Thursday, November 6, 2008

Maybe Just a Teensy-Weensy Depression…


Here's an interview with one of the few people who warned the housing bubble would pop with a bang. Nobody listened, of course. But Yale economics professor Robert Schiller's outlook for a speedy recovery is quite grim. Is anybody listening now?

“This is not a run-of-the mill crisis that we’re seeing. The volatility in the past month, with the exception of one time in 1987, has not been seen since the Great Depression. The great Depression started with a big shock October 28 and 29, 1929, and then volatility stayed up for the better part of a decade in the stock market. Now we’ve seen another shock up, and the big question… is this 1987 again, or 1929 again? I’m actually fearful that it’s 1929 again – not in all respects – but in terms of volatility. Because it seems the situation we’re in now is very different from 1987. There’s much more of a fundamental shock to confidence, and much more worry set off among investors.”
-Robert Schiller, Economics Professor, Yale University



A closing comment from Mish:
Nine out of 10 of the world's largest economies are contracting. China is the lone exception, but even in China manufacturing is contracting.

South Korea, the world's 14th largest economy is contracting and Mexico and Australia, 13th and 15th respectively, will soon follow suit although both are in denial at the moment.

How so many people thought that China could decouple from the US and lead world growth higher remains somewhat of a mystery except to note that irrational exuberance always marks the top.
-Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com/2008/11/global-recession-country-by-country.html

Wednesday, November 5, 2008

If Nothing Changes, Nothing Changes


If ever there was a fair-weather friend it’s the body politic, the what-have-you-done-for-me-lately crowd. The dust will not be settled by tomorrow, but today, the United States elected its first black President. The wedding was fun, but we shall have no honeymoon. In fact, this fair-weather friend might as well be the Devil himself.

Americans have much to process in the next two months. It will not be easy no matter whom you voted for.

If you voted for John McCain, do you think the world will end sooner because we’re now hearing the words “President-Elect Barack Obama? If you voted for Barack Obama, are you really glad he won, given the tremendous pile of debt, blackness and bleakness both men worked so incredibly hard to inherit?

Now comes the real work. Now, too, comes the real pain as we Americans – real and unreal – get down to the business of un-screwing what has been so very well screwed so recently. Be clear, I blame neither party; we are all at fault. The time has come for bold sacrifice, and the price is on all our heads. Our Federal Gubment just spent $1 trillion on sand and stilts with which to prop up the listing, sinking wreck we once referred to as our economy. It won't be enough. It's not nearly enough, because our solution amounts to applying more problem.

STOOPID.

I could bore you with all the little details and list the myriad bombs going off all around us Earthers, but today I’ll just briefly mention the big picture… the world has lost half of its equity market wealth since last October. How much money is that? How much?

$29 TRILLION. Twenty-nine trillion dollars. $29,000,000,000.000.00. 2.9 x 10-to-the-twelfth-power-dollars. Twenty-nine thousand-billion dollars. The negative wealth effect of this unwinding will be devastating and WE HAVE NOT EVEN BEGUN TO FEEL IT. Not really. We have had only the tiniest taste of our terrible financial fate.

(T)he most frightening chart we have seen is one that compares total credit market debt to U.S. GDP. The average of this ratio over the last 100 years has been around 155%. This ratio peaked first heading into the Great Depression at 260% (after then falling back to 130%) but has now risen to an unprecedented 350%! We would imagine that Paulson has a calendar on his wall with a red marker marking off each day with a big red “X” on it. He has January 20th circled with party hats, confetti, and champagne on it. His last day won’t come fast enough.
Over the last 10 days, we have seen Hank Paulson and his international colleagues put away their policy bazookas and reach for the red button to launch ICBMs, but the fundamental flaw in the governmental response is that it is trying to re-lever an already massively overleveraged system in a short-term attempt to halt an unavoidable cycle of asset price deflation.
This policy prescription is like treating the withdrawal symptoms of our global credit addiction with another hit of heroin. Like any addict, one hit is never enough and the only question remains is how long it takes the global economy to ask for just one more…
J. Kyle Bass, Managing Partner
Hayman Advisors
http://ftalphaville.ft.com/blog/2008/10/20/17216/time-for-the-darwinian-flush/

I believe America's present good mood, however fleeting, will help us enjoy the last bear market rally we will see in quite some time. The markets and consumer sentiment will conspire to keep us under the ether’s happy spell at least until the first waves of new credit card debt show up like hungry wolves along about February of 2009. So in the meantime, have some eggnog. Be merry! Be bright! Live today as if tomorrow might never come. This advice is just as good for you and me as it is to America's 44th President, who, through no fault of his own, is about to inherit a 95% un-fixable mess, in exchange for which he gave two prime years of his life to the inbred and wickedly ungrateful breath- hair- and life-stealing campaign trail. Today, he is President-Elect. Tomorrow, President. But before the first term is over, he may wish he had spent his time on something more rewarding than winning an election.

