Slow bleed or spurting wound? (Headlines from the Meltdown)
GENERAL COMMENT FROM CARDIN:
An economic bleedout or a swift death?
I’ve written such an extended assortment of commentary to go with the assembled items below that I’ll let them do most of the talking for me this week. Just scroll through and look for my introductory comments, which are clearly marked.
But I’ll pause here at the outset to say that as it appears to me right now, two general scenarios for the U.S. are equally likely in the immediate future, as in, the next few days, weeks, months, and years.
One might be labeled the “slow bleed” scenario. This would involve more of what we have already been seeing, namely, a society-wide and economy-wide squeeze from various general and specific economic pressures — inflating energy and food prices, cratering housing market, ongoing discoveries of “toxic” debt being held by all kinds of companies, the relentless progression of the home foreclosure catastrophe, the drain and strain of the wars in Iraq and Afghanistan, increasing scalebacks and failures of basic government services, the progressive death of the middle class and widening of the gap between rich and poor, etc., etc. — that continue to mount steadily, with perhaps a few intermittent periods of perceived relief, so that we slowly hemorrhage our way into a new and vastly altered cultural and economic landscape characterized by a stupendous decrease in our standard of living and a dramatically altered political environment.
The other might be labeled the “spurting wound” scenario, in which a sudden and acute crisis slashes our national jugular vein and alters things practically overnight. Any number of events might accomplish this, including the failure of one or more large financial institutions, a terrorist attack, the onset of fuel shortages, a natural disaster (earthquake? hurricane?), and/or an outbreak of civil unrest akin to the recent food riots in Haiti, Egypt, and elsewhere. For the first time since the heady days of the 1960s and 1970s, life here in America is pervaded by an authentic and undeniable sense of imminent crisis and breakdown. It wouldn’t really surprise most of us — or at least those among us who aren’t completely encased in the soporific cocoon of mass entertainment culture — to wake up tomorrow morning and be greeted with news of a large scale disaster and political/economic/military lockdown.
The end result of both scenarios will of course be similar or the same (that decreased standard of living and altered political environment mentioned above). And it will of course not be an either/or situation. The slow bleed and spurting wound aren’t mutually exclusive. We will experience both, with our steady hemorrhage being punctuated by periods of acute injury.
Sorry, but them’s the facts.
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Anarchy or worse: Peak oil and the end of the world as we know it
Horizon, KAET (Arizona PBS), April 14
[Cardin comments: In my last installment of Headlines from the Meltdown, “The end of the future as we knew it,” I included excerpts from an op-ed in The Arizona Republic by University of Arizona professor Guy McPherson about the imminent end of life as we know it due to the societal and civilizational breakdown that will be occasioned by peak oil. A little over a week after that article appeared, McPherson was interviewed on Horizon, a nightly public affairs program on Arizona PBS station KAET. The interviewer grilled him about the flat-out apocalypticism of his views and asked him how he expects people to react to such a prediction. It’s well worth watching. Here’s the entire interview as archived on YouTube. But you should only watch it if you’re prepared for a serious dose of darkness (as measured by common emotional standards). McPherson speaks in a calm, friendly, and matter-of-fact manner about the complete breakdown of America and, by implication, all other industrialized nations within our lifetimes.]
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Global food fight
CNN, April 14, 2008
[Cardin comments: At 1:40 into the following video there’s an itemized list of factors that economists say are causing or contributing to the current global food inflation crisis. They include:
- Bad weather
- High oil prices
- More demand in China and India
- Competition with ethanol
Notice how this falls entirely in line with what should be expected in a scenario characterized by peak oil and catastrophic climate change. “Bad weather” is a climate change factor as well as a peak oil-related factor due to the carbon emissions caused by burning fossil fuels. High oil prices and competition with ethanol are drawn directly from the peak oil playbook. And the increased demand from China and India likewise spin off from this same nexus of factors, since the population explosion and technological expansion that have occurred in these nations and elsewhere (including the U.S.) over the past several decades have been entirely facilitated and enabled by reliance on oil in all areas of life.]
