Unfolding financial carnage (Headlines from the Meltdown)
Hmm. It’s been a month and a half since I made the first of six announced updates. Tempus fugit.
Right about now, for various reasons, I want to upload this post before it’s possible for me to groom it properly. The haste is due to the fact that I want to beat the American stock markets opening tomorrow, so that I will have committed myself, as it were, by making my opinions public, and can then see whether I was even remotely correct in my expectations of a wild economic roller coaster ride exploding into motion tomorrow morning, January 22, 2008.
What follows is a handful of messages that I’ve posted in various discussion threads at various Internet message boards, and also in some private emails, over the past couple of days. I’ve leave the contexts out and simply give the passages without explaining their settings.
Oh — and good luck to everybody reading this. Economic life just may be about to get very troublesome and strange for many of us.
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I’m so far from being economically educated that it’s almost laughable, but over the past four years I’ve become positively fascinated with our macroeconomic situation and have taken to watching and reading financial news (and also geopolitical and other, related stuff) with a positively voracious appetite. And last October I saw the stars line up just right and began to realize with a sinking feeling that a major meltdown, blowup, shitstorm (pick your metaphor) is almost certainly situated right in the January-through-May 2008 corridor. I’ve lightly expected such a thing for quite some time now but the feeling that came over me in October was of something palpable, something definite, something concretely forecastable in the immediate future.
After having already realized this, I saw John Michael Greer advising his readers at The Archdruid Report in a post titled “Waiting for the Other Shoe” to shed speculative investments and keep extra food on hand in view of the imminent possibility of a major economic discontinuity. This is pretty strong stuff for Greer, who is one of the most prominent peak oilers forecasting the gradual decline scenario for industrial civilization as contrasted with the doomer/catastrophist expectation of rapid and catastrophic destruction.
Then I began to hear a snowballing cacophony of dire predictions emanating not only from the alternative news sources I regularly monitor but from the mainstream press as well.
Events in November, December, and the first half of January have continued to line up absolutely perfectly in support of my original hunch of something prominent, swift, and ugly happening in the very near term. Who knows, the new revelations about the problems with the bond insurers may be the final shoe to drop and the straw that broke the camel’s back.
I work at a public school in a rural Midwestern American town, and last November I wrote a long letter to the school system’s superintendent warning her that she ought to be aware of the economic storm that’s shaping up since she’s the literal and symbolic figurehead of one of the town’s most prominent institutions. I’ve continued to update her about it periodically. I’ve also warned my principal, as well as friends, family, and a few of my students.
In terms of the overall “big picture,” I really don’t think there’s such a thing as the “big one,” as in, some single catastrophic event that will undo America or civilization in general. Well, okay, global nuclear war might do the trick, or a super plague. But short of these semi-science fictional possibilities, it’s silly and counterproductive to make plans based on the idea of a one-time, once-and-for-all fall. That said, in practical reality it really looks like there’s a serious economic emergency staring at us from the immediate future. The announced stimulus plan from Bush and Co. is like a flashing red alarm light. Prudence dictates not just talking about the situation but making real preparations.
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We may not “officially” be in recession right now, since the U.S. government hasn’t officially recognized the situation as such. But in actual life on the ground and also in the financial markets, it’s a full-blown bloodbath and has been increasingly so since last summer. I’m no economist. I’m not even that good with numbers. But I’ve become fascinated by the macroeconomic situation over the past few years. And I say, hold on to your ass. This isn’t your grandfather’s recession. In fact, it’s going to blur the line between recession and its grimmer cousin, depression.
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G– asked if my prediction of a mega-recession has anything to do with P.O. (peak oil). The answer is yes, the oil and energy issue is definitely involved since it’s squeezing everybody in a serious way. But the more direct and immediate cause of the trouble is the way the entire American and much of the rest of the global economy has been rotted through with fancy “trick” investment vehicles based on collateralized debt. Combine this with the fact that pretty much the entire U.S. populace has been suckered — or else has willingly transformed itself — into a consumeristic zombie horde laden with maxed out credit cards, zero or negative savings, stupendous mortgage debts on overvalued real estate, absurdly long (and increasingly expensive) commutes from home to work and town, and so on. And factor in as well with the additional reality of a U.S. economy that has been completely financialized over the past 30 to 40 years with an even older economic undergirding working to support current trends. And what you have on your hands a real problem.
