Friday, December 12, 2008

Flogging the Corpse

Of course, the Treasury and Paulson are going to step in and throw money at the failing Detroit car makers, so you have to wonder why they even bothered to discuss it in Congress. We seem to waste a lot of time and energy in this country in hot debates over things that are really foregone conclusions, even though I must say I'm grateful for the efforts of Shelby and Armey to block the diversion of yet another major chunk of public money to yet another failing, badly run industry that ought to be allowed to die with dignity.

Paulson is going to use some of the TARP funds to prop up these sclerotic, uncompetitive businesses with their overpaid executives and bloated Union wages, thus removing all incentive for these companies to evolve into concerns that could compete under rapidly changing conditions,and supply us with useful products in the times ahead- times in which the market for automobiles will shrink drastically. We will be paying an even larger portion of our taxes to subsidize an obsolete industry while the Koreans or Russians or Chinese build the rail cars, wind turbines, innovative nuclear and coal technologies, super-efficient solar panels, and other new and yet-to-be-conceived-of technologies and products we will be needing for most people to have any motorized transportation, electrical power, heated homes, reliable supplies of clean water or decent sanitation, or any other technological amenity that enables a civilized existence for hundreds of millions of people.

We won't be inventing or manufacturing these things here in the U.S., because we're casting all our energy, and our money for years to come, at obsolete industries and at maintaining the fiction that we can do things exactly the way we've been doing them for the past forty years.

The denizens of Detroit, likewise, will continue in their Cargo Cult-like fixation on the dying auto industry, and continue to pour all their resources and energies into reviving its twitching corpse, instead of recreating their economy on another template, and making the city a place that any other sort of business might want locate in or commit to. This is the typical pattern of dying civilizations. A major cause of the deterioration and death of a culture is the tendency most people have to remain fixated on that which made them successful in the past, in the face of vastly altered conditions. I've always said that the best thing that could happen to Detroit is for all of the Big 3 to roll over dead, so that the citizens of that poor battered city could focus on rebuilding their economy along lines more in keeping with 21st Century realities. But as long as our politicians and policy wonks are controlling the economy, we will just keep on throwing our resources at investments gone bad, while nipping emerging industries in the bud.

Given that the rescue of the financial industry is an admitted failure, I don't expect the domestic auto makers to revive under the ministrations of the Feds, but I do expect that the $14 Billion in loans under consideration won't be the last cash call. Similarly, we will keep throwing money at the failing financial firms, and have committed around $7 Trillion in loans, buybacks, mortgage assistance, and general assistance to the failing effort, while failing to generate jobs or new investment in the private sector. General Motors has $60 Billion worth of debt, and its only profitable division, GMAC, committed suicide with its DiTech 125% mortgages. The auto rescue will probably entail over $100 Billion in loans that will most likely never be repaid; these companies will still fail, for they have rolled rapidly downhill for over 30 years, thanks in no small part to government assistance and accommodations that have enabled them to cling to outdated business models and products.

Locally, we continue to create more TIF districts even though almost every TIF district designated to date has failed of its stated purpose, sometimes spectacularly (remember March First?). Others have merely produced revenues that are less than if the development had not taken place, and all are funneling money from each tax hike away from essential municipal services, resulting in revenue shortfalls and the steep deterioration of essential services and infrastructure. Worse, much of the touted retail development our taxes paid for is failing. Border's Books will close four locations along the lakefront (Uptown on Broadway; Diversey& Clark, North & Clybourn, and Hyde Park) as soon as they can get the spaces sublet, and other chain retail is downsizing rapidly. In return for hundreds of millions of dollars in direct assistance and tax incentives, we will have empty spaces, most of which are too large for most of the business that might want space in these locations, while the suburbs will be littered with dozens of dying, half-empty shopping malls and power centers that are of no use to any other type of concern, and will blight every neighborhood they're located in.

A 'rescue' of the failing airlines is now be discussed, even though we already render $14 Billion a year in direct subsidies to the commercial carriers. That the airlines have been failing for years because air travel is intrinsically uneconomical and inefficient for short distances, and the whole industry is predicated on plentiful supplies of extremely cheap fuel, is not discussed. We speak of rendering larger subsidies to Amtrak, but we do not discuss removing the multiple regulatory barriers to the development of private rail carriers and otherwise leveling the playing field between them and thier extensively subsidized auto and airline competition, so that passenger service can be profitable for them. Instead, we think only of tossing more money at another mismanaged, government-owned entity. Likewise, we continue to subsidize other failing industries, as well as lifestyles and patterns of development that we would have evolved away from decades ago had not our hamfisted policy makers had the ability, granted by our taxing authorities, to implement policies whose reach extended down through decades, far beyond the limited vision of any collection of human beings, no matter how brilliant and knowledgeable. The result is continued misinvestment on a gargantuan scale, with borrowed money we will never be able to pay back, in industries and lifeways that have no future.

The economic carnage and physical blight left behind by government assistance, incentives, and other interventions is visible in every municipality in the United States, and in almost every industry. It began with many of the social programs of the New Deal era, that included low-income housing projects that were supposed to be a cure for the teeming slums, and the policy-driven and tax-funded steering of the general population toward auto suburbs and car dependence via FHA loans available only for homes in newly constructed subdivisions, and the construction of the highway system that tore apart fine-grained urban neighborhoods a;d isolated remaining residents from jobs and mobility. It is culminating in the disastrous failure and unprecedented destruction of our financial system, the complete socialization of our economy and the destruction of budding new technologies and business models, while draining the last of our diminishing economic power and depleting resources to keep failed Old Economy business afloat, that would have died a natural death many years before without such intervention.

Yet, we can blithely babble about the failure of something we call the "free market". What free market? We haven't had anything resembling that since the late 19th century, and it is difficult for most people to imagine an economy that somehow functions without "partnerships" between business and the government. We fail to see that the more an industry is subsidized, the more it fails- and almost every industry in this country is subsidized, to the extent that it has become impossible to tell what really supports itself and makes economic sense, and what doesn't. The debt bubble would never have reached the proportions it did without the easy money policies of the Fed in conjunction with massive subsidies for home builders and buyers, and the implicit guarantees of rescue for feckless financial institutions should they (again) encounter problems with the layers of bad debt our policy makers urged them to underwrite. And our domestic auto makers might have remained innovative and competitive had they not been spoiled with the easy profits of defense contracting where they never had to justify their costs, or their friends in Congress and in their local governments, who enabled them in continuing to build obsolete products by favored tax treatment and incentives.

Now that our leaders have publicly admitted that the housing "rescue" is a flop, can we reasonably expect the auto or airline bailouts to succeed? And can we also expect that government policy makers and politicians will do a better job of operating these concerns that their current managment has?

Could we start rolling back all the "rescue" programs, and instead make the emergency provisions we should have made to begin with? Government intervention is warranted only for emergencies, and the appropriate response to the failure of our financial institutions would have been to protect the innocent by protecting all "demand" money in checking, savings, and money market accounts up to any amount, as well as fixed insurance policies and annuities, and then let the tottering institutions fail. We could then spend a portion of the money we have misinvested so far, instead, on extending unemployment and on necessary infrastructure repair and replacement. The idea is to protect the innocent and their money, while providing a minimal safety net for the swelling numbers of unemployed and destitute until they can regain their footing. The idea should not be to socialize the entire economy, and it's time to look at the massive hairball of subsidies and government incentives, going clear back to 1900, that have caused so much misinvestment and pernicious development at the expense of industries and development that would be more appropriate to where and what we are now, and would be flexible enough to adjust to changing conditions as they emerge.

Thursday, December 11, 2008

Safety Alert

The Edgewater Community Council has issued a safety alert that pertains especially to elders, here in its entirety, for residents of Uptown, Edgewater, Ravenswood, Rogers Park, Lincoln Square, and West Ridge:

December, 2008

Community Alert

18th,19th,20th,24th Chicago Police Districts

One to three offenders
  • male white or white Hispanic,
  • 20's to 30's
  • 5'04 to 5'08
  • 150-160 lbs
  • white or silver automobile, possibly a white hatchback with temporary plates
try to gain entry into homes of lone elderly victims by deception. Offenders claim to be employees of a utility company needing to enter the residence to make repairs. Occasionally the offenders claim to be new neighbors or construction workers.
One of the offenders keeps the victim distracted while the others search for and remove valuables and cash from home.

If you have any information please call 911.

Tips on calling 911

Keep your Holiday Season Safe by Following These Safety Tips

The Holiday Season is a very special time of the year. It's a time for family, friends, and festivities! But also a time when busy people forget to be careful about their personal safety and property. As a result, people can become victims of burglary, theft, fraud, and con-games.

Everyone could use extra money around the Holidays, including the criminals. The Chicago Police Department is publishing a few suggestions to make sure that your holidays are safe and secure.

