A lesson in dramatic structure — and why we’re in the final act (Headlines from the Meltdown)
GENERAL COMMENT FROM CARDIN:
We just entered Act Three of a three-act economic disaster movie
It’s illuminating to consider the unfolding economic disaster in narrative terms. That is, it’s illuminating to look at it as a story, because although life isn’t stories (an insight that post-modern theory has helpfully established), you can still get your bearings sometimes by pretending that it is. When we apply this approach to current events, it becomes evident that we ought to be bracing ourselves for some really momentous stuff to go down in the very near future. In fact, we’ve been experiencing momentous events for several weeks now. And in purely narrative terms, the financial and economic developments of the past week (March 9-15) seemed like the beginning of the story’s final act, with the run on Bear Stearns and the accompanying joint government and private bailout signaling the beginning of the story’s final stretch.
Think of the situation as a movie. Most movies are written according to a narrative pattern known as three-act structure. Each act follows certain guidelines and serves a specific function. Act One introduces the characters, establishes the setting, and basically lays the groundwork for the ensuing story to be told. It ends with a reversal or “plot point” that throws a wrench in the protagonist’s life and forces him or her to take action and struggle through conflict on the way to achieving some goal. Act Two forms the main body of the movie and shows the protagonist fighting past various obstacles on the way to achieving that goal. In this act we typically learn backstory about the characters and their situation. Like Act One, Act Two ends with a reversal that knocks the protagonist down and makes him and the viewer fear utter defeat. This sends the story off in a new direction — that is, Act Three — that shows the climactic final confrontation between the protagonist and the antagonist, followed by a period of resolution that shows how everybody and everything turned out in the end.
Three-act structure is basically a formula for telling an exciting story. And our unfolding real-life economic drama is nothing if not exciting (which may may or may not compensate for the fact that it’s damned scary, too).
Examples of three-act structure
A brief example of a real movie may help to make clear the current economic narrative scenario. The original Star Wars movie (Episode IV: A New Hope) proceeds according to three-act structure as follows:
Act One — There’s a battle in space. Two robots escape bearing a secret message and arrive on a desert planet where young Luke Skywalker lives with his aunt and uncle. He dreams of escaping his boring life and experiencing adventure. He meets the robots and discovers their secret message. He goes to wise old Ben Kenobi in the desert to find out what it means. It turns out the message was sent by a princess and intended for Ben.
–> Reversal/plot point for Act One: Luke returns home to find his aunt and uncle murdered and his home destroyed by bad guys who came looking for the robots. He’s devastated.
Act Two: Ben, Luke, and the robots hire a captain and a ship and leave the desert planet to save the princess. They encounter lots of adventures and end up aboard a space station owned by the bad guys. We learn more about the main characters through all these events.
–> Reversal/plot point for Act Two: Ben faces off against the main bad guy and is killed. Luke is devastated.
Act Three: The good guys regroup on a moon, join some other good guys, and launch an assault on the bad guys’ space station.
–> Dramatic climax: Luke successfully blows up the space station.
–> Resolution: Luke and the others are celebrated as heroes. Everybody lives happily ever after.
Notice how the hero, Luke Skywalker, is utterly defeated and devastated at the end of each act, and this devastation and reversal leads directly to the next act. Think of almost any movie and you’ll find the same pattern at work. For instance, a couple of nights ago I watched High Crimes with Ashley Judd, James Caviezel, and Morgan Freeman. Act One depicts the blissful married life of Judd and Caviezel, which is shattered when he’s arrested by the FBI and charged with a war crime. Judd is devastated. Act Two follows the attempts of Judd’s character, who is an attorney, to exonerate her husband, aided by Freeman’s character. It ends when she and Freeman are run off the road by the bad guys. She’s seriously injured, resulting in a miscarried pregnancy. She’s devastated. Act Three shows her picking herself up, dusting herself off, an carrying on to completion, resulting in the climactic moment when we find out the legal fate of her husband. (In this particular movie, there’s a “twist” and a second dramatic climax after the apparent climax in the courtroom.)