Barack Obama won the election because he had an idea and American voters bought into it. But ideas alone change nothing. Faith without works is dead. If we cannot agree on how to work together on a plan of action designed to weather the stormy winter ahead, the 'winds of change' that brought us here will retroactively morph into the 'farts of fiddle-with.' Let us hope the next chapter of America's big book will be titled Into Action. Real, lasting change, as always, must come from within. Everyone must participate; everyone must sacrifice.

Obama's ideas need more than the sheer force of will; they will quickly become worthless without the people's muscle behind them. We must change, because to do otherwise will bring our once-great nation to its knees. One thing is certain: if we keep doing what we're doing we'll keep getting what we're getting. We stand at the turning point. The work will be difficult. But if we fail to act now, history -- and our progeny -- will judge us most harshly.


Monday, November 3, 2008

W-43: Bringing Common Sense to the Clean Air Act


We deserve a plaque. It should be ornate. It should be larger than the average commemorative, and should drip with the sycophantic irony of a people who put love of money above all else, effectively dooming their progeny and their only planet to die slow and painful deaths. Let it read simply, "WE DID IT TO OURSELVES."

The White House is working to enact a wide array of very last-minute federal regulations, many of which would weaken government rules aimed at protecting consumers and the environment. They are in a hurry because it looks like there’s going to be a power-shift in the U.S., so they need to finish before President Bush leaves office in January. The new rules would be among the most controversial deregulatory steps of the Bush era and could be difficult for his successor to undo. Some would ease or lift constraints power plants, mines and farms. Ripping the tops off of mountains to extract coal more easily and cheaply, dangerous overfishing, increasing emissions of pollutants that contribute to global warming, and allowing far more carcinogens in our drinking water—these would all be quite all right under the new regs.

Once such rules take effect, they can only be undone through lengthy and tedious new regulatory proceedings. The fallout from these irresponsibly negligent actions would erase years of hard-won environmental gains. But let's face it: the Bush White House never gave a damn about the environment whenever Bambi got in the way of big corporate profits.

"They want these rules to continue to have an impact long after they leave office," said Matthew Madia, "a last-minute assault on the public . . . happening on multiple fronts." Madia is a regulatory expert at OMB Watch, a nonprofit group critical of what it calls the Bush administration's penchant for deregulating in areas where industry wants more freedom.

One rule, being pursued over some opposition within the Environmental Protection Agency, would allow current emissions at a power plant to match the highest levels ever produced by that plant, overturning a rule that more strictly limits such emission increases. According to the EPA's estimate, it would allow millions of tons of additional carbon dioxide into the atmosphere annually, worsening global warming. A related regulation would ease limits on emissions from coal-fired power plants near national parks. A third rule would allow increased emissions from oil refineries, chemical factories and other industrial plants with complex manufacturing operations.

These rules "will force Americans to choke on dirtier air for years to come, unless Congress or the new administration reverses these eleventh-hour abuses," said lawyer John Walke of the Natural Resources Defense Council.

But Scott H. Segal, a Washington lawyer and chief spokesman for the Electric Reliability Coordinating Council, said that "bringing common sense to the Clean Air Act is the best way to enhance energy efficiency and pollution control." He said he is optimistic that the new rule will help keep citizens' lawsuits from obstructing new technologies.

Jonathan Shradar, an EPA spokesman, said that he could not discuss specifics but added that "we strive to protect human health and the environment." Any rule the agency completes, he said, "is more stringent than the previous one."

White House spokesman Tony Fratto said: "This administration has taken extraordinary measures to avoid rushing regulations at the end of the term. And yes, we'd prefer our regulations stand for a very long time -- they're well reasoned and are being considered with the best interests of the nation in mind."