  • Give your home the "occupied appearance" by leaving various lights on.
  • Let a trusted neighbor know if you are going to be gone for longer period of time. Return the favor and create a "Neighborhood Watch".
  • Don't use shortcuts through alleys or walkways. Always use well-lit and well-traveled areas.
  • Always keep a hand free for emergencies.
  • Shop with friends and relatives. There is safety in numbers.
  • If you must take a purse with you, carry it close to your body with the clasp turned towards your body.
  • Cash should be carried in a front pants pocket.
  • Do not display large sums of cash.
  • Never leave your purse in a shopping cart or on a counter unattended while you shop.
  • Transfer valuables to the trunk of your vehicle before you reach your destination.
  • Never leave valuables in plain view inside of your vehicle.
  • Keys should never be carried in your purse. Keep your keys in your pocket.
  • Remain alert at all times.
  • When returning to your vehicle or home, have your keys in your hand before you reach the door.
  • Use the "panic or alarm button" on your chain if you feel fearful or suspicious.
  • Be alert for suspicious persons loitering in parking lots.
  • Always lock your vehicle even if you are only going to be gone for a few minutes.
  • Lock your doors immediately upon entering your vehicle and always drive with your doors locked.
Have a Safe and Happy Holiday Season!
Aida Kulasic
Edgewater CommunityCouncil
Housing and Safety Director

Monday, December 8, 2008

Now Don't Tell Anybody

There's nothing that plays so badly with the American public as bad news, especially if it means that we might be compelled to alter our daily habits or give up things that we've grown to view as entitlements, like ever bigger and more amenity-stuffed houses on 3-acre lots 50 miles out of the city that appreciate 20% a year and have ATM machines attached to them so that we can pull money out of them every time we get an itch for some recreational shopping, or the ability to wrack up a three-quarter million dollars' worth of debt on those houses while making payments against them barely equal to the rent on an average city apartment and while using them as piggy banks from which to pull money for vacations and boats and Hummers and shopping sprees at the mall.

Willful blindness on the part of the people we pay to lead us in policy matters, and coddling the public in its delusional state, have been the chosen political operating methods of both our political parties, which did a wonderful job of deluding themselves and the public as to the price that would exacted for the 10-year credit binge that has produced the current economic debacle. Anyone who pointed out the rather obvious facts- that the debt being incurred would sometime soon have to be repaid by somebody, and that debt both public and private had reached levels beyond what we jointly or severally could hope to pay back in our lifetimes- was labeled a killjoy and party-pooper, and booed off the stage.

However, there are a few public figures that have been stalwart in their determination to level with the public and deliver the information we badly need in order make the personal decisions and plans that either enable us to successfully resist the destructive hysteria of the moment and make the life and financial decisions that will enable us to negotiate some of the most wrenching shifts in our economy and life arrangements in over a century, and continue to lead reasonably comfortable lives- or end up being refugees in Tent Cities, bartering toilet paper for washing water and canned beans. Senator Roscoe Bartlett, a Maryland Republican, is one of these, along with former Fed Chairman Paul Volcker, oil geologists Colin Campbell and Kenneth Deffeyes, and SAIC Senior Energy Program Advisor Robert L. Hirsch, whose landmark report on the eminent peaking of world oil production, Peaking of World Oil Production: Impacts, Mitigation, and Risk Management, is an unsparing assessment of the bleak and choppy future on the downslope from the peak of production; and the difficult and wrenching shifts in our entire fix on life that we must make in order to ensure a shift to lower energy use, and still enjoy anything like the technological amenity that we have enjoyed since 1900.

Therefore, it's unsettling and not a little ironic, that at just the hour when we are being shown the gruesome cost of willful blindness regarding our finances public and private, that Hirsch himself would counsel us to soft-pedal the truth regarding world energy supplies, and enable the public in self-delusion regarding the harrowing energy sitution and our lack of viable alternatives to our current energy-guzzling life arrangements. Hirsch was quoted in the November 14 issue of The New York Times, and many other places, as follows:


The world is in the midst of the most severe financial crisis in most of our lifetimes. The economic damage that has already been wrought is considerable, and we have yet to see the bottom or the turnaround. Against this background, I suggest that the peak oil community minimize its efforts to awaken the world to the near-term dangers of world oil supply. The motivation is simple: By minimizing our efforts in the near term, we may not add fuel to the economic fires that are already burning so fiercely.

We are all aware of how disoriented governments and business are right now. Our leaders, leaders-to-be, and best minds are disoriented and seeking pathways out of the current morass. The public is in a quiet panic mode — those who were reasonably well off are less well of, and their options for action are limited. Those that have lost their jobs and/or homes are desperate. Businesses and the markets are in what might be called a free fall. If the realization of peak oil along with its disastrous financial implications was added to the existing mix of troubles, the added trauma could be unthinkable.

Like many of you, I’ve devoted my recent efforts to trying to wake the public and governments to the impending horrors of peak oil. As much as that awaking is urgently needed, continuing to press forward now is almost certainly not in the broader interest.

Many may be tempted to directly challenge the recent IEA World Energy Outlook. I am among those who were very disappointed. Pressing those concerns at this time might further the peak oil “cause,” but it could well do much more damage than any of us really intend.

Please keep up your studies and thinking, because helping the world realize the dangers of peak oil is an absolute must. In the near term, keeping relatively quiet is likely the better part of valor.

Certain phrases in Hirsch's plea speak to the problem with Willful Blindness. Would "our leaders, leaders-to-be, and best minds" be so "disoriented", had they sqaurely confronted the many signs out there, that were there as early as 2003, that the credit rampage was ratcheting out of control and that the overhang of public and private debt, the largest ever in the history of the world, was a massive threat to our financial system and economy? They did not confront the situation because doing so would have wrecked the "ownership society" party of "wealth creation, which was wholly dependent upon debt creation and asset inflation; and the underlying weakness of our unproductive and parasitical economy would have been laid bare, with unacceptable political repercussions.

Well, the confusion and disorientation of our leaders and "best minds" regarding the global financial unravelling is nothing compared to the panic, hysteria, and total inability to deal with non-negotiable realities, that will ensue once we are headed irrevocably down the slope of fossil fuel depletion,and which is starting right now- if we continue to delude ourselves regarding the gravity of the global fossil fuel drawdown and the weakening position of this import-dependent country in competing for dwindling global supplies. Once again, our leaders will be blindsided by circumstances that these wonderful minds will tell us they could not possibly have been expected to forsee, and we will have to deal with a constellation of suddenly dire circumstances, from a position of extreme ignorance, a bloated sense of entitlement, and the almost total lack of alternatives, coping skills, or willingness to adapt our behavior and world view to new and unwelcome circumstances.

As any floundering home debtor grappling with the reset of his $500,000 mortgage to payments that exceed his monthly income can ruefully attest, willful blindness regarding the core material facts of your life is not a sound operating policy for individuals. You wouldn't have taken that mortgage had you troubled yourself to actually read it and understand it, would you?And if the failure to see and understand is disastrous for individuals making major life decisions, how dangerous is it for a troubled country of 300 million people who are mostly totally dependent upon systems and arrangements that simply will not function once the fuel supplies that make them possible begin to dwindle sharply? The failure of our "best minds" to confront this bald truth is criminal.

We're not talking here about just having to give up our cars and being stranded in unheatable houses 5 miles from the nearest public transit. We are talking about the breakdown of all the systems and structures we depend upon for food production and delivery, for health care, for electrical power and home heating, for sanitation and potable water. We have not discussed how we will allocate fuel supplies in order to make sure that lifeline services such as the fire and police departments are adequately supplied, nor have we talked about the public health challenges that spot shortages and suddenly upward-ratcheting prices due to that, might entail, such as the sudden unavailability of essential vaccines, or the inabililty of many municipalities to deliver the clean water we take for granted, or provide for basic sanitation.

We cannot afford to be willfully blind regarding the global fuel drawdown, which is continuing apace even with the recent destruction of oil prices and the return to $40 a barrel oil due to the global financial unwinding. This is a temporary circumstance that in itself could lead to critical shortages, as many drilling and recovery projects have been cancelled due to the impossibility of realizing a profit at these price levels, meaning that we will have less oil in the near future. Failure to negotiate the downslope successfully will mean that we will not only never recover economically in our likely lifetimes, but will also experience systems failure, social disorder, and material hardship comparable to that experienced by Russia after the Soviet collapse, except that the Russians had a degree of social cohesion and experience in dealing with material adversity that we totally lack here in this land of total dedication to personal convenience at any cost in fuel and debt.

Our politicians will not tell us the truth because their careers depend upon making us feel good. And now even people who usually know better are afraid of panicking us sheoples out here and possibly causing a stampede. Therefore, may I suggest that we each of us begin, as individuals and local communities, to prepare ourselves? For individuals, that means getting out of debt to the extent possible in these jobless times, curtailing spending on non-essentials, and redesigning our lives for comfort and amenity, not to mention bare material survival, on a much smaller energy platform. What adjustments a person makes will depend on personal necessities and means. It might mean getting to know your community and neighbors better, and forming informal cooperative associations and mutual-aid pacts. It will probably mean relinquishing treasured material goals and adjusting to meaner circumstances than what we've been accustomed to. For communities, it means tabling planned public expenditures, especially on large infrastructure projects that will be increasingly obsolete under the new regime of energy scarcity, while committing to putting the systems and platforms in place that we will badly need down the road. It should certainly mean curtailing spending on monument-building and "vanity" projects that bring no long-term benefit to the community but occasion large net costs, like Chicago's planned 2016 Olympics. It should also mean rolling back the pay raises of public officials, in keeping with the reduced circumstances of the citizens underwriting their paychecks. It should absolutely mean a critical look at all our lifeline services and our critical water, utility, and sanitation infrastructure in order to make critical repairs and improvements while fuel is still relatively cheap, for the costs of improvements will ratchet beyond affordability as fuel prices start to hike again.

Most of all, we need to get the word out. Willful blindness is not "the better part of valor"; it is cowardice, and if ever there were a time that we cannot afford to walk through a minefield blindfolded, this is it.

Saturday, December 6, 2008

Nix the 2016 Olympics

Is the City of Chicago broke enough without committing $2 billion or more to another idiotic and disruptive exercise in empty symbolism and monument- building?

If New York City doesn't want the Olympics, should we consider whether we really want it?

And just exactly what will the city gain from hosting this 8-week extravaganza with the attendant security risk, and the disruption and displacement of thousands of residents from the area around Washington Park?

The cost alone ought to make boosters pause. Chicago is in poor case to front the projected $2 billion the event will cost, which would mean a pretty steep net loss to the city, for revenues from ticket sales are projected to be about $750 Million.