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Bloomberg.com, April 12
Further gains in food prices would be “terrible” for the world’s poor and throw hundreds of thousands of them into starvation, International Monetary Fund Managing Director Dominique Strauss-Kahn said.
Governments throughout Asia, Africa and the Middle East are seeking to combat food inflation and avoid social unrest by curbing exports or lifting import duties on basic food staples such as rice. Global food prices surged 57 percent last month from a year earlier, according to the United Nations, and the World Bank warns civil disturbances may be triggered in 33 countries.
If food inflation keeps accelerating at its current rate “the consequences will be terrible,” Strauss-Kahn told reporters at the IMF’s semi-annual meeting in Washington today. “Hundreds of thousands of people will be starving, leading to a disruption in the economic environment.”
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ABC News, April 14
Basic access to food is slipping out of reach for many people in developing countries. The cost of the rice has risen by more than three-quarters in two months and the price of wheat has more than doubled in the same time.
The desperation in dozens of countries has turned deadly of late. In the past week alone there have been violent, food-related riots in Haiti, Indonesia, the Philippines and Cameroon.
World Vision Australia head Tim Costello says the situation is desperate and chronic. “It is an apocalyptic warning,” he said. “Until recently we had plenty of food. The question was distribution. The truth is because of rising oil prices, global warming and the loss of arable land, all countries that can produce food now desperately need to produce more.
….”Disruption may occur in the economic environment so that at the end of the day most governments, having done well for the last five or 10 years, will see what they have done totally destroyed and their legitimacy facing the population destroyed also.”
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The New York Times, April 18
[Cardin comments: This is serious. And if you live in the U.S. or another First World country and think this kind of thing can’t happen to you, think again. As reported on Bill Moyers Journal on April 11, a hunger crisis is already underway on the lower end of the economic spectrum in the U.S. Also see the article immediately below about the food rationing that is currently going on in the U.S. What’s more, the entire populace is increasingly uneasy and riled up by the increasingly undeniable signs of, first, a serious nationwide social/economic/political/ecological crisis, and second, a real failure of leadership at all levels of government. The problem with food prices is now creeping and will continue to creep up the economic ladder, affecting an ever greater portion of the population. Revolution, anyone? Or widespread chaos and social breakdown? Don’t think it can’t happen. But don’t expect it to be pretty or to solve much of anything. Remember the aftermath of Hurricane Katrina?]
Hunger bashed in the front gate of Haiti’s presidential palace. Hunger poured onto the streets, burning tires and taking on soldiers and the police. Hunger sent the country’s prime minister packing….Haiti’s hunger, that burn in the belly that so many here feel, has become fiercer than ever in recent days as global food prices spiral out of reach
….That anger is palpable across the globe. The food crisis is not only being felt among the poor but is also eroding the gains of the working and middle classes, sowing volatile levels of discontent and putting new pressures on fragile governments.
….“It’s the worst crisis of its kind in more than 30 years,” said Jeffrey D. Sachs, the economist and special adviser to the United Nations secretary general, Ban Ki-moon. “It’s a big deal and it’s obviously threatening a lot of governments. There are a number of governments on the ropes, and I think there’s more political fallout to come.”
….“This is a perfect storm,” President Elías Antonio Saca of El Salvador said Wednesday at the World Economic Forum on Latin America in Cancún, Mexico. “How long can we withstand the situation? We have to feed our people, and commodities are becoming scarce. This scandalous storm might become a hurricane that could upset not only our economies but also the stability of our countries.”
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The New York Sun, April 21
Many parts of America, long considered the breadbasket of the world, are now confronting a once unthinkable phenomenon: food rationing. Major retailers in New York, in areas of New England, and on the West Coast are limiting purchases of flour, rice, and cooking oil as demand outstrips supply. There are also anecdotal reports that some consumers are hoarding grain stocks.