The current crisis as a three-act story
So the point is established. Three-act storytelling structure follows a specific pattern and ends each act with a reversal or crisis. So what do we see when we apply it to the unfolding economic crisis? Things might be divided up as follows, with Ben Bernanke cast as the protagonist (for narrative reasons) and the specter of economic collapse as the antagonist:
Act One: The American people are going their happy way, living the high life, borrowing money on the ever-inflating value of their homes, buying vehicles and high-tech gadgetry, eating out at an ever-proliferating array of restaurants, driving everywhere, and generally having a great time. Bernanke is the new captain of their economic life.
–> Plot point/reversal for Act One: The credit markets seize up in the summer of 2007 due to the subprime mortgage crisis. In tandem with other economic and financial developments, this kicks off the widespread recognition that a real systemic crisis is either probable or already afoot. Players in the financial market are devastated.
Act Two: Bernanke and other central bankers around the world go into crisis management mode, fighting the ugly specter of recession or, at worst, depression or outright economic collapse. From August 2007 until mid-March 2008 they adopt various tactics in response to various general and specific problems, using massive liquidity injections plus a few other tricks both old and completely new to battle the bad guy. The mainstream press begin filling in the backstory for the increasingly confused populace, running many stories that detail the buildup to the mortgage and housing crises. Additional problems crop up or come to the fore: oil, water, food, national debt. More backstory is provided as the media begin to examine the way the groundwork for this disaster has been laid over a period of decades. The U.S. and global stock markets almost crash in January but Bernanke and the others step in and save the day through dramatic rate cuts. Inflation accelerates. Home foreclosures accelerate. Consumer spending slows. The judgments of the bond ratings agencies are called into question. Municipal governments start to feel financially threatened. The U.S. government works out a stimulus plan for the public. Credit of all kinds begins to dry up. Bernanke warns of impending bank failures. Bush speaks several times to the nation about the economy. There’s an increasing sense of impending disaster. A couple of small banks fail. Hedge funds and investment banks are threatened. Pundits and analysts call it the worst crisis since the Great Depression. Etc., etc., etc. During the week of March 9-15, it looks like a national and global stock meltdown is happening again. Bernanke steps in with a massive two-part, $400 billion save. The markets shoot up by a staggering amount. Then they lose momentum almost immediately and come back down. Everybody wonders what’s going to happen.
–> Plot point/reversal for Act Two: There’s an all-out run on major investment bank Bear Stearns. It’s obvious that none of the damage is contained and all of it is worse and more extensive than most players and commentators have been letting on. Everyone is devastated.
Act Three: The New York Fed and JPMorgan bail out Bear Stearns, after which. . .
. . . after which, we don’t know. We’ll find out what happens beginning this week. But it’s obvious that the narrative feel of what’s happening places the Bear Stearns run and bailout in the position of a reversal/plot point that heralds the start of a new act. Because as has been prominently pointed out in many stories in the press over the past couple of days, right up until Bear Stearns announced it was in complete crisis, it was publicly denying that there were any problems. And the failure of such a major institution is one of the shoes that everybody has been expecting to see drop. Transitions between narrative acts are all about major negative events that cause major shifts in direction, mood, and tone. And that’s what happened last week.
So what’s left? Obviously, the big “final battle,” the narrative climax, is what we’re waiting for, followed by the resolution or final outcome. Will Ben “Skywalker” Bernanke blow up the Death Star of economic collapse? (Note in the stories catalogued below that this is exactly what the Fed is fighting, despite ongoing claims from various quarters that the foe is a mere recession.) Will he be hailed as the conquering hero, and will the American people live happily ever after? Or will the climax show the bad guy winning — as does happen in some dark-toned movies — and will the resolution involve a descent into some sort of economic devastation? Only time will tell.
Of course, life isn’t really a movie or a story. That’s the realization we should return to after such a speculative analysis. Stories have definite beginnings and endings, whereas real life doesn’t. There will be no “final outcome” like in a movie, since life will go on in some form or other with no ultimate fade to black or final chapter. But maybe the three-act analysis can give us a bearing on how to regard and what to expect from current events.
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Bloomberg, March 12
Mortimer Zuckerman, co-founder of Boston Properties Inc., the largest U.S. office real estate investment trust, said the U.S. economy is in a recession and there’s no sign of a recovery.