However, the estimated cost is most likely a very conservative estimate of the actual costs involved. The experience of other cities hosting the event is very instructive. Tessa Jowell, the minister in charge of the London 2012 Olympic Games, has admitted that it was "a mistake, in light of the current recession", to have bid for the games, and that costs are far exceeding original estimates. The cost has, according to Jowell, risen almost four-fold, to 9.35 Billion pounds, or approximately $20 Billion. Bejing fared much worse with its 2008 games, which not only cost more than $40 Billion, but occasioned a massive diversion of water from the provinces, causing widespread crop failures in water-short,poverty-stricken rural provinces.

The London games will not take place for another four years, yet the costs continue to mount, and during the worst ecomomic downturn in 75 years. Given our mayor's penchant for monument-building projects that virtually always overrun their costs estimates and siphon much-needed funds from lifeline services such as our underfunded and steeply undermanned police department, and decrepit public transit and essential water, sewer, and road infrastructure, we can pretty well figure that the expenditures on the Olympics will cause steeper shortfalls, with potentially disastrous results, in our necessary municipal services and structures. We need urgently to consider whether an open-ended financial commitment to this immense vanity project is in order given our current economic situation, especially since it so closely parallels the debacle of 1929 and ensuing Great Depression. Falling personal incomes, failing businesses, and mass layoffs will probably continue for quite some time, and we will be severely challenged to meet minimal public needs from falling tax revenues. All public expenditures will have to be carefully weighed, and whatever is not essential to maintain our muncipal services at a level that assures the safety and basic well-being of its citizens and businesses, will have to be tabled.

Well, counter the boosters, the games will boost tourism and enrich city businesses. My first response to that, is: at whose cost? Will the taxpayers at large be soaked once more to provide profits to a few business concerns? Are the taxpayers not being soaked enough through the city's 165 or so TIF districts in order to provide lavish profits to a few crony businesses?

However, it appears, from the experience of Atlanta, that the event can result in a net loss of tourism and revenues to tourist-related businesses. A 2003 study by Coates and Humphrey concluded that "building new sports facilities and attracting new professional sports teams did not raise income per capita or total employment in any US city." In his excellent article, Estimating the Costs and Benefits of the Olympic Games:What Can Bejing Expect From Its 2008 Games?, Jeffrey Owens describes the disappointing economic results of the 1996 Atlanta, Georgia games:

In reality, data and anecdotal evidence strongly suggest the Olympics had a significant crowding out effect on the rest of the tourism industry. Table 3 shows convention attendance in Atlanta, which had been increasing steadily over the previous ten years, fell ten percent from 1995 to 1996. hotel occupancy rates fell from 72.9% in 1995 to 68% in 1996 despite the Olympics. Macroeconomic indicators in Georgia and Fulton County show no discernible break in the pattern of per capita income growth or unemployment rates (State of Utah 2000). Due to the disruption caused by the Olympics, hotels and restaurants that would be expected to benefit from increased tourist traffic were actually hurt. "In other parts of town, many hotels and restaurants reported significantly lower than normal sales volume during the Games. Even shops and resorts in areas up to 150 miles away reported slower than normal business during the summer of 1996" (French and Disher 1997, p. 390).

Mr. Owen goes on to remark:

Along with crowding out on the demand side, local businesses and workers must also deal with temporary entry on the supply side. Although the Atlanta economic impact report makes no mention of entry by either workers or firms, the Atlanta experience serves as an example of how entry can bring into question if area residents actually benefit from growth in the tourism sector. The Centennial Olympic Park in downtown Atlanta served as the focal point for entry of corporations who sponsored the Games. To some extent the Olympics in Atlanta were self-contained. Entry of corporations and workers from outside the Atlanta area made the Olympics an economy unto themselves. Much of the income would go to firms and workers who are not permanent residents of the local economy.

Lastly, consider the terrorism risk. Chicago got lucky in the 911 attack. The 911 terrorists had a much bigger day planned than what they were able to accomplish, for the Sears Tower was on their list of targets, and only the immediate closure of all airports in the country saved this city. Security will have to be a major obsession at the games, given Atlanta's experience, and the known threat that exists at this time. The Games have been so politicized and are so laden with symbolic value that they are a very appetizing target for terrorists.

Whether considered in the light of its cost to the taxpayers, the security risk involved, the disruption of the lives of thousands of residents in the affected area and their inevitable displacement, or the negative return on investment that most cities hosting the games have experienced, the Olympic Games are a costly and unjustifiable vanity.


Because of the lenght of the URL links to articles quoted here, I didn't link them in the article but am posting the links below.

The title of this post links to a series of articles examining the Chicago 2016 Olympic bid, by Daniel Honigman. Dan's website is http://danielhonigman.com. He has posted an entire series of articles discussing the costs and benefits of the 2016 Chicago Games.

Jeffrey Owens, Estimating the Cost and Benefit of Hosting Olympic Games: What Can Bejing Expect From Its 2008 Games? is at http://findarticles.com/p/articles/mi_qa4127/is_200510/ai_n15705690/pg_1?tag=artBody;col1

Sunday, November 23, 2008

Bailout Nation

Senator Shelby of Alabama and other economically literate political leaders are walking against a gale-force wind in opposing the government-financed rescue of every failing business concern, because it looks like almost every major entity in the United States is floundering in a flood of bad debt and falling revenues. You have to wonder just how many holes the treasury can plug before it flounders, too.

This weekend, treasury officials are scrambling to concoct a plan to rescue Citicorp, whose collapse financial pundits have been anticipating for months, in which the government, i.e. the taxpayers, will assume approximately $100 Billion-200 Billion in losses on the books, according to sources. The government will be guaranteeing about $300 Billion of mortgages at the troubled institution.

Meanwhile, Team Obama is contemplating a $700 Billion stimulus package to be implemented over the next two years. This will be in addition to the approximately $2.5 Trillion in government interventions to support the crumbling financial system and the additional $2 Trillion in loans given to various banks over the past two years.

At the same time that we are placing ourselves at risk of a treasury default with a complete economic collapse, Argentina style, by bailing out the messes created over the past ten years, our massive structure of government-sponsored home ownership programs is enabling more of the same. The FHA, which was created expressly to help otherwise unqualified buyers afford homes, is in the process of making hundreds of billions of dollars more in shaky mortgages to unqualified buyers, that many financial observers predict will create the need for yet another massive rescue package a few more years down the road.

Right now, it is fashionable to blame something some folks refer to as the "free market" for the cascading financial debacle, yet, were it not for FHA, GNMA, the GSEs, local home buyer programs, and the multitudes of other government props to home buyers, lenders, and builders, as well as the implicit government guarantee of rescue for failing financial concerns, most of these bad loans would never have been made to begin with, and the structured debt based on them with its uncharted and apparently unlimited risk, would not have been created.

Let's put the blame for this debacle where it belongs- on government intervention in economic affairs.

Saturday, November 22, 2008

Obama Energy Policy Fraught With Contradictions

The new administration's energy policy was released a couple of months before the election, and received very little attention, due to the nation's preoccupation with the financial collapse and economic morass, and the focus on the show-stealing Republican running mate.

The best that can be said for Obama's energy policy, is that his heart is in the right place, and that the new team's policies constitute a significant and positive departure from Republican policies that encouraged waste and promoted the disastrous transportation and land use policies of the past 60 years as "patriotic". At least Obama recognizes that we are on the eve of a massive shift in the conditions on which they're predicated, and that the energy regime that made them feasible is over.

However, many of the the new liberal policies will not only not mitigate the hardships of the new energy regime of scarcity and upward spiraling prices, but might well aggravate the waste and misallocation of finite resources. In short, the new administration's Energy Policy is a well-meaning disaster, and the policy statement is an essay in the power of denial and wishful thinking, in that its principal feature is the emphasis on symptomatic treatments and short-term "feel goods", at the expense of the complete overhaul of transportation, agricultural, and land use policies, which is what we really need in order to cope with shrinking fossil fuel supplies.

Mainly, the program is another attempt to repeal the law of supply and demand, and maintain fuel at artificially low prices while doing nothing to steer the country's population away from wasteful lifestyles Among the short-term measures outlined by the report are: 1) an Emergency Rebate of $500-$1000 for every American family, to mitigate the escalating costs of energy; 2) Crack down on energy speculation; and 3) Swap light and heavy crude, Release oil from the Strategic Petroleum Reserve in order to cut prices.

The futility and potential averse effects of the foregoing ought to be obvious. The "energy rebate" is merely another costly "stimulus package" and short-term salve that will add to the towering public debt load and further endanger savings and jobs, in addition to necessitating a tax increase, which is supposed to be paid for by a tax on the windfall profits enjoyed by oil companies.

Measures to "crack down on energy speculation" are worse. These are blatant scapegoating, and worse than useless. The only reason "speculators" buy any commodity or security in order to scalp profits from a move in prices is because they perceive a move in prices in the direction of their bet- if traders perceive a drop in demand, they can just as easily "short" the market. It's interesting that, just as our authorities made no attempt to cap the rampant inflation in house prices or run-up in stock prices unrelated to underlying fundamentals, or prevent "speculators" from profiting from it by "flipping" houses; it is also making no attempt to prevent "speculators" from profiting from fluctuations in oil prices by shorting oil as prices of crude dropped rapidly from last year's high of $149 a barrel.Speculators are no more responsible for the increase in global demand for petroleum and global depletion of supplies, than they are for the Fed's disastrous monetary policies and explicit support of the loose lending that created the financial debacle, and we aren't going to mitigate either condition by "cracking down" on attempts by market players to respond to whatever situation presents itself.

