On the wisdom of welcoming doom (Headlines from the Meltdown)
General comment from Cardin
The past seven days, February 24-March 1, made up a fairly extraordinary week in terms of both news and events. (And it’s always prudent to make a mental distinction between the two, since the former has become its own self-generating industry that often deviates from actual events; a very attentive rereading or first reading of the opening chapters of Daniel Boorstin’s foundational classic of modern media criticism, The Image: A Guide to Pseudo-Events in America , is in order for a great many people on this count.)
At any given moment on any given day in the past week, a person could scan financial and economic headlines and see a fairly dizzying list of Bad News for Americans. Oil made history by topping $103 per barrel, which was bad news for consumers but good news for oil investors and traders. Municipal bonds fell headfirst into the toilet, signaling very difficult financial times for local government s across America. The dollar plumbed historic new lows, which was bad news for everybody in the U.S. except for exporters and others who sell to foreign buyers, and good news for the multitude of European and other giddy shoppers who are now using the U.S. as a nation-sized discount shopping mall. Newly released figures showed the U.S. economy ground to a near halt in 4th quarter 2007. Various companies reported serious losses and writedowns, including Sprint, which posted a $29.5 billion loss. Numerous stories about a looming world food crisis and likely famine sprouted like mushrooms around the news-o-sphere. In the midst of it all, and largely in reaction to it all, the Dow Jones Industrial Average had its second worst day of 2008 on Friday, the final (and extra) day of February, losing 315 points and marking the fourth straight month of declines.
Here are two thoughts and observations, not necessarily joined by a common theme (though not completely unrelated) on the linked and excerpted items that follow.
1. Nouriel Roubini’s 12 steps to disaster
Two and a half weeks ago, I provided a link to and excerpts from Roubini’s explication of a 12-step road to disaster at his online newsletter. But only the introduction was available to nonpaying readers, with the bulk available only to subscribers. Last week I gave information from Martin Wolf’s complete summary of Roubini’s 12 steps at The Financial Times. Now Roubini himself has made his 12-step diagnosis freely available for public reading at Financial Week. You’ll find a link and excerpts near the middle of the aggregated items below.
From the field of education and learning theory, we know that the key to increased retention of skills and information in memory is repetition. That means at this point we ought to be able to recite Roubini’s list from memory. If only it would get some primetime airplay at the same level of repetition and ubiquity as television ads for Survivor, McDonald’s and Verizon! Corporations aren’t stupid. They employ this psychological truth in their high-saturation advertising campaigns. Most of us can start with “Two all-beef patties, special sauce…” and continue to chant the McDonald’s mantra all the way to completion. We know Coca-Cola is “the real thing” and inadvertently serve as undercover advertising agents for Verizon by jokingly incorporating into our daily speech the holy mantra, “Can you hear me now?” If only we were equally able to start with Roubini’s first step, “U.S. home prices fall between 20% and 30% from their bubbly peak,” and continue on to step 12, “A vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue,” maybe we would all be a bit saner and more informed. It would certainly help us to “read” the actions of the Fed and other government and private institutions more consciously and accurately.
But that’s never going to happen. Most of us are too programmed and anesthetized by television, junk food, video games, wage slavery, and the other supposed wonders of an über-capitalistic techno utopia to see the swelling tide of reality that threatens life inside our cocoon. Oh, well. Never mind. Pass the special sauce! Oops, it’s time to shower and get ready for work. And where’s my cell phone? (Of course, the outcome of this scenario in which we’re kept comatose until it’s too late may well be, “Pass the canned goods, I’m starving! Oops, I’d better go work in my garden. And where’s the firewood?”)
2. When bad news is good, or, The wisdom of welcoming the meltdown
A lot of people, including me, have ruminated publicly about the salutary long-term effects of a wholesale economic, political, and generalized cultural meltdown/collapse. We recognize that collective human life in the industrialized, technologized, computerized, digitized, pleasure-ized, hyper-financialized, super-sized First World has morphed into a kind of planetary cancer. It’s not that we hate classical Western democratic ideals and their rich philosophical pedigree — far from it! — and on the flipside idealize or romanticize the materially impoverished life of people in the Third World. Although some (but not all) exponents of the “primitivist” critique of human civilization do fall into that error, neither I nor the vast majority of the writers and thinkers who discern a kind of millennial moment in our current crises are “America haters,” terrorist sympathizers, or anything of the sort. It’s just that we recognize how frantic and inhuman this modern life has become. We recognize that the imperialist-consumerist way of life that America has cultivated for itself at home and now exports abroad is in fact a desertion and betrayal of the seedlike noble ideals from which the nation originally grew. And the cultural cancer has metastasized so quickly and thoroughly that nothing short of a systemic crisis in the body politic, resulting in a kind of death, may serve as the necessary medicine to save the patient.