“We are looking at the worst set of macroeconomic conditions since the Great Depression,” Zuckerman said in an interview with Bloomberg Television. “I don’t know where the bottom is. The federal government’s going to have to do a lot more to contain what I think is the potential of a perfect storm.”
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The New York Post, March 15
A tsunami of fear slammed the financial world yesterday as one of Wall Street’s biggest investment banks teetered on the brink of collapse and the federal government was forced to engineer an unprecedented rescue.
Stocks were pummeled across all sectors, with the Dow Jones industrial average swinging wildly, falling as much as 360 points between the day’s highs and lows.
….The panic struck trading desks early in the morning when the Federal Reserve announced that it was invoking a procedure from the Great Depression to save Wall Street giant Bear Stearns from going belly-up.
The near-collapse of the investment bank served as another reminder to investors that the global credit crisis continues to wreak havoc on the economy.
….The government essentially stepped in to provide desperately needed access to cash for Bear, which has been pummeled over concerns about its large holdings tied to the battered US housing market.
….[Y]esterday’s meltdown now has US and global markets bracing for another shoe to drop.
Harvard University economist Martin Feldstein further sounded alarms yesterday, saying: “I believe the US economy is now in recession,” and that it could “become the worst recession we have seen in the postwar period.”
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The New York Times, March 15
The Federal Reserve’s unusual decision to provide emergency assistance to Bear Stearns underscores a long-building concern that one failure could spread across the financial system.
Wall Street firms like Bear Stearns conduct business with many individuals, corporations, financial companies, pension funds and hedge funds. They also do billions of dollars of business with each other every day, borrowing and lending securities at a dizzying pace and fueling the wheels of capitalism.
The sudden collapse of a major player could not only shake client confidence in the entire system, but also make it difficult for sound institutions to conduct business as usual. Hedge funds that rely on Bear to finance their trading and hold their securities would be stranded; investors who wrote financial contracts with Bear would be at risk; markets that depended on Bear to buy and sell securities would screech to a halt, if they were not already halted.
….“You get to where people can’t trade with each other,” said James L. Melcher, president of Balestra Capital, a hedge fund based in New York. “If the Fed hadn’t acted this morning and Bear did default on its obligations, then that could have triggered a very widespread panic and potentially a collapse of the financial system.”
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Ambrose Evans-Pritchard, The London Telegraph, March 12
The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.
The Bank of England, the key European central banks, and the Bank of Canada all joined in a co-ordinated move with a mix of policies to halt the dowward spiral in the credit markets, expanding on the “shock and awe” tactics used late last year.
The Fed’s dramatic step came after an emergency conference call by governors on Monday night. It followed the melt-down of the US chartered agencies — Fannie Mae, Freddie Mac, and other lenders — which together guarantee 60pc of the entire US home loan market. Fannie Mae’s share price fell 19pc in panic trading on Monday after Barron’s magazine said it may need a rescue package.
“The agency crisis was a Tsunami event,” said Tim Bond, global strategist at Barclays Capital.
The market was starting to question the solvency of bodies that stand at the top of the credit pile. These agencies together wrap or insure $6 trillion of mortgages. They cannot be allowed to fail because it would cause a financial disaster. The fact that this sector has blown up has caught everybody’s attention in Washington,” he said.
….It is a ground-breaking move for the Fed to accept mortgage collateral, even if the debt is theoretically ‘AAA-grade’ debt. The Fed is not allowed to buy mortgage bonds outright, but it can achieve a similar effect by letting banks roll over collateral indefinitely.
….Bernard Connolly, global strategist at Banque AIG, said the Fed action may help calm the markets for now, but it cannot solve the root problem of eroded of bank capital.
“There is the risk of a very damaging credit contraction. We face the most serious global crisis since the Great Depression. But this time at least the North American central banks are doing their best to stop it spreading to the real economy,” he said.
The emergency actions appear to have been co-ordinated by the Fed’s top two figures, Ben Bernanke and Donald Kohn, working closely with the Bank of Canada’s Mark Carney. “We should be thankful that we have people in charge who appreciate the gravity of the situation,” said Mr Connolly.
The travails at Fannie Mae and Freddie Mac — once rock-solid institutions — had combined in a deadly cocktail with a fresh wave of panic over the solvency of the investment banks with heavy exposure to sub-prime debt.