The third short-term palliative is to swap light for heavy crude and release oil from the Strategic Petroleum Reserve. May I ask: Are we insane? The policy paper explicitly states that "swapping light for crude" means that we will release the light, sweet crude from the Strategic Petroleum Reserve in an attempt to lower oil prices, to replace it later with sour, heavy crude, which is much more difficult and expensive to refine. The obvious implication is that we will be forced to replenish the Reserve with inferior oil at a time when doing so will be much more expensive, in attempt to maintain artificially cheap prices for petroleum products to placate American consumers and enable them in unsustainable lifestyles. This is sheer insanity, and it will only cause more pain and disruption down the road as it will only encourage more consumption of the very resources we need badly to conserve. Worse, we need badly to protect the Strategic Petroleum Reserve against a real emergency, such as critical spot shortages of fuel that could threaten our lifeline civil services such as police and fire protection, never mind the copious supplies needed by the military to ensure essential defense. Sorry, but $4 a gallon gasoline is not an emergency, and encouraging wasteful civilian consumption by maintaining artificially low prices will only increase the pain and disruption down the road, when the global drawdown in petroleum production becomes critical, and irreversible.

The policy's longer term solutions address Climate Change and the urgent need to develop sustainable alternative energy. Most of these measure are appropriate, as they go. Prominent among them are measures to increase fuel efficiency requirements, begin transitioning to a new digital electric grid, promote development of commercial scale renewable energy, invest $150 Million over the next 10 years to develop plug-in hybrid vehicles, invest in low emissions coal plants, and advance the next generation of biofuels and biofuel infrastructure.

I seriously have to question the emphasis on the development of hybrid vehicles, and even more, the promotion of biofuels, at the expense of the rebuilding of our rail system and intercity public transit. Our "green" liberals are almost as invested in the fantasy that we can continue to run 200 million cars and trucks and continue converting irreplaceable farmland into auto suburbs as any right-wing rube in his 3000 sq ft house on 2 acres in the far hinterlands. There is no recognition that even if we diverted every arable acre of land in this country, including that now used for food production, to production of biofuel feedstock, we could not even replace a fraction of the massive quantities of oil necessary to run our systems as they are currently structured. Increased production of biofuels will inevitably come at the expense of food production, and at a time when we will have less petroleum and natural gas, which is necessary to produce the cheap food that we now enjoy. Yet nowhere in the policy statement is it acknowledged that the mass diversion of land currently in food production, to fuel production, could trigger catastrophic food shortages, or famines.

Nowhere in this policy statement is the critical need for a complete rebuild of our decrepit rail and public transit even mentioned, and there is no mention of the need to curtail our massive over-investment in highway and airport infrastructure, if only to offset the massive amounts of public money that that are to be spent on the development and promotion of "green" jobs and industries. There is no discussion of reversing the disastrous transportation and development policies of the past 60 years that have created a geography of roads and housing development that render 90% of our population totally dependent upon autos for transportation, and that are still promoting urban sprawl and the destruction of some of the best farmland in the world in order to build auto suburbs.

Let's hope that Team Obama's misconceived Energy Policy is only a "feel good" aimed at the more "progressive" elements of the population in order to win the election, in recognition that the truth is too unpalatable to be presented to an already skittish and traumatized population at election time. Let's hope that after the new team is installed, they will Get Real and replace this stew of pandering "feel-goods", and costly diversions that will only set us up for more disaster and disruptions, with reality-based policies that will promote the complete restructuring of our systems to enable steeply reduced energy consumption in a very short time frame.

Tuesday, November 11, 2008

What Happened to Peak Oil?

Tonight's the night of Rogers Park Alderman Joe Moore's little enviro-confab at the No Exit Cafe on Glenwood, the "Global Warming Cafe", another idiotic gesture where our alderman will get to burnish his lib credentials while steadfastly ignoring the rather large environmental problems here in Rogers Park, principally the number of bullets flying around and blood on the streets.

As usual, the discussions center around Global Warming, while ignoring Peak Oil, which seems to have been shoved to the back burner by the steep drop in oil prices to the $60-65 a barrel range, due to massive demand destruction and to the mass unloading of oil forward contracts by financial concerns unloading them and every other salable asset on their books in their desperation to stem the loss of blood due to the collapse of their mortgage-based structured debt. Due to the steep economic downturn, demand for oil has dropped 9% in the past few months, which might help us make it through the winter without a steep hike in our heat bills.

People tend to have extremely short memories, and to focus on the issue of the hour, which at this moment is the collapse of our financial system and related loss of jobs, incomes, businesses, and homes. But the fact remains is that we are still past the peak of global oil production, which, according to oil geologist Kenneth Deffeyes, occurred in 2005, right on the schedule predicted by M. King Hubbert in 1956. Global oil production has dropped every years since, so we can be thankful for demand destruction, and hope that the vacation from escalating gasoline prices doesn't trigger another spate of gas-guzzler purchases and moves to remote suburbs. As it is, prices have dropped low enough to render unprofitable many of the ventures that are essential to augment the world's dwindling oil supplies, such as the tar sands ventures in Calgary, and deep sea drilling.

However, the demand destruction here and abroad, due to the unfortunate global economic situation, may not be enough to keep demand level with production, for nearly all OPEC members are cutting production and exports, and some forecasters predict that global oil production will drop as much as 9% in 2009, due to depletion of major oil fields and increasing oil use in member countries, who are now reserving more of their production for their own use. A minor increase in demand in tandem with production cuts could, and probably will, cause prices to escalate again, especially if lower prices render much production unprofitable.

For all our local politicians' blathering about climate change and the need to reduce our carbon footprint, we don't see them engaging in serious action to reduce Chicago's prodigious energy consumption and car dependence. We should be making full use of the respite in oil prices to prepare our city for the inevitable draw-down in fossil fuel supplies, yet we have made very few policy changes that would steer development and infrastructure investment in a direction that will produce systems that will serve us when foreign oil is no longer available, or available only in quantities insufficient to run our current systems. Neither Joe Moore or Mayor Daley has made a serious commitment to improving and expanding our inadequate public transit, in spite of a steep spike in ridership in recent years, and the obvious inadequacy of the system to the demands that will be made on it when car ownership drops by 30% or more in coming years. None of our politicians seems eager to develop other infrastructure that will be necessary to keep sensitive communications and other services viable in an energy-short future, either- plans for universal, cheap wireless internet connectivity have been tabled because of the city's failure to negotiate favorable terms with commercial wireless providers, and no other alternatives are being considered.

Worse, Daley and most of our aldermen remain committed to costly and unnecessary expansion of existing highway and airport infrastructure, at a time when the commercial airline industry, which is completely predicated on the availability of cheap fossil fuels, is collapsing, and auto travel is headed for steep decline. Scarce tax monies invested in increasingly redundant and obsolete highway and airport infrastructure, is money being taken away from the systems that we will desperately need in order to maintain a minimal level of technological amenity in an era of depleting fossil fuel supplies and rapidly increasing costs of necessities in combination with disappearing jobs and industries.

It's easy to yap about ways to reduce your carbon footprint on an individual basis, and Joe Moore could sure stand to get a few clues on how to reduce his. However, all the individual efforts - trash recycling, home gardening and canning, buying used goods, turning down the thermostat- don't mean much when individuals are living in a context that demands massive energy waste just to live a normal life, thanks to 80 years of disastrous public policy at the federal and local levels alike that have driven the most wasteful urban development patterns and allocation of resources in the history of the world. Our politicians need to stop twaddling in empty gestures and get down to the necessary and gritty work of developing policies and systems that will enable steep reduction of energy consumption, and the harder work of managing the transition so that it doesn't blow our system, and our lives, to pieces.

Bottomless Bailouts

Why did nobody back there, about the time our politicians promulgated the first "housing rescue" bailout package, twig that this was a bottomless pit and that one "rescue" would lead to another?

And another. And another.

And why did no one up there figure out that the money borrowed against our future taxes was not going to accomplish the goal of propping up the inflated housing market, because the only way to prop housing up at prices paid in 2006 was to float more of the bad loans that caused the inflation to begin with?

And why have none of our pols figured out that if we pile on so much government debt that we go into to default on it, that the result will be a collapse so complete and and a depression so deep we need not hope to recover within the lifetime of anyone born before 1970?

It's deeply frightening that none of our politicians, not one, can reason through the hysteria and self-serving arguments of the bank and housing lobbyists, to reach the conclusion that we have already borrowed far beyond our ability to repay, and that adding more unrepayable debt will only prolong the pain.

The loans made to financial houses, completely apart from the $700 Billion rescue plan and all other official interventions, brings the tote for this debacle, to the taxpayers, past $5 trillion and we're nowhere near finished. AIG is now into us for $150 Billion. Many more hundreds of billions will be tossed at banks to help renegotiate home loans in danger of foreclosures.

Expect far more job losses for the next couple of years, and expect the financial sector to shrink by at least 50%. Don't expect to find it any easier to borrow to buy a house or condo, for lenders are reverting to traditional lending standards no matter what. The easy money machine has been dismantled. Do look for prices to drop further as incomes drop in the shrinking economy, and as lenders continue to tighten lending standards to require things like down payments, decent credit scores, and proof of your ability to repay the loan.

Expect higher local taxes with reductions in services as the local tax base shrinks, and less of the money we pay in Federal income taxes is returned to us to help fund our infrastructure repairs and essential services.

I'm not faithful that Obama, much as I like him, will do anything to improve the situation, because his solutions are very much like those deployed so far- when in doubt, throw money at it. I believe that Obama is the best choice that we could have made, but all politicians are financially inept and do not grasp that you don't fight a fire by pouring more fuel on it. The most that Obama is going to be able to do is offer comfort to citizens in their desperate pass, and lay the truth on us in as palatable a form as possible, which is that this country is stone broke, owned by not-quite-friendly countries, and is dependent on enemies for its most essential resource. We also have no manufacturing left, and tossing tens of billions at our failing auto manufacturers is not going to make them competitive in the present time, let alone enable them to develop the transportation technologies we will need to make it throught the decline in oil supplies.

