Boom, boom, boom, boom, boom

[solarbird]

This post is a MESS. But I wanted something up. A lot of links are missing. If there's interest, I'll dig them up tomorrow.

Debt talks in Greece fell apart on Friday. European markets took it in the face on Monday, down 5%ish overall. (There's a bit of bounceback in early morning trading today, as I type; we'll see whether it sustains itself.) Greek bonds are trading at default rates now. IMF people are talking openly about expectations of a default within the next 12 months.

German voters are weighing in on the bank bailout series, and not approving. Gold is spiking.

Zero Hedge has a laundry list of reasons to panic. One of those reasons is if the Greek debt talks collapse. Aheh.

And on Wait Wait Don't Tell Me this weekend, Austan Goolsbee - until recently an economist at the White House - said, and I quote, "you wouldn't want to be European at this moment, they are screwed." Refreshing candour? It's sad that all the best news sources are comedy shows.

Here's an article on the Fed's secret bank bailouts, and remember all those desperately-underwater mortgages and mortgage backed securities swapped to Freddie Mac / Fannie Mae at face value? The properties themselves are about to be sold back to investment houses below market value, for a nice double-dip. TheStreet reports:

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs(GS_) and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

In the process, these investors will instantaneously become the largest improved real estate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.

Now, in somewhat better news, there is finally some action against some of the fraud, in the form of a variety of lawsuits against various banks over mortgage fraud. (Also here.) What should be happening is criminal charges, and what will probably happen is settlement without admission of wrongdoing, which will be just another notch in the "cost of doing business" pistol grip. As The Street says, Goldman Sachs has nothing to fear.

Even that little bit of action is prompting fierce condemnation, with MarketWatch calling it a "self-inflicted wound" on the economy. No, the mass fraud was the wound.

That said, Bank of America is raising capital and selling off non-core investments like there's no tomorrow. Very important insiders think they need a lot of cash. Now.

Meanwhile, mass document forgery continues unabated. This is black-letter-law illegal, of course. It gets reported a lot as "paperwork snafus;" that's a lie. It's fraud.

Credit default swap costs are soaring in China. Remember those? Foo.

And, of course, the jobs report was terrible. There's no good news to dig out of it. Worse, the previous two months were revised down - like usual, but worse - so the signs of recovery in employment? Eh, not so much.

Unrelated to any of this, MIT has an interesting project going on measuring inflation, called the Billion Prices Project.

European markets are bouncing around all over the place right now. Italy's down hard after the (mostly symbolic) President said "yeah, we're screwed" over the weekend. It's not freefall, but it's ugly. French and German markets are now down after spiking up in opening trades. FTSE still up but gyrating pretty well. No telling how this is going to fall out in the short term. Good luck, everybody.

Comments

[gwendally.livejournal.com]

Thanks, I really appreciate your economics posts. We follow similar story arcs from different sources

I was just telling my husband that watching Greece collapse was instructive because we're on exactly the same path. I find it fascinating.

One of the things that distinguishes us from Europe is that we don't even notice our inter-state transfers; how much New York taxes bail out New Mexico, for example. It's been a boon to our country's stability and not one person in 1000 ever thinks about it. Unlike in Europe.

[bradhicks.livejournal.com]

Somebody should have told the Europeans that monetary union without full political integration is something the United States tried back in the 1770s, and it was disastrous. Oh, wait: we did. Now, if they follow our example, given a choice between discarding the Euro and uniting Europe into a single country, they'll choose the latter. But with much longer history and bigger language differences, uniting Europe's a lot harder problem than the 1789 constitutional convention faced.

[gwendally.livejournal.com]

Really? We had slave-owning landowners in the south joining up with financial and manufacturing abolitionists in the north. I'm still stunned it worked in the first place. But, you're right, we didn't have the language differences. (We do now, of course.)

[king-chiron.livejournal.com]

How are we on "exactly the same path?" That's a Tea Party line that doesn't bear much resemblance to reality.

The rates on Treasuries have been falling but the Tea Partiers/gold bugs assure us that we'll be hit with soaring rates and hyperinflation any minute now. The same thing they've been saying for the past three years.

[gwendally.livejournal.com]

An the o rings have never failed, either.

The thing is, that which cannot continue will stop. It's not rocket science. We cannot continue to live beyond our means forever. We live in a finite bounded world.

One of the major puzzles being faced right now is how to handle Peak Oil. How to do an energy descent? Preferably with safety nets intact. But cheap energy = complex systems and the more expensive energy gets the harder it is to maintain complex systems.

Another major puzzle - and it's related - is what to do when you grow up. How to use your labor to produce a goods or service that other people wish to pay you for so that you can earn a sufficient wage to buy your energy and health care and shelter and food. It's no small question and it has faced humans through-out eternity. What makes labor worthwhile? Generally-speaking it has the major attribute of transforming energy into something.

With extraction industries on the wane - we extracted things LAST century, including our cheap oil - what is left that provides our current standard of living? What do we DO that is of such worth that we can continue to live a 1st world lifestyle? (And what forces exist that would allow us to live a better lifestyle than, say, workers in Nigeria? Or Brazil? Or India?)

The economic forces are leveling the 1st world down to the standard of living of the BRICs. Fighting it by living on debt CANNOT work against the array of forces working against us. Math always beats fantasy.

I think we might be disagreeing on a matter of time frame. Keynes actually IS dead, so in that sense he was correct. But I'm NOT dead. I'm interested in the long run. If what we're doing isn't sustainable, isn't good stewardship, isn't fiduciarily responsible then I think we should stop.