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The London Telegraph, March 12
[Cardin comments: The final sentence of the second paragraph below hits the nail right on the head, with gusto: “How much further can the central banks go to support a system that is so obviously broken?” I think it was James Howard Kunstler, but it may have been somebody else, who a few months ago drew a comparison between current attempts to prop up the economy and Weekend at Bernie’s, the movie in which two losers try to cover up the death of their boss by propping him up in various poses and costumes. Right now I can’t think of a more apt comparison. I mean, sure, this latest Fed action plus whatever new actions they take in the future may stave off an explicit meltdown, perhaps for quite some time. I can see the current Twilight Zone-ish, limbo-like economic environment lasting indefinitely as the “body” is posed in various ways and dolled up in various guises. But even if an all-out crash that could be undeniably named as such never occurs, it seems certain that what will emerge on the other side of the current turmoil will be a drastically changed economic and financial environment — so drastically changed, in fact, that it will represent an entirely new world.
The thing is, the psychology and practical exigencies of the corner we’ve painted ourselves into by putting all of our eggs, and then some, into the “basket” of the current hyper-financialized, debt-based economy may well prevent us and our leaders from collectively admitting the truth. And this kind of denial on a mass scale has never been and can never be a good thing, since “life on the ground” still presents itself baldly to us and our psyches, even if we only recognize it subconsciously through the obscuring haze of countervailing ideology and doublespeak. And this creates massive cognitive dissonance, resulting in massive social, cultural, and political disruption, resulting in our making still more shortsighted, foolish choices on a national scale.
Or, to boil it down to simpler form: We and our leaders may well be fooling ourselves into still further and maybe worse problems by clinging to our lies and self-deceptions, as represented by current Fed and other actions that are apparently intended to kickstart and reinflate the financial markets back to what they were. These attempts to stabilize our present economy are like propping up a corpse. History doesn’t provide much encouragement to think we will abandon this tactic until reality forces us to do so.
For an alternative opinion, see the Pearlstein piece immediately below.]
The Fed, with its latest $200bn offer of cheap cash, has provided yet more state aid for errant hedge funds and another Washington-backed bail-out for Wall Street bankers. The Bank of England joined in again, further shedding any notion of being wary of moral hazard. But as the bail-outs are getting bigger, then clearly the problems causing them must be getting bigger.
The Fed has saved the day again, but it will only be for a day or so. It was Friday remember when it had to pump $200bn of cash into the system. Yesterday it was offering to lend a similar amount to try and soak up some of the toxic debt out there which has left the lending markets hamstrung. How much further can the central banks go to support a system that is so obviously broken?
Arguably, having come this far, Mervyn King and Ben Bernanke have breached the point of no return. There is no going back. The US certainly is now relying on its central bank to keep its most important credit markets open, its equity markets from plunging and bring a veneer of normality to financial life. Traditional supports, such as confidence in normal commercial debt repayment, have been knocked away as institutions are engaged in a desperate dash for cash.
We have not seen anything like it since the decade of the Great Depression. Melodramatic as that might sound, it is a fact but a fact that markets seem unwilling to accept. While the Fed is willing to slash rates and hope, and pump liquidity into the system, markets will remain optimistic. But it is a race to the bottom. The Fed hoping it reaches the finishing line first and restores confidence returns before a bank goes bust. But the spectre of a collapse is neck and neck with Bernanke and it’s still anyone’s guess which will win.
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Steven Pearlstein, The Washington Post, March 12
[Cardin comments: Pearlstein’s general opinion of the Fed’s actions is obviously contra the one I gave in the comment above. He argues that the “Fed’s goal has not been to impede that process [i.e., the current de-leveraging], simply to make sure that it proceeds in an orderly fashion.” I’m open to the possibility that he’s right, and that this really is the best and wisest course to take. The upshot, of course, is that regardless of such differences of opinion, parties from all quarters are publicly recognizing that this massive de-leveraging is in fact taking place. The resulting political, social, and economic ramifications cannot help but be massive and profound.]
Forget all that nonsense about the Bernanke Fed being too timid or behind the curve. In the face of what is turning into the most serious financial market crisis since the Great Depression, the Fed has been more aggressive and more creative in using its limitless balance sheet — in effect, its ability to print money — than at any time in history.