….Shoppers said the limits [at a Costco Warehouse in Mountain View, California] had been in place for a few days, and that rice supplies had been spotty for a few weeks. A store manager referred questions to officials at Costco headquarters near Seattle, who did not return calls or e-mail messages yesterday.
An employee at the Costco store in Queens said there were no restrictions on rice buying, but limits were being imposed on purchases of oil and flour. Internet postings attributed some of the shortage at the retail level to bakery owners who flocked to warehouse stores when the price of flour from commercial suppliers doubled.
The curbs and shortages are being tracked with concern by survivalists who view the phenomenon as a harbinger of more serious trouble to come.
“It’s sporadic. It’s not every store, but it’s becoming more commonplace,” the editor of SurvivalBlog.com, James Rawles, said. “The number of reports I’ve been getting from readers who have seen signs posted with limits has increased almost exponentially, I’d say in the last three to five weeks.”
….At the moment, large chain retailers seem more prone to shortages and limits than do smaller chains and mom-and-pop stores, perhaps because store managers at the larger companies have less discretion to increase prices locally. Mr. Rawles said the spot shortages seemed to be most frequent in the Northeast and all the way along the West Coast. He said he had heard reports of buying limits at Sam’s Club warehouses, which are owned by Wal-Mart Stores, but a spokesman for the company, Kory Lundberg, said he was not aware of any shortages or limits.
An anonymous high-tech professional writing on an investment Web site, Seeking Alpha, said he recently bought 10 50-pound bags of rice at Costco. “I am concerned that when the news of rice shortage spreads, there will be panic buying and the shelves will be empty in no time. I do not intend to cause a panic, and I am not speculating on rice to make profit. I am just hoarding some for my own consumption,” he wrote.
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Charles Hugh Smith, Of Two Minds, April 16
To those of you currently ensconsed in quiet, comfortable suburban America, the notion that the U.S. shares a number of disturbing traits with Third World countries might seem implausible or even insulting. But please read on before passing judgment.
Here are some key traits the U.S. shares with Third World nations — trends which are only growing more visible with each passing month:
1. Income and wealth inequality. One of the defining characteristics of Third World countries is extremes of income and wealth; a relative handful of families/elites control most of the property, wealth and “means of production” (wealth generating assets) while the majority of citizens own and earn essentially nothing.
Here in the U.S. it’s not that visibly extreme, but facts are facts: a relative handful own the vast majority of key wealth-producing assets
….2. The gutting of public services to pay burdensome interest on massive public debt.
….3. The gutting of public services as public employee elites rally round their salaries, benefits and fiefdoms. One of the distinctions of a Third World economy is the extremely high premium placed on securing a government bureaucracy position, as these are essentially the only secure jobs in the entire country.
….4. Secure “formal” jobs are replaced with insecure “informal” jobs. You know the drill: fire all your salaried workers in a downsizing, then hire back the best as contract workers without benefits or pensions.
With secure permanent positions as rare as gold statues, laid-off workers take part-time jobs, or reluctantly enter the “informal” job market as handymen, babysitters, etc. On a societal-wide basis, this means the destruction of tens of millions of once-secure or relatively secure jobs, which are then replaced with completely insecure, informal jobs with no pension or healthcare protections/benefits.
….5. As the economy falters, a vast prison-state/gulag acts to control petty criminals and provide patronage-rich public-worker positions. Sell a gram of cocaine, go to jail for 25 years. The prison guards union is one of the most powerful and feared lobbying organizations in the state of California, surpassing even the mighty Teachers Union and trial lawyers for political power. More prisons? You can bet we need them.
6. As secure, decent-paying jobs vanish, the working poor turn to the Military for secure jobs with benefits.
….7. Top-level public education is increasingly expensive and thus increasingly out of reach for average citizens’s offspring. Since when did students have to borrow tens of thousands of dollars to attend public universities?
….Put this all together and what do you have? A nation which clearly shares key characteristics with oft-maligned Third World “basketcase” nations which are wallowing in debt, unfilled potholes, overflowing prisons and declining public-sector services. Does that mean the U.S. is a Third World state? Of course not; but the above trends should raise our collective awareness of the risks ahead.