Yes, that’s a rather stark way of putting it. Other people are saying it starkly as well; see, for instance, James Lovelock’s cheerful prediction of disaster among the linked stories below. Lovelock is writing more about the earth’s climate than human culture, although culture definitely plays into what he’s saying. And he, too, speaks hopefully of a wiser people who might emerge from all of the current and imminent chaos.
For a particularly heartfelt reflection on the wisdom of embracing meltdown and collapse, one can’t do better than to read a recent blog post by Sally Erickson, co-producer with Tim Bennett of the (essential) 2007 documentary What a Way to Go: Life at the End of Empire. Read the excerpt below, which I’ll use to cap off this comment. Then click through and read the whole post. Then come back here and reread all of the “bad” news for this week. It will cast an entirely different light on the matter.
The word collapse calls up images of horror. And that’s not inappropriate. But images of collapse inspire no visions of ultimate benefit. On the other hand the term radical simplification could sound a different chime for people exhausted from the current wage slave system, where the many work ever harder to stuff the ever more soft and opulent feather beds of the few elite. Radical simplification of life, if people would slow down enough to contemplate it, could actually feel like a breath of non-polluted air. Too many people, most people I would venture to say, and even those with currently stable incomes, are incredibly lonely. They sit in quiet despair in front of their television sets or walk the malls with iPods stopping their ears, or drink beers and soullessly cheer at yet another sporting event, forever in frantic search of more distraction. For most, collapse will be, alternatively, either a shock or, if it proceeds slowly, just a heightened erosion of already degraded and meaningless lives. The coming transition will not be pretty for the bewildered herd. But for visionaries and cultural creatives collapse, or radical simplification, likely calls up what may seem to be paradoxical feelings of relief and even empowerment. I’ve heard more than one friend recently exclaim, “Bring it on. I’m sick of this shit.”
….If we wake up now, see the handwriting on the wall of this prison and walk away from it, we can sit together in circle with one another, and with the whole community of our landbase, to weather the huge storms that will rage around us. And as the storms abate, those of us who have done our work, our mental, emotional, spiritual and physical work, with the help of greater forces, will have the opportunity to make amends, to work to offer deep reparation for the harm we have collectively caused. With grace, we, and our descendants, will also have the chance to water and care for the seed of re-member-ing our deeper ancestral selves, our ancient legacy of consciousness, that honored life in all it’s forms.
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Deseret Morning News (Salt Lake City), Feb. 28
[Cardin comments: In the remainder of the article following the excerpt below, Studdert specifically refers to the following clear and present dangers: unfunded federal liabilities (especially Medicare and Social Security), the credit crunch from the housing crash, U.S. indebtedness to China, China’s exponential growth, heavy dependence by the U.S. on Middle Eastern energy sources, and possible economic threats from Russia, Pakistan, North Korea, and Iran.]
A former White House adviser for four U.S. presidents says America is on the verge of financial and political upheaval unless the country makes substantial changes in the very near future.
Speaking Wednesday at the Hinckley Institute of Politics at the University of Utah, Stephen M. Studdert, author of the book “America in Danger, What You Must Know to Protect Yourself,” said the country is facing economic threats on various levels, including growing government and corporate debt.
“I think the debt level in this country is enormous and dangerous and frightening,” said Studdert. “If the government of this country were a business, they would have to declare bankruptcy.”
Studdert, who served as adviser to Ronald Reagan, Gerald Ford, George H.W. Bush and Bill Clinton, said the U.S. comptroller general has described the U.S. as “bankrupt as a nation.”
“Today the United States of America is a house of cards that could tumble at any time,” he said. “The elements of a perfect storm of destabilization and crisis are all about us.”
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CFO.com, Feb. 29
When the U.S. government’s official 2007 financial report was released last December, the response could hardly have been worse. Not only were its ratios worrisome enough to make corporate shareholders blanche [sic], but its results were so full of “serious material weaknesses” that the Government Accountability Office could not even audit it.
In the absence of an audit, the Treasury Department and the Office of Management and Budget heeded the GAO’s advice and released a more informal report titled “The Federal Government’s Financial Health: A Citizens Guide to the 2007 Financial Report of the United States Government.”