We can argue till the cows come home about whether this is a bailout for Wall Street. It is — but only to the extent that it is also a bailout for all of us, meant to prevent a financial and economic meltdown that drags everyone down with it. In broad strokes, we’re going through a massive “de-leveraging” of the economy, wringing out trillions of dollars of debt that had artificially driven up the price of real estate and financial assets, and, more generally, allowed Americans to live beyond their means. The Fed’s goal has not been to impede that process, simply to make sure that it proceeds in an orderly fashion. But even that has required central bank intervention that is unprecedented in scale and scope. And despite yesterday’s huge rally in the stock market, Fed officials warn that this de-leveraging is nowhere near finished.
….It’s anyone’s guess how long this credit crunch will last, but the chances are that we’ll have several more market meltdowns and Fed rescues before it’s over, probably in the fall. Until then, the dollar will continue to get hammered and stocks will continue their fitful decline. And if the last two financially induced recessions are any guide, it will be well into 2009 before the economy hits bottom, followed a couple of years of slow growth and “jobless” recovery.
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MarketWatch, March 13
[Cardin comments: It’s just astonishing, really, to hear how much the swelling tide of comments from major government figures and mainstream economists, analysts, pundits, and investors has come to sound like the warnings that were only coming from a select few observers as recently as a few months ago. Paulson is now openly calling for a complete overhaul of the mortgage derivatives market and decrying the “excessive complexity” that has rendered that market so complex, confusing, and flat-out opaque that nobody can figure out what to make of it or how to deal with all the fallout from the epic misinvestment in it. Gee, haven’t Warren Buffett and James Howard Kunstler and Peter Schiff and Marc Faber and Nouriel Roubini and several others been preaching that same sermon for quite some time, often to the accompaniment of scorn from their peers and apparent ignore-ance by government regulators? I’m telling you, it shouldn’t be this fun to watch these things happening. But sometimes it just is.]
You know things are very very bad on Wall Street when a guy like Henry Paulson — Treasury secretary, solid Republican, and former Goldman Sachs CEO — joins the crowd calling for more regulation over the financial markets.
Paulson spared no one in his criticism Thursday of the excesses of deregulation that has now created the worst global financial crisis in a generation, threatening the health of the U.S. economy, the savings of millions of Americans, and the survival of some of the biggest financial institutions in the world.
Wall Street and Washington both failed big time, he said. Wall Street invented new ways to make money by selling securities so complicated that no one could really follow which shell the pea was under. Fortunes were made on the paper Wall Street sold.
At the same time, Washington’s watchdogs were dozing, tranquilized by the false assurance that Wall Street would police its own. It’s been obvious for years now that Wall Street could not be trusted, and finally official Washington agrees.
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The Daily Reckoning, March 12
The big picture still shows the same scene: America is getting poorer. Its money buys less stuff. Its working people earn less money. Its assets are worth less than they used to be.
“This thing is not about a recession or not a recession…and it’s not about inflation or deflation. It’s about re-pricing the U.S.A., downward. Sell America…sell its money…sell its stocks…sell its property…sell its politics…sell its economy…sell its I.O.Us. Sell it all,” said a friend over the weekend. “It’s clear to me that America’s best days are behind it. The United States has had a disproportionate share of everything for too long — stock market valuations…the world’s savings…the world’s energy…the world’s calories…the world’s military power. That’s what is changing. The world is readjusting…it’s not getting out of balance; it’s getting back in balance. It will be a world where the United States plays less of a role…and takes less of the world’s resources.”
….America has enjoyed an extraordinary run of luck. She had cheap energy…history’s most powerful military…and the world’s reserve currency. Now she has the world’s biggest debts…its highest deficits…and the most colossal financial problem ever. In short, it has passed its I.O.Us out all over town and now owes more money to more people than anyone ever did. It now has more financial commitments any nation has ever had (with a financing gap of $60 trillion — not including the cost of the Iraq War…which is expected to be as much as $5 trillion)…and has a competitive disadvantage against much of the rest of the globe. Asians make things cheaper. Europe makes them better.