What we're doing with the ongoing and ceaseless cash calls for more "rescue", is throwing all our money and resources at propping up a failing and obsolete financial system whose "wealth" was all debt and that cannot survive as it's set up, or help finance the types of industreis we will need going forward. Debt creation and asset inflation never were the foundations of real wealth and a solid economy.

Friday, November 7, 2008

Is the Skyscraper Obsolete?

It was with a long pang of sadness that I read of the current financial difficulties of the developers of the lovely Chicago Spire. Financing always was dicey for this mega-scraper, even at the peak of the boom, which is why the original plans for the building were altered twice before the third and final version was settled on; and now it begins to look like the building might not get built at all for lack of adequate financing. At this time, only one third of the units have sold, and that might not be sufficient to get the project off the ground in the current crisis.

I would so much rather have had this beautiful and appropriately sited structure than the Trump building on the Chicago River that has destroyed the beautiful sightlines along Michigan Ave from Wacker Drive. But, hell, I'm not the one putting up the money, so it was not exactly mine to say, even though I feel strongly that the city should have blocked the Trump building because of the total mismatch between the building and its site among the dense grouping of much-smaller vintage buildings with their intricate ornamentation, that are among the city's chief architectural gems.

Of all the creations of the Age of Fossil Fuels, the thing I'm personally most loathe to give up is the high-rise building and the type of city that these buildings have made Chicago.

Will the Trump tower be the last building of its type and scale built in this country? Will the magnificent skyline of Chicago become a symbol, not of human ingenuity and ascendancy as a species, but the gravestone of a mentality and a society that didn't know when to stop and whose major achievement was the ability to build things that are just too big? Many people think so. In spite of the many "green" features now incorporated into mega-scrapers, such as the geothermal cooling system designed for the Spire that will use lake water to provide air conditioning, these extremely large buildings carry disproportionately large internal energy loads, that more than offset efficiency gains made by high population density and concentration of services; and many critics contend that these buildings will be rendered unusable as we move further into the age of resource depletion, and are destined to become slums, or scrap. Additionally, these really large buildings of 50 stories or more are much more difficult for first responders to deal with in the event of emergency-consider the challenge of evacuating an 85-year old off the 124th floor when the elevators have stopped running, as they are programmed to do in the event of a fire. Thus, these buildings require many redundant systems and fastidious maintenance thereof, as well as battalions of highly trained personnel to keep them running and to deal with such emergencies as might arise. Most come with their own power generators and fire protection systems, and most of them are highly dependent upon the ongoing availability of resources, such as natural gas, that are in steep depletion and might be unreliable twenty or thirty years into the future.

While I tend to think that substitutes can be found for these resources on the scale that a large building requires, they will most likely not be economical, and we can be thankful most of the inhabitants of these mega- structures are extremely affluent. However, it's not only the extremely affluent who live in buildings 20 stories or more, for Chicago and other cities contain thousands of buildings ranging 20-60 stories with hundreds of thousands of lower, moderate, and middle-income residents shoehorned into their flanks. The high-rise lifestyle has been, for most of those who live it who are above poverty level, a very comfortable and convenient existence, and the population densities it makes possible are crucial for the support of city services and amenities such as dense, various commercial and entertainment districts, and most of all frequent, and reliable public transit that can only be supported by these types of densities.

Can we make our existing stock of skyscrapers sustainable into the future, and should we build any more? It might be wise to impose height limits on residential buildings outside the downtown area, of twenty stories or less. The New Urbanist ideal is 4-7 stories, 7 stories being the maximum comfortable walking height in the event of a power failure. Some neighborhoods have limited new construction to that height, and that might be pragmatic, in addition to keeping new construction to the scale of an area of historic homes and buildings.

Saturday, November 1, 2008

Save Our Beaches and Stop The Lakefront Expansion

Vote YES To Stop the Landfill

The vista pictured at the right, the shoreline in Berger Park, will be destroyed forever if Mayor Daley and Friends of the Park have their way and ram through the plan to extend Lake Shore Drive northward into Evanston, and southward to Promontory Point.

Voters in Rogers Park, Edgewater, and other areas affected by the beach landfill and extension of the Outer Drive will have the opportunity to vote on this issue again in a non-binding referendum that will be on the ballot on Tuesday, November 4.

The provision reads as follows:
Should the City of Chicago, State of Illinois and Federal Government prohibit lakefront expansion from Hollywood Ave. to Evanston that includes extension of Lake Shore Drive or establishment of any other roadways, marinas or harbors, housing, major landfill or commercial development?

Yes _____
No _____

The plans of Mayor Daley and the Friends of the Park to construct an immense landfill and extend Lake Shore Drive into Evanston have met with overwhelming opposition from residents of affected areas in Edgewater, Rogers Park, Evanston, and Hyde Park (where the infill will extend south). In the referendum of 2006, 88% of Edgewater and Rogers Park voters voted against the expansion, as did 80% of Evanston voters. In a more recent referendum in Hyde Park, 90% of voters voted against it. However, FOTP and Mayor Daley are undeflected by the overwhelming opposition, and are continuing their efforts to ram this costly and destructive boondogle down our throats.

The original plans include a marina at either Calvary Cementary, or at Devon and Sheridan, and the extension of the Lake Shore Drive Expressway north into Evanston and south to Hyde Park. A vast landfill will be constructed east of the expressway.

At stake are the beaches in Rogers Park and Edgewater, which offer the only beach access on the north side north of the Oak Street Beach. These beaches will be lost, replaced by an extension of Lake Shore Drive to the east, and infill that will extend Lincoln Park, which is already underutilized. If the plans are fully realized, a marina will also be constructed, bringing boat pollution and increased traffic to the area, with no gain for area residents who will lose a major amenity, our beaches.

Loyola University is pressing for the expansion, and Mayor Daley badly wants this. The desires and priorities of residents in the affected areas are of no importance to Daley, or , apparently, to the aldermen who are supposed to be representing them. The justification offered is the relief of the heavy rush-hour traffic on Sheridan Road, which will be replaced, if plans are realized, by even heavier and faster traffic, complete with additional traffic noise and pollution, where now repose our beaches.

Year 2006 estimates, subject to revision, peg the cost of the project at $300 Million. It will mostly likely be at least three times that, at a time when the city is having a difficult time funding essential services and maintenance of critical water, sewer, and road infrastructure. Moreover, it will add greatly to the ongoing cost of maintaining the lakefront, in an era of constricting energy supplies and reduced need for highways or demand for amenities such as marinas.

There is no justification for the construction of another marina to accommodate pleasure boats, or another high-speed, limited-access roadway. Demand for harbor space and highway traffic both will most likely decrease drastically in coming years as energy supplies tighten further, while the need for expanded and more efficient public transit is growing rapidly. Money allocated to this wasteful and destructive project is money badly needed for repairs to our dangerously decrepit and outdated water and sewer infrastructure, for repairs and expansion of our decrepit and inadequate public transit, and for the expansion and improvement of our underfunded, and steeply undermanned police department and fire department.

Tuesday's referendum is, as mentioned, non-binding, and much more work and citizen involvement is needed to block this project.

Sunday, October 26, 2008

Wall Street: The World's Greatest Welfare Queen

$70 Billion of $700 Billion "Rescue" Funds Being Distributed to Wall Street Executives as Bonuses and Salaries

Can anyone think of a more compelling reason to steeply raise the income and capital gains taxes on high incomes, than the distribution of 10% of the "financial rescue" funds underwritten by our tax dollars, to the top executives of the financial firms whose greed, malfeasance, poor management, and failure to control risk is causing the cascading collapse of our financial system and the financial decimation of almost every non-rich American? These awards are being made while financial firms are shedding middle and lower-level jobs by the tens of thousands, and while the remaining rank-and-file employees are accepting pay freezes and cuts. The funds are definitely not "trickling down".

Does anyone out here believe that the recipients of this incredible largess could be said in any sense to have "earned" these awards? If you make a mistake that costs your firm $100,000, say, will you be given $300,000 of the taxpayer's money, or your company's, for that matter, as a reward for your performance?

By "high income", I don't mean $250K a year, or even $500K a year. I mean $5 million to the stratosphere, for we are talking here about people who commonly receive $10 Million or more in compensation, and sometimes receive hundreds of millions of dollars in return for destroying the value of their companies and our financial system, in the process.

The "rescue" funds are being distributed at the discretion of Paulson, whose first loyalties are to Wall Street, and who has total, unrestricted discretion over the use of the funds. Congress has imposed no guidelines or control on their use, even though this was "suggested", but merely rammed the funding package through with haste that is truly incredible given the stakes involved.

We are being systematically plundered, as well as being set up for complete financial and economic collapse including a treasury default, in order to guarantee lifestyles comparable to those of Saudi Oil Sheiks to the most rapacious and unprincipled passel of crooks, thieves, and con artists ever to manage the finances of a major nation. 90% of our population is being rendered poorer and less secure as a result of the mismanagement of our financial system that has been enabled and subsidized for the past two decades by our authorities, and all hope of a reasonable recovery, and the rebuilding of the economy on a sound, honest foundation, are being destroyed by the ballooning of treasury debt and the wave of hyper-inflation that will surely result. Long-standing businesses are being destroyed, along with many formerly well-off citizens, while the the middle-classes are being driven to near poverty and the poorest among us are losing their last faint hopes of bettering their situations and climbing to the next rung of the ladder. Our cities and towns, and our necessary services, will lose essential funding and "give backs" of the taxes they have sent to Washington D.C., while local taxes whither with dropping incomes and inflating costs, so we can expect less police protection, steeper deterioration of essential water, sewer, and road infrastructure, and higher local tax rates to offset the money we toss into the deepening hole of the federal budget.

