actually have a word for precisely the thing that has
bewitched us, first accounting for an ever-increasing share of our gross
domestic product, and is now responsible for our ever-larger financial
black hole. That word is "фуфло" /fufló/ when applied to a quantity of
something, and "фуфел" /fúfel/ when applied to a singular item. This
word has the obscure English cognate "fuffle", which the Oxford English
Dictionary dates to the early XVI century but fails to define
adequately. I suspect that this word has been in circulation in many
languages ever since some Protoindoeuropean simpleton showed up at some
archaic fair and, being none too wise, bartered his meager trade goods
in exchange for what thereafter became known as a fuffle. At that point,
his story may have gone two different ways. Either he could have
discovered that he'd been handed a fuffle, chased after the unlucky
fuffller, and summarily ran him through with a pointed stick (positive
outcome) or he could have stumbled back to his village proudly
displaying his prize, and perhaps even got his entire tribe to acquire a
taste for fuffles (negative outcome). In the latter case, the
fuffle-addled tribe could never grasp the meaning of the word "fuffle",
because doing so would have resulted in some painful cognitive
dissonance. (Perhaps this psychological mechanism accounts for the fact
the Anglo-Saxon tribe still has the vestigial word but no longer
remembers its meaning.)

A fuffle is an artful fake, an artifact specifically made to fool,
beguile, seduce, or intimidate people into paying for it. Ideally, the
initial transaction serves as the basis of a permanent arrangement, with
the victim roped into an installment plan, which keeps the payments
flowing even after the fuffle itself has crumbled into a pile of dust.
An even better fuffle is one that grows over time. Since a fuffle is, in
essence, a fake, its useful properties, should it have any, are largely
irrelevant, and so its abstract (which is to say, financial) properties
come forth as being the essential ones. The most important such property
is, quite obviously, size, and indeed fuffles tend to get bigger and
bigger over time. This is a telltale feature of fuffles that makes them
easier to identify: if something gets bigger and bigger over time while
delivering the same or lesser value, then it is quite likely to be a
fuffle. Also, fuffles breed: as a fuffle gets larger and larger, it
produces offspring of other fuffles, which also grow. Examples come from
many realms.

Take, for example, suburban and exurban houses. For a time, people
couldn't get enough of them, and at one point fully half of the US
population was living in them. Their square footage had increased far
past what even a large family might actually need, while at the same
time their cost had exceeded what an average family could afford. In the
final act of suburban expansion, these fuffled houses begat fuffled
mortgages: fraudulent loans clearly not intended to be repayable over
their entire term but quickly rolled over into some other fraudulent
monstrosity. And fuffled mortgages begat fuffled equity-backed
securities. And these begat fuffled government bailouts.

Another example is America's favorite fufflemobile: the SUV. This is a
truck chassis made to superficially resemble a gigantic passenger car,
with none of the advantages of either and all the disadvantages of both.
These were advertised as safer than cars, while they are some of the
most unsafe passenger vehicles ever sold. These also grew in size and
cost, while begetting fuffled auto loans, and eventually leading to
fuffled automaker bailouts.

Or take the gigantic fuffle of guaranteed student loans, which enabled
fuffle-like growth in college tuitions. Following a few years of
flipping burgers or serving lattes the value of the diploma may be zero,
and most of the knowledge it implied either forgotten or obsolete, but
repayments continue, sometimes until the poor student's death. And if a
period of financial hardship results in a deferment, interest and fees
are piled on top of the original loan, allowing it to balloon to an
astronomic size that bears no relation to either the value of the
diploma or the expected earnings of the graduate. To keep the payments
flowing, income and social security payments can be garnished.

My last example is private retirement based on IRA and 401k retirement
funds. Unlike proper retirement systems, which transfer a percentage of
earnings from working-age people directly to retirees, this fuffled
scheme takes these earnings and invests them in some fuffles, expecting
these fuffles to grow like they always do, making the retirees well off
upon retirement. The non-fuffled fallback, as a lot of retired fufflers
are about to discover, is to come to rely on your grown children for
support, awkward though that may be.

It may be clear to us that fuffles must be eradicated. But it is almost
impossible for a society that has for so long and to such an extent put
its faith in fuffles to part with the notion that they are valuable and
accept the notion that they are a lot worse than worthless. And so they
grow and grow, until they swallow up the entire country. At some point
last year, in a vain effort to avert financial collapse, the Federal
Reserve started accepting fuffles (which they called "troubled assets")
as collateral for fuffled rescue loans to insolvent financial
institutions. Thus, the assets column of the Fed's balance sheet is now
loaded with fuffles. And next, we have the US Treasury poised to create
the next wave of fuffles. These are US Treasury securities, backed by
whatever remains of the full faith and credit of the US Government, but
destined to be sold not to investors (who have no taste for any more
fuffles) but, in a truly incestuous move, to the same old Federal
Reserve Bordello of Blood! They are calling this "quantitative easing".
A better term would be "qualitative fuffling": the financial snake is
finally eating its own tail. The Fed will place these fuffles on its
balance sheet as assets, and in return issue prolific quantities of our
new national currency: the US Fuffle. Like all fuffles, the US Fuffle
will grow by leaps and bounds, by sprouting ever more denominations.

"How much do I owe you for this latte, dear graduate?"

"Well, Sir, that will be six trillion fuffles, if you please".

Welcome to Fuffland, people! Enjoy your stay!


http://cluborlov.blogspot.com/2009/03/welcome-to-fuffland.html


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