Mr. Bush's Neighborhood

Yes, I agree that there is something beyond obscene about the recent news that President Nero and his wife Laura have just announced their happy news: they've bought a new home in Preston Hollow, North Dallas, for about $2.2 million.  A specimen of the kind of McMansion they'll inhabit is featured to the left, the sort of energy-wasting, self-aggrandizing, ostentatious joint you'd exactly expect the Bushes to move into after leaving the White House. And leaving the United States, for the rest of us, a smoking ruin.  They'll spend their weekdays there and then "weekend" at Prairie Chapel "Ranch," or at least George & Barney will.  I suppose the consolation story is that Laura will finally achieve her breakaway.  I shudder to think about the logistics involved in getting W, every single weekend, from Dallas to Crawford, if that's really how it's going to happen.  The spoiled little scion is going to demand a helicopter ride, of course; he can't take any chances, not given his "popularity" ratings and the mobs of angry dispossessed he will leave in his ruinous wake.  But if there's one thing we know about W at this point, it's that his new jolly life among the nouveaux riches of North Dallas will be entirely unperturbed by the collapsing American economy.  Deep into his stupid, dreamless sleep he will fall every night, confident that History will judge him a magnificent leader.  As my own personal hero Bugs Bunny used to say, "What a maroon."

At the same time we hear about the Bushes new start in life, the Department of Labor announces that 533,000 more Americans became unemployed in November.  Rest assured that this is a tentative number; the numbers for September and October were revised way, way up at the same time this dismal stat was divulged.  The Department admits at this point that 1.9 million have lost their jobs in 2008, but of course the number is higher than that.  By the end of December, we can have every confidence that Bush's Economy will have delivered over 2.5 million jobs lost.  And since the economy needs to produce about 150,000 new jobs per month to keep pace with population growth, you can see that we're about 4.3 million jobs away from where we need to be.  The "jobs" we're talking about, of course, are the crap jobs of the service economy, but even those are tanking mightily.  

“We have gone from recession into something that looks more like collapse,” said Ian Shepherdson, chief domestic economist at High Frequency Economics, referring to the accelerating job losses in recent months.  New York Times, December 5, 2008.

There's that word again: collapse.  Shades of Dmitry Orlov and his cheery prognostications about the Soviet-style implosion currently underway here in the Homeland.  Realistically speaking (and what other way is there to speak at this point), there is nothing that can really be done to keep things from getting considerably worse for quite a long time.  Even as I, the humble Pond Dweller, mused months ago, the subtraction of the re-fi and LOC (line of credit) money as "income" available to the stuff-buying citizenry (an insight provided in the first instance by the brilliant Kevin Phillips) portended just this rolling-up of the American works.  Nothing else really could happen.  If 70% of your economic activity depends on people buying stuff, and you take away half their money, the first thing that will happen is that consumer spending will come to a shuddering halt.  The second thing that will happen is that all of those crap-job employees will start getting the axe as people stop coming into the stores to buy stuff.  What we have here, in other words (W's favorite throat-clearer), is a classic vicious circle.  As people get laid off, they lose even the real income part of their "income," subtracting them from the Stuff-Buying Horde. So what starts out as, say, a 35% contraction in the economy brought about immediately by the cessation of re-fi and LOC "income," eventually becomes much worse.  Great Depression style contraction, in other words. 

The Maroon of Preston Hollow was advised this was coming in 2007, so he and his fellow croupiers devised a scheme of sending tax money back to the taxpayers so they could spend some more.  The sole purpose of this plan was to buy time.  Isn't that obvious now? How could it possibly work in the long run? Six hundred bucks?  Bush simply wanted to get to the gated confines of North Dallas without this very "collapse" we're now experiencing.

So that is the one, dismal consolation (along with Laura's liberation) that we get out of this fiasco: Bush didn't make it out unscathed.  It all happened on his watch.  The Democratic "Leadership," in their neverending idiocy, are demanding that Obama "take the lead" now.  Huh?  They want him to own this thing without any real power to do anything about it?  Just how fricking dumb are Barney Frank and Harry Reid and Christopher Dodd?

Nah, this is Bush's Baby.  That stimulus plan should have been directed toward the conversion of the American economy toward a sustainable future.  That was $160 billion down a rat hole, a rat hole already jammed with wasted bucks from the Iraq War and the rest of Bush's nightmare initiatives.  In a vain attempt to stave off the collapse, Bush simply inflicted more damage on a writhing body politic.  And then headed off to settle in with Mark Cuban and T. Boone Pickens in the opulent acreage of Preston Hollow.

Economics One Oh No

I saw "President" Bush yesterday in the Oval Office, after a meeting with the Slovakian president, answering a few questions about his riveting encounter with the Central European.  Bush had apparently assured the visiting dignitary that the "president" & his crack crew of economic advisors were coming up with something, in coordination with other countries around the globe, that would be "as best as possible."  That's certainly reassuring.  The Dow Jones has lost about 2,00 points over the last week since the current plan went into effect.  Why come up with anything new that's less than "as best as possible?"