Some of the language in the eight-page summary document — boiled down from a dense 186 pages — is scalding, and the projections border on the terrifying. The first such guide, it was produced in hopes of helping the public understand America’s long-term financial predicament. But what it is that’s to be understood is distinctly scary.
“Unless action is taken to bring program cost in line with available resources, the coming surge of entitlement spending will end in a fiscal train wreck that will have an adverse effect on the U.S. economy and on virtually every American,” the report says.
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Financial Post, Feb. 26
The U.S. banking sector is headed for a credit downturn that will be “the worst in generations,” featuring widespread defaults on a range of debts and a national house price slide not seen since the Great Depression, says one of the most influential analysts on Wall Street.
The banks face massive loan losses — “far more dramatic” than most bank executives and ratings agencies have forecast — as the next chapter in financial sector turmoil unfolds, said Meredith Whitney, an analyst with Oppenheimer & Co. Inc.
“We believe loss rates will exceed the highest levels since 1990 by a significant margin,” she said in a note Monday. “Bank losses will be the highest in the past 20 plus years as a result of greater numbers of individual defaulting on mortgages and/or other loans and from [loan balances that] are far higher than they were in the last housing cycle.”
….”As far as consumer credit is concerned, we are in unchartered territory,” said the outspoken analyst. “Housing prices, now down 6% across the U.S., have begun to decline on a national level, a phenomenon not seen since the Great Depression. We are of the belief that over the next 24 months, national home prices will decline by a factor of three times such levels.”
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Yahoo! Finance (AP Wire piece), Feb. 27
BASEL, Switzerland (AP) — UBS AG’s chairman sees the current financial crisis as possibly the most difficult since the stock market crash of 1929.
Marcel Ospel has told shareholders that he is determined to stay on at the helm of Switzerland’s largest bank.
He believes he can steer UBS back into financial health from the billions it has racked up in losses linked to the U.S. subprime mortgage crisis.
Thousands of UBS shareholders are attending an extraordinary meeting in Basel. Some are calling for Ospel to resign.
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Nouriel Roubini, Financial Week, Feb. 25
To understand the Federal Reserve’s recent actions, one has to realize that there is now a rising probability of a catastrophic financial and economic outcome—a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.
Such a meltdown is likely to unfold in this 12-step scenario:
[Click the above link to read the 12 steps.]
Based on estimates by Goldman Sachs, $200 billion in losses in the financial system would lead to a contraction of credit of $2 trillion, given that institutions hold about $10 of assets per dollar of capital. The recapitalization of banks by sovereign wealth funds, about $80 billion so far, will be unable to stop this credit disintermediation. With the movement of off-balance-sheet items back on balance sheets and of assets and liabilities from the shadow banking system back to the formal banking system, there will be an ensuing credit contraction because the mounting losses will outweigh by a large margin any bank recapitalization from sovereign funds. A contagious and cascading spiral of credit disintermediation, credit contraction, sharp falls in asset prices and widening in credit spreads will then be transmitted to most parts of the financial system. This massive credit crunch will make the economic contraction more severe and lead to further financial losses. Total losses in the financial system will add up to more than $1 trillion and the economic recession will become deeper, more protracted and more severe.
A near-global economic recession will ensue as the credit losses and the credit crunch spread around the world. U.S. and global financial markets will experience their most severe crisis in the last quarter-century.
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Glenn Beck, CNNMoney.com, Feb. Feb. 28
[Cardin comments: Pay careful attention, ladies and gentlemen. This article and the one below it appeared at CNN, the king of the mainstream news outlets. And both of them talk about dire economic possibilities and probabilities that, as Glenn Beck notes in the first piece, were “the last thing on anyone’s mind” less than a year ago. Of course, in this instance the word “anyone” refers to mainstream analysts, pundits, and talking heads. In point of fact, a great many people were already seeing the writing on the wall a year ago, and two, and three, etc. But that doesn’t mean Beck’s piece and the other one aren’t important. Read between the lines. This stuff is now being talked about openly in mainstream news outlets. If they’re the “anyones” for whom economic problems were the last thing on their collective mind just a few short months ago, then how far behind the curve are they right now when they talk about the possibility of “future” troubles and the idea, which Beck doesn’t mouth but the article about looming bank failures does, that economic fundamentals are sound and the banking system is in generally good shape even though there are various concerns and “drags”?