[403.livejournal.com]

You might be interested in the Riot for Austerity (useful explanatory blog post (http://sharonastyk.com/2011/08/01/time-to-riot/), faceborg group (https://www.facebook.com/#!/groups/250703711615466/)), since the goal is to figure out how to have a high quality of life in an "industrial" country, with about the same resource usage as today's average Chinese peasant. (The peasant is using a fair share of the world's resources, while the present-day American is not.)

[king-chiron.livejournal.com]

There's a difference between living beyond your means and eminent financial collapse, like Greece. As has been pointed out by many people there are huge differences between the US and Greece, not the least of which is that we control our own money supply.

The example of Japan suggests that countries can run huge debts for long periods without collapse. Granted, I'm not saying that's a good idea, but again, it's the difference between saying someone needs to lose weight and "OMG you're going to die tomorrow!!"

Generally those pushing the Greece angle are Tea Partiers who believe what we need is huge and massive spending cuts. I would suggest that that sort of behavior is seriously counter-productive in the current situation.

[st-rev.livejournal.com]

I swear, it's like listening to medieval physicians solemnly assuring one another that more leeching is just the thing for the patient.

[epawtows.livejournal.com]

Take a look at Iceland. A few years ago they seemed the worse off. No, they're not so bad (not *great*, but compared to Greece?).

[st-rev.livejournal.com]

They made the bold move of telling the international bankers to fuck right off. The world didn't end. It's a scaaaaaaaary precedent.

[solarbird]

It's an awesome precedent.

[niac.livejournal.com]

Hear hear.

[phillipalden.livejournal.com]

On Robert Reich's website (http://robertreich.org/) he talks about restoring the American economy will take strengthening the Middle Class, and without a strong Middle Class our economy will not recover.

I agree.

[gwendally.livejournal.com]

I was reading an article in the Economist yesterday that referred to the emerging middle class in the developing worlds as earning between $2 and $20/day.

From where I sit, a student of history, the middle class in the United States is wildly affluent, able to afford a great deal of wonders that eluded everyone else in history. Have you ever spent time in the Peace Corp? It gets harder and harder to understand why an American middle class is entitled to the lifestyle to which they became accustomed to during The American Century. Why should a laborer in Kansas be entitled to a better salary than a laborer in Bangladesh?

I'm in favor of social safety nets, but I think people have a confused idea of what the social contract entails. If I had Bill Gate's money I'd be spending it where the dollar had the most bang for the buck in terms of relieving misery IN THE WORLD, not in the United States.

In fact, that *IS* where I spend my charitable giving: digging wells in Africa that allow women to stop spending their day walking to and from water and allow them to earn a bit of money growing vegetables that they can turn into paying school fees for their kids. (Check out "Water for People".)

The American economy in the last century was an aberration fueled by a cheap oil, a provincial growing market, a rising GDP as more and more adults entered the workforce, and finally by the fiat currency with the privilege of being the world's reserve currency... a privilege we're abusing. The question is not how we can rebuild our middle class to that, it's how we can cushion the energy descent as we all fall back to less energy-intensive lives in the post-peak-oil world that now has SEVEN BILLION people in it, all of whom are your brothers and sisters.

[phillipalden.livejournal.com]

I agree with much of what you say. But without a strong middle class we will not be able to make the needed transitions to a country where class and wealth are second to community and the environment.

[gwendally.livejournal.com]

Well, we don't HAVE a strong middle class. So where does that leave us?

I confess myself confounded by these problems. I have no idea how to create valuable jobs. I have a valuable job, so does my husband, but we have no idea what our children will do. The middle is majoring in Hotel & Resort Management and doing internships during his breaks to build his resume. He'll be okay. My eldest is double majoring in Chinese and philosophy in college and fears she'll have to emigrate to China to get a good job. We can't afford to send the youngest to private school (like we did the oldest) and we don't know what level of academic abilities he'll get from the public school system, that seems more focused on political correctness than actual achievement-based learning.

[phillipalden.livejournal.com]

I'm sorry it took me so long to respond to your comment.

I don't have any children, but my partner and I have nephews and nieces that we love very much, and I worry about their futures, (as well as the future of every child.) The things our parent's depended upon, and the things most Americans thought they could depend upon - were torn away from them in October 2007. (As a result of what I call "The Sub-Prime Economic Crime Wave.)

My parents, (were they still alive to witness this horror show,) and most of their friends, would have been in the streets calling for investigations and criminal prosecutions, as well as a public investigation into the banking system.

My partner also has a "high-value" job, but my brothers and my friends are all having trouble finding gainful employment.

These multiple messes, (like Iraq and Afghanistan,) along with the "economic crisis" are affecting all Americans. Yet at a time when we should be united to combat all these societal ills - we are more divided than ever.

I don't watch TV or pay much attention to American mass-media and "news." But our mass media is a large part of the problem.

I don't have a lot of answers, although there are many brilliant people who do, but the American people at large are not listening to these brilliant people, or they're still apathetic even as things fall apart all around them.

I'm past being staggered at the apathy and willful ignorance of many of my fellow Americans. If they haven't gotten off their respective couches by now, I don't know what will motivate them to take back our Democracy from the wealthy and powerful "special interests" that control it right now.

I try to remain hopeful and have faith the universe will balance out eventually - but it's hard.

And I do agree that restoration of the middle class is a key step to making this country truly strong again, and the only way I see that is through good, dependable jobs that allow one to move up.

Or maybe we need to do something radical I haven't heard or thought of.

I just hope for the best - for all of us.