What we can now clearly see is that both of our political parties are not only ineffectual at the task of steering our economy, but that both have colluded in bringing the country to the pass we're in now, which is that we are a bankrupt and impoverished country that has squandered its resources and destroyed its ability to make a living by encouraging the destruction of what was once the world's mightiest industrial economy, and fostering the financialization of our economy, with the result that we are dependent upon financial scams and debt creation to make a living, and are now saddled with non-survivable levels of public and private debt

We can also see that our leaders from both political parties have no stake in the well being of either our economy nor in that of the segment of the population that has a net worth of less than $50 Million.

We can see that both political parties are growing increasingly irrelevant, and that neither is fully addressing the concerns and urgent needs of the polity at large, or of most of the citizens who comprise it.

Most of all, we can perceive, or ought to be able to reason by now, that that certain decisions are simply too major and too far-reaching to be entrusted to politicians and policy makers, and that economic policy is one of them. We now know that many major policy decisions that seemed timely and brilliant in the hour they were made had disastrous effects over the years, and often immediately, because they are too large and because their unintended consequences cannot be predicted, and because they cut off the possibility of making the small, local, fine-tuned adjustments to shifting circumstances that enable individuals and entities to adapt to changes in the economic landscape, for these policies cause massive, sudden changes that are too sweeping for successful adjustment.

I'm not optimistic that we will be able to change the course we're set on now anytime soon, and that path seems to be toward greater socialization of our economy in lockstep with an even greater income divide, and with a bias towards guaranteeing lavish unearned rewards to the very wealthiest class of Americans while destroying all incentives and all hope for anyone not born into this privileged order, whose ranks will be this society's owners. In other words, we will have government sponsorship of private ownership by a small oligarchy, whose ranks will be guaranteed an absence of competition or exposure to risks commensurate with their rewards. The rest of us will assume the risks while being permanently blocked from rising from near or total poverty.

Saturday, October 25, 2008

Lipstick on a Pig Cont'd

Leave it to the Party that Wrecked America to display rare sensitivity to the concerns and priorities of female voters out here by publicizing that the RNC spent $150,000 on new duds for Sarah Palin to wear on the campaign trail, in the belief that Sarah's new style would help draw women voters.Now, they're aghast at the unfavorable reaction they've received, notably from women.

I mean, but here is something that just has to touch the hearts and minds of every woman in America. How heartening, at a time when most women out here are are trying to figure out how to get last year's shoes re-heeled and the three-year-old winter coat rehabilitated, while still managing to put food on the table and gas in the car for the 50-mile commute to the job she is about to lose, and still pay the day-care bill; to see Sarah all buffed up with the latest splashy clothes from Nieman Marcus.

The Republicans clearly still view women as just these li'l fluffy things whose whole lives revolve around reading fashion mags, shopping, and having babies, in keeping with their support of pre-feminist "family values", their allegiance to the anti-woman Christian Right, and their stated platform favoring the "privileging", by tax incentives and other inducements, marriage and stay-at-home motherhood. The Republican contempt for women and lack of sensitivity to our issues is evident in their every attempt to pander to us by their selection of some egregiously unqualified Republican Handmaiden as a candidate for a major office, such as championing Stepford Wife Elizabeth Dole for the presidency in the 90s, or selecting Sarah Palin for John's running mate to begin with.

Well, like the selection of this egregiously unqualified woman with her anti-woman policies to begin with, the Wardrobe Caper is backfiring and alienating the very voters whom it was meant to impress to begin with.

But at least Sarah will have some spiffy duds to take home with her as souvenirs of the campaign after she and her running mate get their asses kicked to the curb this November. Let's hope Sarah finds her new wardrobe to be a sufficient offset to the loss of her political career, for indications of sentiment in her home state, Alaska, hint that the scrutiny of her doings as Governor there has cost her much of her support there.

Thursday, October 23, 2008

$5 Trillion and Still Counting

It's not working, and it's never going to work, and our policy makers should have known that it wasn't going to work.

So far, not a single new job has been created, but incomes have continued to shrink while the costs of food and other necessities continue to spiral upwards. The steep drop in oil and gas prices, due to demand destruction, is a relief- let's hope prices hold for a while at this level, so that people can look for jobs and heat their houses- though you have to sense that careening around the freeways to distant suburbs in search of a job that pays just barely enough to cover their car costs is probably just an especially cruel exercise in futility for most people, what with 165,000 jobs being lost per month.

The tote for the "rescue" of our financial system is now reaching $5 Trillion, and the behavior of the markets constitutes a vote of no faith in the efforts of Bush,Bernanke, Paulson, Pelosi, et all to reverse the collapse of credit by inflating the treasury debt and burdening every single taxpayer in the U.S. with an average government debt load per taxpayer of approximately $24,000.

What they're accomplishing, instead, is the utter and probably permanent impoverishment of 80% of our population and the further crippling of our economy. The efforts of individuals and businesses to recover and rebuild on a solid foundation will be critically hampered by the additional taxes necessary to service the largest government debt, as a percentage of total obligations, of any economy that ever existed.

So far our policy makers have shown a lack of ability to do anything other than wreck more destruction on our fragile economy. Pelosi is proposing yet another "stimulus" package. Watch- in weeks to come, ever more and larger bailout packages will be foisted on us, with ever worse results.

Wednesday, October 22, 2008

Did The Free Market Fail?

It's just possible that the worst consequences of the bubble and its inevitable pop is, not the foreclosures or failing banks, or even the hundreds of thousands of lost jobs, but the final destruction of what remains of economic freedom and the nearly complete socialization of the U.S. economy.Even pundits whose opinions I generally respect are joining the chorus and blaming Free Markets for the almost surreal ballooning of debt, and the inevitable disastrous consequences of that, over the past ten years..... just as they did in the 1930s, when a series of expensive and over-reaching government interventions, very much like those be done now, did nothing to stop the rapid deflation of the credit bubble created in the 1920s.

I have just a few little questions: When has the United States ever been a Free Market? And how can an economy that since 1880 at least, been driven principally by far-reaching policy decisions in conjunction with massive direct and indirect subsidies for chosen industries in combination with the deliberate destruction of others, be considered by any stretch to be a "free market?" And is there a single major trend of the past 100 years or so that was not the result of far-reaching policies that, more often that not, triggered wrenching dislocations in our economy and social fabric that not only more than offset whatever good was accomplished thereby, but additionally triggered chains of events and trends that cascaded and amplified over subsequent decades and ballooned into runaway trains in and of themselves, rolling heedlessly through the landscape and flattening everything in their paths? Our pathological automobile dependence and the destruction of our cities come immediately to mind, and so does the withering of our manufacturing economy, and its replacement by the financialization of the economy and our dependence upon monetary manipulation and the layering of debt to drive the economic growth.

One of my favorite exercises in visualization is to try, if I can, to imagine the physical and economic landscapes as they would be without the creations of our policy makers in conjunction with crony businesses and their lobbyists. Would 90% of our population be completely dependent upon autos for transportation, and would our cities and their dense networks of commerce, industry, and public transportation have been utterly destroyed if we had not, 80 years ago, converted the sentimental cravings of Americans for rural live as depicted in Currier& Ives illustrations, into public policies that dictated suburban development further and further into the hinterlands of cities for decades out, financed with massive allocations of tax monies? Might we still have a fully diversified, manufacturing economy had not our major industries been rendered uncompetitive and ossified by the huge guaranteed profits of defense contracting? Would the old cities of the Eastern half of the country, with their favored locations on waterways and rich farmland just outside their boundaries, have lost half of their populations to cities in the desert that could not exist without hundreds of billions of dollars in "investment" in transportation and water diversion, beginning with the massive subsidies to Union Pacific in the form of land grants that made possible the transcontinental railraod, to the pharaonic water diversion and highway projects of the 20th Century, all paid for with tax dollars?

Steve Saville, in "Trying to Get Something for Nothing", identifies with precision the absurdity and destructiveness of government intervention in the financial system and how government policies have been the root cause of this debacle, as well as that of 1929-1933. Saville confines himself to two main facets of government intervention, specifically the belief that rampant infation in housing prices was good and should be promoted by government policy, and that the way to do this was to push interest rates as low as possible and flood the country with easy money available to anyone, regardless of their ability to repay.

I could add that these policies were rendered ever more destructive by removing the very last constraints on speculative excess by the government financing, direct or indirect, of the greed stampede, namely through the alphabet soup of government agencies and government-sponsored entities-HUD,FHA, FNMA, GNMA, and the rest- whose sole purpose was to serve as a place for financial institutions to offload undesirable loans for which there was no other market, and to make "ownership" possible for people who can barely pull their rent together, or people who chronically spend themselves into steep debt no matter how high their incomes are.

We have, over the past century, ceded to our authorities almost unlimited power to steer our economy and our lives according to the dictates of whatever intellectual or social fad holds sway at the moment, and to codify it into policies that become rigidly entrenched long after they've proved to be fallacious, and have become drivers of destruction. Once a program or agency is in place in this country, it is reinforced with layers of bureaucracy that are self-perpetuating and have a tendancy to replicate themselves vorociously, especially those which, like our various housing agencies, dovetail with the business needs of large and profitable industries, such as the home builders and financiers.

Worst of all, at the same time we provide easy, unearned subsidies to certain industries, we destroy others that might better serve our needs, and with greater efficiency and with solutions that better fit the need, than their heavily subsidized competition.

What we have had is not in any sense a "free market", but a mixed economy, an economy in which most goods and services are produced by entities that are organized as for-profit concerns, and owned by shareholders, but whose direction and business are driven by public policy, by means of outright directives, as well as favored tax treatment, and various direct and indirect subsidies. We have so extensively subsidized so many industries in so many ways- indirectly or directly, openly or covertly, that it is now impossible to describe any part of our economy as "free".