I happen to like Beck’s tack of boiling down Nouriel Roubini’s 12-step disaster scenario into a set of ominously labeled “Defconomy” levels. Cute, that. And appropriately toned, too.]
Less than a year ago, a recession was the last thing on anyone’s mind. In fact, over the summer, as I was questioning the conventional wisdom, I read an article on my television show that quoted a financial expert as saying, “It is the strongest global market that we’ve seen in the history of measuring these things.”
That’s when I realized how fast the herd was approaching the cliff.
But with predictions of a recession now more common than Fed rate cuts — and that’s saying something — maybe now it’s time to look at a worst-case scenario.
….So to understand what a real meltdown could look like, I turned to Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University’s Stern School of Business. He’s also a former adviser to the U.S. Treasury Department.
Professor Roubini recently laid out what he called the “12 steps to financial disaster.” Unfortunately, they were really complicated, and I have severe ADD, so I’ve boiled them down into five phases that even a rodeo clown like me can understand.
I think of these like our military’s “DEFCON” — or defense readiness condition — scale, except that this countdown could end in the meltdown of your bank account:
How you’ll know we’re here: The housing downturn turns into a free fall, making it the worst collapse in our country’s history. That not only triggers massive numbers of foreclosures and lost household wealth, but it also sets off another large wave of bank write-downs.
Odds we get here: Roubini told me that it’s “extremely likely, even unavoidable” that we hit this stage because “the excess supply of new homes in the market is like we’ve never seen before.” Prices, he believes, “need to fall another 10 to 20 percent before that clears.”
• DEFCONOMY FOUR
How you’ll know we’re here: Americans upside-down on their mortgages and unable to pay their home equity loans begin defaulting on other debt, like credit cards, car loans and student loans. In addition, bond insurance companies lose their perfect credit ratings, forcing already troubled banks to write down another $150 billion.
Odds we get here: High. Roubini says that 8 million households are already upside-down on their mortgages and he thinks we could see that number go to between 16 million and 24 million by the end of 2009. A lot of those people, he believes, will simply walk away from their homes and send their keys back to the bank.
• DEFCONOMY THREE
How you’ll know we’re here: Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.
Odds we get here: Very good. Roubini says that we’ll likely socialize the losses, “effectively nationalizing the mortgages or the banks.” It would be, he told me, “like Northern Rock (the large bank in England that was recently taken over by the British government) times three.” He thinks the stock market will head south throughout the year as fears about a severe recession are confirmed.
• DEFCONOMY TWO
How you’ll know we’re here: Most forms of credit (both to consumers and businesses) become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.
Odds we get here: Good. Roubini says that credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.
• DEFCONOMY ONE
How you’ll know we’re here: Welcome back to 1929. A full economic meltdown results in a complete failure of the underlying financial system. What will be known to future generations as “The Greater Depression” has arrived.
Odds we get here: Not likely. Roubini believes that this will be a “very painful and severe recession” that could last for 18 months or more, but it will be more like 1981 than 1929. Families may be eating soup again, but at least it’ll be in their own kitchens.
Now, do I think any of what you just read will happen?
I have no idea, and that’s exactly the problem. I’m not an economist or a stockbroker; I’m just a guy trying to make the best decisions I can, and picking the brains of real experts helps me do that.
But I do know one thing for sure: Depressions aren’t advertised in advance. Last time around we went from the Roaring ’20s to bread lines in a matter of just a few years.
Anyone who says that can’t happen again either doesn’t know history, doesn’t understand how interconnected the world’s economies have become, or is lying to you. While that doesn’t mean you should panic, it does mean you should prepare.
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The New York Times, Feb. 27
The credit crisis is tightening the screws on thousands of small to midsize banks across the United States, squeezing local builders and businesses that depend on those lenders for financing.
Losses are mounting so rapidly at some of these banks that a small number of them, perhaps 50 out of the 7,500 nationwide, could fail over the next 12 to 18 months, analysts said. Some of the others are likely to shut branches or seek out mergers as the weakening economy strains their finances.
Small lenders are in far less danger than they were during the 1980s and early 1990s, when roughly 1,600 federally insured institutions failed during a savings and loan crisis. And unlike many bigger banks, they shied away from complex mortgage-linked investments and subprime home loans.
But the breadth and depth of the current troubles have caught bank executives by surprise.
Federal regulators are particularly concerned about the exposure of smaller banks to the commercial real estate market, which has begun to soften in some parts of the country.