How did such nice people get themselves into such a mess? Are Americans stupider than other people? Are they lazier? More reckless…more feckless? Nah…we’re just victims of our own good fortune. We had it too good for too long. A unique set of circumstances allowed Americans to borrow and spend more than anyone ever could before…and so they did.
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CNNMoney.com, March 7
Five months ago many economists said high oil prices wouldn’t hurt the economy — now they’re choking on their words.
Back in October, when oil prices were near $90 a barrel and the economy was still humming along economists said high oil prices shouldn’t cut into economic growth. The economy used oil more efficiently than it did in the 1970s, and spending on gas was just a small percent of people’s budget, the experts said.
Fast forward to March and you’ve got a sputtering economy, and economists saying $105 oil deserves a big part of the blame.
Even the White House is beginning to sound more pessimistic [!], predicting Friday that the the economy could contract.
….Of course, high oil prices are not the only thing weighing on consumer spending, which accounts for about two-thirds of all U.S. economic activity. Declining home values mean people can’t access cash through a home equity loan or profit from higher sale prices. In addition, the economy is shedding jobs, and unemployed people tend to spend less money.
“On its own, $100 oil wouldn’t pull the economy into recession,” said Beth Ann Bovino, a senior economist at Standard and Poor’s. “But given the other factors, it’s just another shoe to drop.”
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Bloomberg.com, March 6
The markets have become “utterly unhinged,” William O’Donnell, a UBS AG government bond strategist in Stamford, Connecticut, wrote in a note to clients today. A lack of liquidity has “led to stunning air-pockets in price levels.”
Investors are realizing that banks have little room to make new investments amid rising losses and a flood of unwanted assets, said Scott Simon, head of mortgage-backed bonds at Pacific Investment Management Co. The world’s top banks have reported more than $181 billion in asset writedowns and losses, been stuck with $160 billion of leveraged buyout loans, and bailed out $159 billion of structured investment vehicles.
“Everything is telling you the financial system is broken,” Simon, whose Newport Beach, California-based unit of Allianz SE manages the world’s largest bond fund, said in a telephone interview today. “Everybody’s in de-levering mode.”
….”The single biggest concern right now is who’s the next hedge fund to blow up, and how big are they,” Arthur Frank, the New York-based head of mortgage-backed-securities research at Deutsche Bank AG, said in an interview today. “The more the market widens, the more likely it is that another leveraged player has to sell, so it does feed on itself.”
….”Traders are putting their phones down and backing slowly away from their desks,” O’Donnell said today in a telephone interview. “Relatively little” agency mortgage-backed securities are being traded, Pimco’s Simon said.
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The New York Times, March 8
The financial crisis seems to have entered its third wave. Panic in August, then partial recovery thanks to lots of money thrown at the system by the Fed. Renewed panic late fall, then partial recovery thanks to even more money thrown in, especially the Temporary Auction Facility. And panic has set in yet again.
….If foreign exchange intervention works, it’s usually because of the “slap in the face” effect: the markets are getting hysterical, and intervention gives them a chance to come to their senses.
And the problem now becomes obvious. This is now the third time Ben & co. have tried slapping the market in the face — and panic keeps coming back. So maybe the markets aren’t hysterical — maybe they’re just facing reality. And in that case the markets don’t need a slap in the face, they need more fundamental treatment — and maybe triage.
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Tom Whipple, Falls Church News-Press, March 13
Events are moving faster and faster. Equity markets and the dollar are dropping. Oil, gas, diesel and commodities are surging as the investment of last resort.
Margin calls are endangering the financial system. Real estate values and markets are falling. Exotic debt obligations are turning worthless by the billions. Central bankers have started the printing presses and are injecting unprecedented billions of “liquidity” into their banking systems in what so far seems to be a futile effort.
….What is largely ignored in all the discussion of economic recovery is that world oil production is likely to start its final decline somewhere in the next 36 to 48 months. Once this becomes evident, prices will start moving much, much higher and shortages will develop. In an environment such as this, recovery from a recession will be far more difficult and is likely to be measured in decades rather than months.
….There is much heated debate over whether and how soon there will be a “techno-fix” for the decline of oil — wind, wave, and solar power, electric transport and much lower energy consumption. The factors bearing on how the various techno-fixes will play out are so numerous and interdependent that it is impossible to make much of a judgment about when or whether they will come in sufficient quantities to continue with anything resembling current civilization.