A mixed economy almost never remains so, but will always tilt in one direction or the other, and it will usually tilt toward complete statism, as is happening now. This happens as the failures of policy begin to cascade, as they are now, and produce a situation of emergency, causing more and louder calls for more intervention, which usually consists of actions of the sort that caused the problem to begin with... as is happening now, as each intervention is larger and costlier than the last with ever diminishing returns.

And we are now almost at the end of the road toward complete socialization, and our politicians and policy makers are, predictably, attempting to mitigate the situation they've created over the past 20 years by the very actions that created the mess to begin with-by flooding the country with more fake money in the form of easy credit-and attempting to muffle the "feedback" that, left to run its course, would help the situation correct itself. At this time, over half the population of the country is employed by a federal, state, or local government agency, and a substantial fraction of those employed by nominally private concerns are dependent upon subsidies, such as our commercial airlines, major agribusiness, and most land transportation, begging the question of who remains to pay the bills for the bureaucracy, inefficiency, and misallocations of money and resources that inevitably result from government "assistance".

What will the next stage be? A treasury default? The annual budget deficit has now topped a trillion dollars, and the total treasury debt now stands at about $11 Trillion. It's doubtful we will be able to raise more tax revenue in a rapidly deflating economy, so our leaders have opted to inflate our way out of the situation, to the utter destruction of our elderly, our savers, and all of our poor and working poor population. The result will be that our poor will grow poorer, and a greater portion of our middle class will fall into poverty that deepens every year, with no hope of ever climbing out, especially since we now have to compete with other nations for a diminishing pool of resources.

Sunday, October 19, 2008

The Twilight of Belief

"Reality is what doesn't go away when you stop believing in it."- Philip Dick, A Scanner Darkly

"Your reality check is in the mail." - James Howard Kunstler, The Long Emergency

Back in my salad days as a rookie stockbroker, many moons ago, our in-house training consisted, not of analytical tools, product instruction, or prudent money management, but of induction into the Cult of Belief.

Cultivating a Positive Mindset was the focus of most of our sales meetings, which were conducted twice daily, with major meetings scheduled weekly, and division confabs taking place monthly. At these events, the speaker, who would be one of the firm's top producers, or sometimes the CEO or one of his top guns, would strive to imprint us with the notion that you can create the reality you want simply through "visualization" of the outcome that you desired- "Attitude is Altitude!"- and that fabulous success was assured if only you would internalize the necessary beliefs. These meetings were reinforced by more or less compulsory attendance at outrageously expensive seminars (at your own expense, of course) conducted by such stars of the motivation industry as Brian Tracy or Tony Robbins.

In my office, our Branch Office Manager directed us to write down and provide illustrations of our "goals", which were, of course, inevitably of the material sort- a $900K house, say, or a new Mercedes, or other high-priced material goodies. You were- get this- supposed to either draw little pictures of your "goals",or cut them out of magazines, and paste them in a scrapbook, which you would be requested to display at weekly sales meetings, while stating what actions you were taking to bring about the desired results. The idea was that merely by believing that you "deserved" lavish material rewards, that such would accrue to you merely by the rote repetition of the motions.. making the calls, making the closes, and by believing that it would all work......just exactly like the Cargo Cults of the South Pacific,where an American cargo plane made an emergency landing during WW2 and distributed tons of fabulous booty- liquor, prime steaks, luxury clothing, and anything else on board- to the natives, who are doubtless still building bamboo models of the plane and lining a runway with bamboo mockups of runway flashers in the belief that merely by visualizing, that they can score themselves another few tons of manna from heaven.

This is the mentality that informs most Americans of whatever socio-economic rank, level of education, cultural bias, or region, as the collapse of our financial system, and economy, progresses and we roll into the age of permanent energy depletion. Our financial and political leaders and their servant talking heads on shows like CNBC babble about how the unravelling of the tower of fake money is merely a crisis of "confidence" and how prevailing "sentiment" is keeping citizens out of the stores, and that if we can just crank up the fake money press again and harness "alternative energy" to keep 200 million cars and trucks running, that we can party like it's still 2003 and you could make a living on your house appreciation, just by living in the place, and that we can continue to rack up debt and heat our 4,000 sq. ft. crapboxes 78 miles from the city while scrapping the remains of our industrial capacity and fighting ever-widening wars for the remains of the planet's fossil fuels. We can do all this, they say, if only we believe, if only we have "confidence", because, don't you know, the United States is an exceptional country that is especially blessed by Jesus and is bringing "democracy" to the dark corners of the globe, and anyway there'd be "plenty" of oil if only all those enviro-fascist liberals would allow offshore drilling, and there are multitudes of brilliant people out there who will surely find a way to run all our tech when the oil really does start getting short.

"You've heard of mental depression; this is a mental recession." Really, Mr. Graham? I guess that 165,000 job lost per month, reduced hours and pay for those remaining, and trillions of dollars of private and public debt that we don't have the wherewithal to repay and probably never will, are just all in our heads, and so are the maxed out credit cards and stagnating pay that has dropped 1%, on average, since 1999. I suppose that all we have to do is believe that our situations are at least cool, if not improving, and that we have money to spend, and. presto, we will have jobs and money and be able to go back to running up credit bills to "support the economy" and to tapping all that idle "wealth" trapped in our houses.

"You'll do something, Mr. Reardon- ." There exists the blind faith of the more educated middle-class in the ability of our technocrats to just "do something" to "solve" the problem of dwindling resources, and in the doubtful talents possessed by the utterly lame, clueless, and brazenly lying policy makers who created the financial bubble to begin with, to deliver us from the consequences of 10 years of piling on one layer after another of debt in the service of fake "wealth creation"-a belief far less justified than that of Ayn Rand's "wetnurse" character, who at least vested his faith in someone of proven brains and ability. "There are a lot of brilliant people working on these things. They're sure to come up with something, " my mother says in an attempt to reassure me, and I don't doubt that. However, I'm pretty doubtful that they can achieve results that will come close to satisfying the expectations of a population nurtured in feelings of entitlement to the satisfaction of every whim, and in the belief that there are no limits and that you can conjure things into existance despite known limitations merely by believing in them.

Earth to Americans: You are engaging in Magical Thinking, and you are functioning on the mental level of a six-year-old, and you are getting bitch-slapped by reality. The money is gone and the oil is going and we have no way to make a living in this country beyond making lattes and running financial scams and the businesses connected with them. We can't recover all the money that was lost in the past six years just by shifting it to the tax payers and we aren't going to recreate the ease and prosperity of 1965 by tossing more money at obsolete industries. And all the motivational seminars and Positive Thinking and chanting of mantras and Prayer Breakfasts in the world aren't going to help us make the transition from the quagmire of the present to a productive, sustainable society driven by the production of real products in industries that will be relevant in a vastly different world than the one we've been living in for the past 60 years.

Thursday, October 9, 2008

Abolish The Federal Reserve

The Federal Reserve has been responsible for the creation of some of the worst credit debacles since people began using currency and granting credit.

Maybe it's time to return to an economy based on fundamentals and driven by the production of real goods and services, rather than monetary manipulation, debt creation, and asset inflation.

Follow the title link to the petition to abolish the Fed- an institution that shouldn't have been permitted to survive the Great Depression.

Wednesday, October 8, 2008

Citi May Be Next

Nouriel Roubini, NYU Stern School economist and chairman of RGE Monitor, is predicting another failure of a major bank.

"Eventually, a government takeover of the biggest bank in the U.S. is a possibility," he says.

Will Bank of America, Chase, and Wells Fargo make it? Will a single major institution be left standing after this debacle finishes playing itself out?

Will we even still have MONEY after the dusts settles?

Nobody is really surprised that the big bailout is not working. Our policy makers should have know it wasn't going to work, and that we're not going to rebuild the economy by artificially propping up the prices of outrageously overinflated assets (i.e .housing) by shoveling evermore public money into the widening hole, while burdening the treasury with ever more debt.

The only emergency action that the government could have taken that would actually help would have been to guarantee all "demand money"- bank deposits and money markets, to the full amount deposited. This would forestall bank runs and assure that something would be left after all the failures and defaults.

Monday, October 6, 2008

Bailout Fails to Reassure Investors

It appears that the great assistance plan is failing to reassure jittery investors around the globe or to ease credit, and it's increasingly doubtful that the government can do anything at all to restore confidence.

The markets here haven't opened yet, but stocks are already down in Asian and European markets, as panic spreads and credit continues to tighten.

Well-regarded NYU economist Nouriel Roubini, who accurately predicted the present debacle, calls the situation one of "generalized panic", and noted that the numerous government interventions of the past year have been getting larger, with diminishing returns.

What's next? A still-larger allocation of future taxes to be tossed down the sinkhole of collapsing debt? And how do we know it will work, when it's already obvious that the massive intervention of Friday isn't going to work as projected.

We can't continue to take the bait. Too Big to Fail also means Too Big to Bail.

Friday, October 3, 2008

The Day of Infamy: The Official End of the Free Market and the Disaster of Government Intervention

Friday will surely be remembered in history as the most tragic day in the history of the United States, the day when this country's very justification for existence died, as most of our legislators on both sides of the aisle discarded whatever ideological differences they might have, in allowing themselves to be terrorized into legislating the complete socialization of our financial system, and colluding in pushing the country a large distance toward the eventual, and possibly inevitable, complete default on its sovereign debt and the utter destruction of our currency and what remains of our economy.

I had many, many thoughts as I witnessed this past week's ugly spectacle of intimidation by lies, compromise, abject fear, and utter capitulation to the terror-mongering of Paulson and his Wall Street cronies. Why, you had to wonder, would anyone believe that the economy would completely collapse merely because Paulson, who has told us nothing but lies during his entire tenure, and the Wall Street geniuses who engineered this debacle, told us so? Yet this wild claim was taken at face value.