“There were people in denial six to nine months ago,” said Keith D. Maio, the president of the National Bank of Arizona in Phoenix, a small bank owned by the Zions Bancorporation based in Salt Lake City. “I don’t know if anybody is in denial anymore.”
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Yahoo! Finance (AP), Feb. 26
Profits at federally insured banks and thrifts plunged to a 16-year low in the fourth quarter as institutions set aside a record-high amount to cover losses from bad mortgages, data released Tuesday show.
The quarterly banking industry statistics, compiled by the Federal Deposit Insurance Corp., highlighted a dramatic deterioration in the fourth quarter as major Wall Street banks such as Citigroup Inc. took large write-downs in the value of their assets to reflect losses on mortgage-related investments.
“Weakness in the housing sector and the credit squeeze in financial market made it a very challenging time for many institutions,” said Sheila Bair, the FDIC’s chairman. “We can expect these problems to continue throughout 2008.”
Bair also noted that the agency is planning to beef up its staff — including temporarily hiring up to 25 retired FDIC employees who worked in the agency’s more than 200-person division that handles failed banks — to handle an anticipated increase in bank failures. She declined to predict the extent of bank failures this year.
….Losses were concentrated in six large institutions, which accounted for more than half of the total decline in profits, the FDIC said.
However, FDIC officials said problems were also seen in community banks, with more than half of all banks insured by the FDIC reporting lower fourth-quarter earnings and half reporting growth in troubled loans.
The number of institutions categorized by the FDIC as “problem” institutions based on an assessment of finances has also grown from 50 at the end of 2006 to 76 at the end of 2007.
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The Wall Street Journal, Feb. 26
[Cardin comments: Only the beginning of the article is available for free reading at the WSJ Website. The rest is behind a paywall. The excerpts below include snippets from the subscriber-only portion.
Note that the actual increase in staff the FDIC is looking to accomplish is far more than the 25 positions referred to in the WSJ article and the AP article linked to directly above, as a little online poking around will reveal.]
The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation’s housing and credit markets continue to worsen.
The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.
….”Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia,” said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.
….There have only been four bank failures in the past 12 months, a rate the FDIC has easily been able to handle.
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CNNMoney.com, Feb. 28
“Regulators are bracing for 100-200 bank failures over the next 12-24 months,” says Jaret Seiberg, an analyst with the financial services firm, the Stanford Group.
Expected loan losses, the deteriorating housing market and the credit squeeze are blamed for the drop in bank profits.
The problem areas will be concentrated in the Rust Belt, in places like Ohio and Michigan and other states like California, Florida and Georgia.
The number of institutions categorized as “problem” institutions by the FDIC has also grown from 50 at the end of 2006 to 76 at the end of last year.
But to put that in perspective — by the end of 1992 — at the tail end of the banking crisis — there were 1,063 banks on that “trouble” list says David Barr of the FDIC.
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Reuters, Feb. 27
Oil powered to a new record above $102 a barrel on Wednesday, closing in on its inflation-adjusted peak, as a slumping dollar on lacklustre U.S. economic data triggered a surge across commodities markets.
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The New York Times, Feb. 27
Gasoline prices, which for months lagged behind the big run-up in the price of oil, are suddenly rising quickly, with some experts saying they could approach $4 a gallon by spring. Diesel is hitting new records daily, and oil settled at a record high of $100.88 a barrel on Tuesday.
The increases could not come at a worse time for the economy. With growth slowing, energy increases that were once easily absorbed by consumers are now more likely to act as a drag on household budgets, leaving people with less money to spend elsewhere. These costs could worsen the nation’s economic woes, piling a fresh energy shock on top of the turmoil in credit and housing.
….“You’re adding an oil shock on top of a crunch on credit and a housing collapse,” said Nigel Gault, an economist at Global Insight. “Even the U.S. economy cannot withstand all of that at the same time.”
….While demand keeps growing, producers are struggling to catch up. They are not replacing the oil they are pumping out of the ground fast enough because of restrictions on access to fields, as well as rising costs. Meanwhile, demand in China, India and the Middle East is expected to push oil consumption up by more than one million barrels a day, each year, for the next decade.
“An oil crisis is coming in the next 10 years,” John B. Hess, the chairman of the Hess Corporation, said at a recent conference held by Cambridge Energy Research Associates. “It’s not a matter of demand. It’s not a matter of supplies. It’s both.”