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The New York Times, March 9
Everywhere, the cost of food is rising sharply. Whether the world is in for a long period of continued increases has become one of the most urgent issues in economics.
Many factors are contributing to the rise, but the biggest is runaway demand. In recent years, the world’s developing countries have been growing about 7 percent a year, an unusually rapid rate by historical standards.
The high growth rate means hundreds of millions of people are, for the first time, getting access to the basics of life, including a better diet. That jump in demand is helping to drive up the prices of agricultural commodities.
Farmers the world over are producing flat-out. American agricultural exports are expected to increase 23 percent this year to $101 billion, a record. The world’s grain stockpiles have fallen to the lowest levels in decades.
“Everyone wants to eat like an American on this globe,” said Daniel W. Basse of the AgResource Company, a Chicago consultancy. “But if they do, we’re going to need another two or three globes to grow it all.”
In contrast to a run-up in the 1990s, investors this time are betting — as they buy and sell contracts for future delivery of food commodities — that scarcity and high prices will last for years.
If that comes to pass, it is likely to present big problems in managing the American economy. Rising food prices in the United States are already helping to fuel inflation reminiscent of the 1970s.
And the increases could become an even bigger problem overseas. The increases that have already occurred are depriving poor people of food, setting off social unrest and even spurring riots in some countries.
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USA Today, March 10
The mortgage foreclosure crisis has caused a drop in cities’ revenues, a spike in crime, more homelessness and an increase in vacant properties, a survey of elected local officials out today shows.
About two-thirds of 211 officials surveyed by the National League of Cities reported an increase in foreclosures in their cities in the past year, according to the online and e-mail questionnaire. A third of them reported a drop in revenues and an increase in abandoned and vacant properties and urban blight.
….The ills of foreclosures are dominating the agenda of the league’s meeting with congressional lawmakers in Washington, D.C., this week to secure federal funding for local initiatives.
“The American dream for individuals has now become the nightmare for cities,” says James Mitchell, a Charlotte councilman and head of the group’s National Black Caucus of Local Elected Officials.
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Craig Harris, 321Gold, March 14
The US is currently in what I like to call a period of “decay”. It is in a period of decay in every possible way. If you live in the real world like I do, it is evident. If you consume a diet of the corporate media cheerleading squad, then you don’t live in the real world and it could be difficult for us to communicate during the rest of this essay. We’ve got people charged with cleaning up the corrupt broken system going out with an $80,000 hooker bill and being replaced by a blind man. The current El Presidente is a wind-up doll for a bunch that should all be in orange jumpsuits. It would be comical if it weren’t so sad to watch it all go down. It is a modern day tragedy being played out in real time in the context of a giant government/corporate media theatre production.
….That’s one reason I don’t write a lot publicly these days. It is becoming increasingly difficult for people who live in the real world to communicate with those who don’t, and there is an increasing number of those who don’t just simply because most people believe what they are told and the lies they are being told are now monumental. Astronomical in size. That’s one of those universal rules about human beings; the majority will always go along with whatever you tell them. That’s just the way it always has been and always will be. All good propagandists know that.
For those who do think for themselves and live in the real world however, everything that is happening today has been entirely predictable and even expected. I mean, the corporate media will say “no one ever saw this” or “they never saw that” and really the case is they just choose not to have those people appear.
….It’s not going to be over any time soon. The big question in my mind is whether the whole thing is about to go kaput or if we are just going to witness a continuous decay as the wealth shifts into a very small percentage of the population… as the middle class flames out.
….So in the real world right now, we have a situation where the banks are bankrupt, the government is bankrupt, the people are bankrupt, and the cure for this is to lower interest rates and create more money (debt) by pushing a button… diluting the value of the money further and causing everything we have going on now. It all makes sense here in the real world. All the pieces to the puzzle fit and none don’t.
….The country has lost its way and is increasingly operating at the whim of the corporate lobbyists and special interests that own the politicians as the stench of it all starts to smell so foul that even the corporate media disinformation campaign can’t convince your lying eyes. It is not what it appears to be. It is Rome circa 400’s. It has already bankrupted itself policing an unsustainably large global empire. You have to live through the decline.