In some cases, Bush's regulations reflect new interpretations of language in federal laws. In other cases, such as several new counterterrorism initiatives, they reflect new executive branch decisions in areas where Congress -- now out of session and focused on the elections -- left the president considerable discretion.

According to the Office of Management and Budget's regulatory calendar, the commercial scallop-fishing industry came in two weeks ago to urge that proposed catch limits be eased, nearly bumping into National Mining Association officials making the case for easing rules meant to keep coal slurry waste out of Appalachian streams. A few days earlier, lawyers for kidney dialysis and biotechnology companies registered their complaints at the OMB about new Medicare reimbursement rules.

Bush's aides are acutely aware of the political risks of completing their regulatory work too late. On the afternoon of Bush's inauguration, Jan. 20, 2001, his chief of staff issued a government-wide memo that blocked the completion or implementation of regulations drafted in the waning days of the Clinton administration that had not yet taken legal effect.

Clinton's appointees wound up paying a heavy price for procrastination. Bush's team was able to withdraw 254 regulations that covered such matters as drug and airline safety, immigration and indoor air pollutants. After further review, many of the proposals were modified to reflect Republican policy ideals or scrapped altogether.

Seeking to avoid falling victim to such partisan tactics, White House Chief of Staff Joshua B. Bolten in May imposed a Nov. 1 government-wide deadline to finish major new regulations, "except in extraordinary circumstances." That gives officials just a few more weeks to meet an effective Nov. 20 deadline for the publication of economically significant rules, which take legal effect only after a 60-day congressional comment period. Less important rules take effect after a 30-day period, creating a second deadline of Dec. 20.

Lee Crockett of the Pew Charitable Trusts' Environment Group said the administration has received 194,000 public comments on the rule and protests from 80 members of Congress as well as 160 conservation groups.

These rules "will force Americans to choke on dirtier air for years to come, unless Congress or the new administration reverses these eleventh-hour abuses," said lawyer John Walke of the Natural Resources Defense Council.

But Scott H. Segal, a Washington lawyer and chief spokesman for the Electric Reliability Coordinating Council, said that "bringing common sense to the Clean Air Act is the best way to enhance energy efficiency and pollution control." He said he is optimistic that the new rule will help keep citizens' lawsuits from obstructing new technologies.

Sure can't let little things like breathing get in the way of progress.

Doin’ a hell of a job, Bushie!

Saturday, November 1, 2008

David King versus Goliath Lehman


There were two stories in the news this past week that interested me beyond all others.

The first story concerned the breathtaking new photos taken by the freshly revived Hubble Space Telescope. I marveled at the sheer distance of the energy's journey, and the eons it traveled to reach us so that the particles could be captured at that moment by a bunch of lenses and circuits.
http://www.msnbc.msn.com/id/27455467/

The second story related the discovery of Hebrew text dated from what is reckoned might be the time and place of King David.
http://www.cnn.com/2008/WORLD/meast/10/30/israel.ancient.text/index.html?imw=Y

What of the timing of this discovery? Is it an accident that we 21st century plunderers may be discovering physical evidence of a great battle between Saul and the Israelites versus the Philistines at Socoh in Judah? Could it not be a message that should directly concern us in these troubled times, one that might prepare us for a battle not quite at hand? Goliath challenged David to a fight and most witnesses were terrified, but David was emboldened. David taught us a great lesson when he decreed, “the battle is the Lord’s.” For David it was not an excuse to run from the battle line but a prophetic decree of victory. David knew that God was with him and Goliath would soon fall.

Today, the global economic crisis is the 800 pound Goliath; it threatens to destroy our very civilization. Society could be teetering on the verge of collapse; that which is built upon sand can eventually have no other outcome. In this case, that which is built upon sand was built by dust. The world is dust that got together. We are dust that was put together. To dust all this must someday return.

Something made me aware of impending financial doom, but I never gave a darn about economics. I never gave a darn about frugality. For some reason the economic, social and political plight in which we find ourselves is supposed to matter to me when by all accounts of my personal history it should not matter. Perhaps I am moved to warn others of the dire and dreadful danger we face if we do not change. Perhaps I am just a natural part of the K-wave phenomenon; perhaps I am just a bastard. Perhaps it is more than I imagine.

I cannot just watch and appreciate that which is put on my heart to broadcast passionately and directly. To do otherwise, for me, is to smile and wave at the thing which is about to make a meal of us. I choose to take dead aim at it, instead.