I’m no oracle. I may well be throwing my hat into the prophecy business only to have to eat it later. But I’ll predict right now that anybody who’s a fan of apocalyptic novels and movies might find much to interest them in the absolutely panicked headlines that are going to start splashing through America’s mainstream media beginning tomorrow morning. The American stock markets are closed today for the MLK holiday but the European and Asian ones tanked in spectacular fashion in negative reaction to Bush’s proposed economic stimulus package last Friday. What do you think will happen tomorrow morning when the American financial engine restarts? It’s going to be a wild ride for the next few months, and more immediately, for the next few days and weeks. How much of it will take the form of actual problematic events, as distinct from overwrought handwringing and doomsdayism, remains to be seen. Based on the initial troubles with the bond insuring agencies that began last week, I think it’s very possible we might see the prominent and dramatic collapse of one or more banks or other financial institutions very soon. That would certainly get people riled.
As for me, I’m certainly glad I don’t presently have any speculative investments. I may need to bulk up the food in the pantry, though
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Is anybody else watching the financial carnage unfold? For those like me who have made a hobby of following economic news — and who have therefore been increasingly awed at the major meltdown that’s been gearing up since last summer — this present moment, circa 5 p.m. CST on January 21, 2008, is an emotional mixture of thrilling and terrifying.
How much of the current doom-mongering is justified and how much is overwrought? I suppose only time will tell. But one thing’s for sure: A person no longer has to go digging to find all the doomer porn, as it’s commonly known, that he may crave.
A brief trawl through today’s offerings alone yields a net-busting catch. Don’t believe me? See for yourself, complete with excerpts:
Jan. 21 on Bloomberg.com: Corporate Default Risk Soars to Record on Ambac Ratings Cut
The risk of European companies defaulting soared to a record on concern credit ratings cuts at bond insurers Ambac Financial Group Inc. and MBIA Inc. may trigger forced asset sales and worsen credit market turmoil.
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Bloomberg.com: Stocks Plummet on Germany, Hong Kong, India, Brazil Rout
“It’s the worst I’ve ever seen,” said Johan Stein, who helps manage the equivalent of about $14 billion at Nordea Asset Management in Stockholm. “The financial system is in terrible shape, and no one knows where this will end.”
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MarketWatch from Dow Jones: British shares in worst fall since Sept. 11 attacks
“Shares in London tumbled Monday in their worst session since the terrorist attacks on Sept. 11, 2001 as a sharp downturn in mining and banking shares pointed to growing investor fears about a slowdown in global economic growth and a U.S. recession.”
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Bloomberg.com: U.S. May Be Heading for Severe Recession, Economists Tell WSJ
The U.S. may be headed for a recession worse than any seen in the past 25 years, as households are weighed down by a housing slump, debt and high fuel and food prices, the Wall Street Journal reported, citing economists including Merrill Lynch & Co.’s David Rosenberg.
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CNNMoney.com: Global economic crisis ’serious’: IMF chief
The head of the International Monetary Fund called the global economic situation “serious” and said markets worldwide had responded skeptically to a U.S. stimulus plan.
Dominique Strauss-Kahn stressed that a U.S. recession would affect economies across the globe.
“The situation is … serious,” said Strauss-Kahn following a meeting in Paris with French President Nicolas Sarkozy. “All the countries in the world are suffering from a slowdown in growth in the United States.”
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In his op-ed “Warning signs missed on economy,” Glenn Beck seems to stray off point in the second but the first half is dead on. He uses the metaphor of successive damaging waves crashing into America’s economic shore, with each doing a little more damage. This is vaguely similar to an image that’s hovered in the back of my own mind since last fall: that of a great ship sailing along and being impacted by repeated torpedo hits or iceberg collisions. None sink it but each does significant damage until the ship becomes like the Titanic: It’s going to sink for sure but awareness of this fact spreads only gradually among the passengers, whereas the crew knows exactly what’s happening.
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A couple of months ago I was predicting that Bush would appear before the nation shortly into the new year to talk about economic troubles. Friday’s press conference to lay out his proposed stimulus package is only the start. Next up will be a primetime television talk — certainly during his upcoming State of the Union Address, if not before — which will cause a stir. According to the CNN.com story covering Friday’s press conference, he appeared “flanked by economic advisors.” Sounds like appropriate and deliberately staged symbolism. The article also reminds us that last week Bush said economic signals “have become increasingly mixed” in recent weeks. That’s an example of euphemism or outright Orwellian doublespeak if ever I heard one. “Increasingly mixed” in this case means “undeniably horrific.” It means there’s no longer any possible way to put a univocal positive spin on the situation.