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CNNMoney, April 16
[Cardin comments: So now Bernanke has actually uttered the word “recession”! This is a distinct step up from his and Paulson’s and Bush’s ongoing insistence on playing the political game of impressions and perceptions by referring only to economic “pressures” and the possibility of a “slowdown” and “downturn.” As I (and others) have been saying for some time now, based on nothing but the experience of the very recent past you can bet the farm on the fact that public statements by government officials about the unfolding economic crisis are deliberately targeted several notches below the actual severity of the situation. And this means you should perk your ears up every time one of them concedes a worsening of any aspect of the situation, since the reality behind the rhetoric must undoubtedly be very dire indeed to have forced such a concession. Or, in a nutshell, and to repeat myself: It’s all much worse than they’re letting on.]
The country’s economic health deteriorated further in the early spring as shoppers buckled under the strains of the housing and credit debacles and a weaker employment climate.
Manufacturers and other businesses, meanwhile, were walloped by zooming prices for energy and other raw materials. However, their ability to jack up retail prices to customers was mixed, with some companies restrained by competitive pressures, according to the Federal Reserve’s new snapshot of nationwide economic conditions released Wednesday.
“Economic conditions have weakened,” the Fed report stated.
Many analysts believe the economy has fallen into a recession, predicting that economic activity contracted in the first three months of this year and is still ebbing now.
Even Fed Chairman Ben Bernanke recently acknowledged for the first time that a recession was possible. That was a rare utterance of the “r” word for a Fed chief.
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The Washington Post, April 17
The economy is slowing across the nation, the home-building sector is tanking more than even the pessimists could have imagined a few months ago and prices keep rising at an uncomfortably high rate.
Those are the unpleasant conclusions of several government reports released yesterday that, together, offer a picture of a U.S. economy being squeezed from all directions.
“Today’s news confirms a lot of what we’ve been hearing and how people have been feeling about the economy,” said Mark Vitner, a senior economist at Wachovia. “There is a clear case that the economy is lousy, but not a clear case that the economy is in recession.”
The bad news was in line with economists’ expectations and did not restrain a rally on Wall Street
Economic conditions have weakened almost across the board in the past six weeks, according to the “beige book,” a compilation of anecdotal reports about business conditions from around the United States prepared by the Federal Reserve.
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The Minneapolis Star Tribune, April 21
There are few trees or hills in this flat, predominantly rural county to obscure the evidence: Rows of vacant and unfinished homes, often with lockboxes on the front doors and foreclosure notices taped to the windows. Realtors call them “see-through houses,” so empty of furniture and curtains that it’s possible to see right through them.
“Based on what I see out here, we’re headed for the Great Depression,” said Dan Frie, a sales agent with Wright Sherburne Realty in Monticello, who has been in the business nearly 30 years.
While Frie blames fraud for exacerbating the problem, many of the mortgages that are in default are held by people who believed — as many did and as the real estate community told them — that real estate doesn’t lose its value.
“And just because the national economy recovers doesn’t mean that our local economy will recover, and that’s what I’m worried about,” Frie said.
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USA Today, April 16
The nation’s already alarming pace of home foreclosures is poised to accelerate through the rest of the year, according to RealtyTrac, which reported Tuesday that foreclosure filings jumped 57% in March from March 2007.
The report painted a grim picture of growing numbers of people unable to make their mortgage payments. Bank repossessions more than doubled in March. Foreclosure filings surged 57% last month from March 2007, with one in every 538 households receiving a foreclosure filing during the month, RealtyTrac said. Nevada, California and Florida were the states hardest hit. In total, more than 234,000 homes were in some stage of foreclosure in March.
….“This isn’t a subprime problem,” says Dean Baker, co-director of the Center for Economic and Policy Research. “The underlying issue is housing prices are falling. It’s going to get worse. Subprime (foreclosures) may have peaked and will start to trail off. In terms of the rest of the market, we’re just beginning.”