I don't have a degree in economics or really much of anything in the way of formal training on the subject.  Alan Greenspan does have such credentials, but his ideological bent (he thought he should take his cues from the fiction of Ayn Rand) made him oblivious to the perils of unregulated derivatives trading, which lie at the root of much of what is going on these days.  I'm more objective; I don't have a religious faith in the "Free Market" as some sort of omniscient decision-maker for all things economic.  My commonsense take is that business is run by human beings, and humans tend to push things to the outer limits of the prudent and ethical unless there is some kind of arbiter and rule-enforcer.  We keep seeing that throughout history.  It's in the nature of competition: if you think you can't compete without cheating, then you are forced to a decision.  Either get out of the business or do as the cheaters do.  I find it interesting (as the "president" would say) that Congress is all for clamping down on major league baseball because of steroid use but doesn't see that this is simply the sports business version of regulating competition.  If the ball players think they can't compete with the players who are using steroids, then they'll find a way to use them too or quit the game.  Only a regulator can level the competition to get rid of the problem.

George W. Bush, Phil Gramm, John McCain, Grover Norquist, Ronald Reagan -- all have been idiots on this fundamental question of regulation.  It's not surprising, in Bush's case certainly, that mental habits engrained in religious thinking would slop over into his view of the business world.  In place of Divine Providence, he and his fellow Christers substitute the Free Market, and they accord the same mindless reverence to this fictitious "control" over outcomes. It is a form of Magical Thinking, and it connotes an extremely unrealistic view of human nature. This approach has now brought us to the edge of systemic financial collapse.  Without regulation (or even quantification) of credit default swaps and the other arcana of modern finance, no one can now say just how bad the situation really is.  Banks all over the world are failing, insurance companies are tanking, America's few remaining investment houses are on life support, and the U.S. Treasury is running out of options as fast as it's running out of money.  The "credit crisis" is mainly a function of incomprehension: no financial institution can accurately assess the situation to determine the solvency of any other financial institution.  And now General Motors, the fortunes of which determine what's good for the country, according to ancient wisdom, trades for five bucks a share.

This gargantuan mess was built up, piece by piece, byte by byte, by individual actors making decisions which were uncoordinated and unregulated by any government oversight.  The profit motive drove each decision and action, using the wide latitude available under a free market ideology.  Potentiated by computer speed and complexity, the deals were fed into complex algorithms and then elaborated through ancillary financial setups "derived" from some species of underlying equity asset.  All kinds of Casino Capitalism games were played using all of the complex interrelationships in Acronym World: MBS, CDS, CDO, all of them shorted, played long, tranched and sold all over the world.  All of this "costly nonsense" (Charles Dickens: Bleak House) was carried on in a mad frenzy, and the players who were best at the games made billions.  Every branch of the American financial world, representing 22% of American GDP (the largest sector of the economy), became intricately involved, from home mortgages to insurance companies to the mega-big investment banks, all as permitted by the repeal of Glass-Steagall, that archaic (and eminently sensible) regulatory framework from the Depression era, and the enactment of the Financial Services Modernization Act around the turn of the Millenium, which might be subtitled the Chaos & Financial Free-For-All Act of the New Gilded Age.  

So when the Ship of the American Economy went down, it took everything with it. Characteristically of a Gilded Age, it became conventional wisdom that greed was good in and of itself and no one need inquire about the social utility of all these rackets.  Bush seems now most determined to restore, or at least to do "what's best as possible" to reinstate, the system exactly as it was before the Crash of '08.  I think it's natural for humans to cling to the familiar when in a state of shock; it's the mind's first defense, to deny the reality of what's right in front of you.  But I don't see how anyone can put Humpty Dumpty back together again.  America's "prosperity" under "President" Bush was built on a Consensus Hallucination, the housing bubble made possible by one-time conditions that are not going to recur in our lifetimes.  The big investment banks are gone, either bankrupt or parted out to banks who want some of their lines of business. Lehman, Merrill, Bear Stearns had all gotten involved in the mortgage-backed securities hustle because the old bread and butter game of investment "advice" to the common person had died a slow death from Internet competition. Many commercial banks are going to fail and those which don't will become wholly owned subsidiaries of the United States Department of the Treasury, a form of "sovereign wealth fund" right here in the United States.

The U.S. trade deficit is shrinking, but that's because our consumption of imports is declining. And that leads to a reduction in dollars recycled to the U.S. Treasury from abroad, putting a dent in the Fed's ability to finance our "recovery."  As consumerism tanks, unemployment will rise.  The strains on the pension funds of state and local governments will become unsupportable without some high-yield investments to make their Ponzi methodology work.  Real property taxes, the bulwark of much of state and local government financing, will head south as millions of Americans with vanished equity seek reassessments.  That will lead to government layoffs and municipal bankruptcies.

There will be no quick fix, not at all.  Bush doesn't actually know what he's talking about, but if he did, he would realize there cannot be a return to "normality," only to a state of basic functionality commensurate with America's diminished wealth.  When the carnage is complete and the thrashing of the economy in its death-throes finally stills, I imagine we will see that the net asset value of the United States is about 60% of what it appeared to be at the height of the Bubble.  This is not a cyclical "correction;"  this is serious Attitude Adjustment.