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Yahoo! Finance (Reuters), Feb. 26
The collapse in home prices accelerated to a record pace in the fourth quarter of 2007, with prices plunging 8.9 percent last year, according to a national home price index released on Tuesday.
….”We reached a somber year-end for the housing market in 2007,” Robert Shiller, professor at Yale University and chief economist at MacroMarkets LLC, said in the statement.
Shiller, co-developer of Standard and Poor’s S&P/Case-Shiller Home Price Indices, said home prices across the nation and in most metro areas are significantly lower than where they were a year ago.
“Wherever you look things look bleak, with 17 of the 20 metro areas reporting annual declines and the remaining three reporting flat or moderate growth rates,” he said.
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The International Herald Tribune, Feb. 26
Across much of the nation, home values are dropping — even those backed by solid mortgages — and banks are repossessing more every day. Most experts say the dive won’t hit bottom for another year and only after excess inventory is sharply reduced and credit markets improve.
More government intervention may be needed, too, if the free market system doesn’t work quick enough.
“The housing value crisis is spreading and deepening,” said David Abromowitz, a senior fellow at the Center for American Progress. “It has gone way beyond subprime borrowers stretched too far with bad loans and now has clearly extended into the housing markets more broadly.”
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U.S. News & World Report, Feb. 28
One domino toppling the next. It’s been a convenient metaphor for how troubles in the American subprime mortgage market have cascaded into a global financial mess. Rising interest rates collapsed the housing bubble, which caused a wave of subprime mortgage defaults and foreclosures. That, in turn, froze corporate credit markets as risk-averse investors stopped buying esoteric mortgage-backed securities and led to big losses at bond insurers. Auction-rate securities — an obscure corner of the credit market used by hospitals, museums, schools, and local governments — have been the most recent dominoes to tumble. “We’ve gotten to the point of almost paralysis in some segments of the market,” says David Resler, chief economist at Nomura Securities.
A daisy chain of financial disaster, you might say. One crisis begetting another. Yet at least there’s been a certain linear, if ruthless, logic to it all. But now there are signs that the housing recession is turning into a full-fledged economic meltdown in what the Federal Reserve recently called an “adverse feedback loop.”
Put simply, this means a tightening of credit across the spectrum — from mortgages to credit cards to auto and student loans — that robs consumers of their confidence, further constricting credit and stopping the economy in its tracks. Result: a full-blown recession as nasty as Americans have seen in a generation.
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The Guardian, March 1
In 1965 executives at Shell wanted to know what the world would look like in the year 2000. They consulted a range of experts, who speculated about fusion-powered hovercrafts and “all sorts of fanciful technological stuff”. When the oil company asked the scientist James Lovelock, he predicted that the main problem in 2000 would be the environment. “It will be worsening then to such an extent that it will seriously affect their business,” he said.
“And of course,” Lovelock says, with a smile 43 years later, “that’s almost exactly what’s happened.”
….”You’re never going to get enough energy from wind to run a society such as ours,” he says. “Windmills! Oh no. No way of doing it. You can cover the whole country with the blasted things, millions of them. Waste of time.”
This is all delivered with an air of benign wonder at the intractable stupidity of people. “I see it with everybody. People just want to go on doing what they’re doing. They want business as usual. They say, ‘Oh yes, there’s going to be a problem up ahead,’ but they don’t want to change anything.”
Lovelock believes global warming is now irreversible, and that nothing can prevent large parts of the planet becoming too hot to inhabit, or sinking underwater, resulting in mass migration, famine and epidemics. Britain is going to become a lifeboat for refugees from mainland Europe, so instead of wasting our time on wind turbines we need to start planning how to survive. To Lovelock, the logic is clear. The sustainability brigade are insane to think we can save ourselves by going back to nature; our only chance of survival will come not from less technology, but more.
….Humanity is in a period exactly like 1938-9, he explains, when “we all knew something terrible was going to happen, but didn’t know what to do about it”. But once the second world war was under way, “everyone got excited, they loved the things they could do, it was one long holiday … so when I think of the impending crisis now, I think in those terms. A sense of purpose — that’s what people want.”
….”There have been seven disasters since humans came on the earth, very similar to the one that’s just about to happen. I think these events keep separating the wheat from the chaff. And eventually we’ll have a human on the planet that really does understand it and can live with it properly. That’s the source of my optimism.”
What would Lovelock do now, I ask, if he were me? He smiles and says: “Enjoy life while you can. Because if you’re lucky it’s going to be 20 years before it hits the fan.”