No matter how dismal is the current situation in the credit markets at present, this massive addition to our national debt, which is almost too large to be repaid even now, will not only not arrest the unwinding of the un-repayable debt with which our large financial firms have burdened themselves, but will spread the distress to every corner of the economy.

Given that we are headed into an economic disaster no matter what, and that the great unraveling is proceeding with great speed and is unstoppable at this point, it would seem that the most constructive thing we can do is isolate healthy institutions and activities from the spreading blight, while triaging operations that are too far gone to be salvageable. However, this massively costly intervention, which basically commits the U.S. Treasury to supporting the financial system and its major players at whatever cost to the taxpayers, on terms left to the discretion of Mr. Paulson, will most likely make it certain that the Righteous will die just like the Wicked, and that no citizen and no enterprise will be able to isolate itself from the avalanche of failure.

It's easy to blame the Republicans, for it was Bush and his appointees Paulson and Bernanke, in response to the desperate entreaties of wealthy Wall Street executives- almost all Republicans, who made hundreds of millions of dollars in fees and profits by setting this country up for the most catostrophic financial debacle in recorded history. However, the Democrats have had the major part in creating the structure of entitlements and government agencies that enabled and fueled the speculative binge of the past 10 years, while the Republicans made debt formation, calling it "wealth creation" and the "ownership society", the centerpiece of their economic policy. The public, meanwhile, was unable to pass on the good times to be had by pretending to be rich by means of virtually unlimited credit available to almost anyone.

We are all guilty, but the major responsibility attaches to the policy makers who saw clearly that a disaster of unimaginable proportions was setting up by 2003, yet said not a word in protest as the lending and spending became even more reckless and our institutions continued to layer on evermore unrepayable debt and as homebuilders and mall builders continued to build hundreds of thousands more 4000 sq ft homes in suburbs 80 miles out of the city, and condo builders threw up more and more shoddily built 50- story highrises with $400K one bed apartments in buildings with ever-shoddier construction within the speculation-crazed precincts of Miami, Los Vegas, and Chicago's South Loop.

The ugliest upshot of the collapse of our credit markets, is that the lessons contained therein are completely lost on both policy makers and the public at large, all of whom have managed to draw from the disaster the conclusion that free markets do not work and that the economy can be managed only by the heavy hand of the government.

That this debacle was created by government intervention and that the creation of the credit bubble was, in fact, a centerpiece of Bush economic policy, goes unmentioned. That the disaster that is now unfolding and cascading through our economy, toppling businesses, bankrupting unprecedented numbers of citizens, and triggering tens of thousands of layoffs, was forseen as early as 2003, and many credible experts warned of the developing catastrophe, their cogent, well-worded warnings, backed up by hard numbers, unheeded and mostly unacknowledged by Bush, Paulson, Greenspan, and Bernanke, as well as by executives at financial firms that have now collapsed under the weight of all the worthless garbage paper that they have now succeeded in offloading onto the American public. As the venerable and brilliant former Republican strategist Kevin Phillips, states in his landmark analysis of our current political alignments, American Theocracy, the creation of the monstrous structure of layered debt based on steeply overvalued assets, as a tool to drive our otherwise unproductive economy in an era of depleting resources and dependence on foriegn oil, was well underway by 2004, by which time it was obvious that the chain of utterly reckless debt creation could not possibly be sustained for much longer into the future, and that its inevitable unraveling had the potential to blow our financial system to smithereens:

"If there's a bubble, it's in this four-letter word:debt. The U.S. economy is just awash in it".
-David Rosenburg, Cheif North American Economist at Merrill Lynch, speaking in 2001.

"The United States has never run such large currrent account deficits and no single
nation's deficit hs ever bulked nearly as large relative to the global economy.
- Former U.S. Treasury Secretary Lawrence Summers in a 2004 speech.

"There are disturbing trends: huge imbalances, disequilibria, risks-call them what you will. Altogether the circumstances seem to be as dangerous and intractable as any I can remember.......I don't know whether change will come with a bang or with a whimper, whether sooner or later. But is things stand right now, it is more likely than not that it will be financial crisis rather than policy foresight that will force the change."
_Paul Volker, former Federal Reserve Chairman, The Washington Post, 2005.

And now, the massive intervention, that comes at such great cost to the public till, will not only not change the destructive fiscal policies of the current administration, but will attempt to enable our financial system to do more of what it was doing that caused the problem to begin with, which is the reckless extension of credit to unworthy borrowers for fantastically overvalued assets. Accounting rules are being suspended in order to allow firms holding piles of reeking garbage debt to allow mark-to-fantasy valuations of their worthless crap. Every attempt will be made to prop up stock prices and house prices. The treasury will have unlimited power to buy whatever securities it sees fit at evaluations that may or may not have any basis in reality, for it is the task of the treasury, under this bill, to create an evaluation for the assets, whether they would fetch that in this market, or any market, or not.

FHA loan limits have been raised, as have the limits of conforming mortgages eligible for purchase by GNMA and the GSEs, Fannie Mae and Freddie Mac., what agencies were responsible for the inflation of the debt bubble to begin with, for were it not for these government agencies and GSEs whose whole reason for being is to serve as a dumping ground for risks that would be unacceptable to financial institutions were it not for the explicit and implicit guarantees of such agencies, and by the Federal Reserve. We are in our present predicament not in spite of government intervention, but because of it, for were it not for the multitude of socialized housing programs specifically designed to make housing "affordable" for high-risk borrowers, and the stated and visible willingness of the Federal Reserve to bail out failing institutions and entities on the grounds of the public interest, our institutions would trim their risk considerably, and the normal fluctuations of the business cycle, with its expansions followed by contractions, would be much milder and shorter-lived.

Worse, we will set the stage for more destructive financial binges, for it is now completely understood by all that government authorities will always step in to rescue failing business entities that are considered of key importance because of their size and their executives' connections to powerful politicians.

We will additionally continue to throw good money after bad, in supplying tax-funded support to obsolete, non-competitive "sunset" enterprises, such as our sadly incompetent and uncompetitive domestic auto manufacturers, while killing budding enterprises in promising new industries in the inception, as they are deprived of necessary capital because the tax burden has grown so large by way of supporting failure that capital is scarcer than ever, especially for the innovative and experimental industries that we will need if we are to survive resource depletion and the failure of our financial system and rebuild our economy and lifestyles on a sustainable platform.

A reader of James Howard Kuntler's blog, a citizen from Ohio, remarked that we could completely rebuild our railroads and electrify them, with service to every town with more than 5,000 people, with the money that is being allocated to the bailout of our financial system.

Worst of all, this will not be the last cash call. Expect another desperate call for another trillion dollars or so, or more, in a couple of months when it becomes obvious that this rescue attempt is not working, for $700 Billion is only a fraction of what will be necessary, given the immense exposure in structured debt instruments and other derivative instruments that grossly amplified the leverage, and risk, inherent in the mountain of overvalued mortgages and commercial loans. Commercial credit is only beginning to unwind, and there remains the mass of credit card debt overhanging the economy.

If there's anything that ought to be evident from reviewing past and present financial debacles and the depressions that resulted, it should be that the largest and most far reaching disasters result in the attempts of government authorities to "play God" with the lives and fortunes of hundreds of millions of citizens and thousands of business entities; that the economy is simply too large and too complex for any group of people, no matter how expert and educated, to predict how sweeping policy decisions made at the top will play out over the near term, let alone over decades. We should by now have learned that the policies and instruments put into place 75 years ago by well-meaning people of ability and deep knowledge, had many unintended consequences that played out and amplified over the ensuing decades, with disastrous results, such as the decision, made with the best of intentions in Roosevelt's era, to enable as many Americans as possible to afford, with government assistance, the unaffordable. Roosevelt could not have predicted that the current administration would turn these socialistic enterprises into the agencies by which his administration's disastrous fiscal policies, namely the stated intention to enable the creation of a mountain of debt as the driver of "wealth creation", could be implemented and developed with the results we have seen.

What will be the unintended consequences of this latest disastrous and most far-reaching intervention? Aside from attempting to do what no government has any business doing, which is propping up housing prices at still-unaffordable levels, and stock prices at levels unjustified by the prospects and current financial situation of the underlying companies, for the benefit of dishonest and incompetent financial firms and flagrantly imprudent and extravagant home debtors, it will take us further down the road to government insolvency, which would be the ultimate disaster, and one that no one will bail us out of.

Instead of devising evermore ways to offload the burden of malfeasance and incompetence on the next three or four generations of hapless taxpayers while freeing the guilty from responsibility, we could start the process of unwinding the structure of government agencies and entitlements designed to facilitate easy credit, while returning to lending standards reasonably designed to select for borrowers able to repay, from citizens buying homes to businesses contemplating expansion or startup. We could start the long and painful process of de-financializing our economy and founding it on manufacturing and agriculture, the only true founts of wealth creation.

A system in which your responsibility is commensurate with your liberty would work to restore equilibrium, by weeding out the irresponsible, the incompetent, and the criminal as they failed, while rewarding prudence, responsibility, worthwhile innovation, and accurate judgment. But there is no way a "free market" will work as long as players have absolute license with no commensurate responsibility for the consequences of their failures, and know that they will be rescued by the body of taxpayers whenever they produce the kind of results we are now seeing. It is like handing your manic 16-year-old an American Express card with an unlimited line of credit, while making it clear to him that he will not be held responsible for the bill, and wondering why you get a $360,000 bill in the mail, payable immediately, the following month. Therefore, we must, unfortunately, return to the stricter regulatory climate that prevailed before 1980.