Wednesday, September 24, 2008

Welcome to Fantasyland I
September 24, 2008

You are now entering Fantasyland, where an all-powerful god known as The U.S. Treasury will sweep away all the bad things in life and make everything right again--if only we grant it unlimited power and an unlimited budget. (Hitler's "Playbook for instituting fascism in a republic," page 1)

To alleviate the depressing reality that Congress is fiddling with the deck chairs of the Titanic as its bow slips ever lower into the cold waters of financial fascism, I've assembled an image-centric post today.

Reader comments follow.

Please go to to view the charts and humorous images.

Here's the reality you are leaving as you enter Fantasyland:

Consumers are increasing their debt burden even as they pay less and less on their credit cards. Card payments fell 6.2% YOY (year over year) in July, for the 9th month even as consumer borrowing on credit cards grew at 4.8% YOY.

Leverage will drop from 30-to-1 to 10-to-1 overnight, and stay there, greatly decreasing money floating around looking for a quick return.

Global confidence in the U.S. is utterly broken and cannot be repaired in a few months. Given our dependence on foreign capital inflows, that's an economy-killer.

The fact that this bailout is so haphazard, so hasty, and demands so much power for the Treasury with no counterbalances by the courts or Congress will lower confidence even further, not repair it.

It's the Iraq War and the Patriot Act all over again--hasty, stupid, based on lies and a phony propaganda build-up of "emergency," with many unintended side-effects--that's what the drop in the dollar and the rise in gold and the market's plummet is telling us. Some are looking out to a new Administration, hoping for a "bottom" and a "rebuilding of confidence," but 25 years of excess cannot be unwound in 6 months or even 6 years.

If the Devil seeks to destroy the U.S., He wouldn't pick a wild-haired anarchist--He would pick someone like Paulson: a smooth liar, a "trustworthy" insider. He is the ideal Devil's Mole, and his actions speak loudly that he is truly the Devil's Pawn. A few books of related interest:

The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century by James Howard Kunstler
The Misbehavior of Markets
The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb
Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay

Manias, Panics, and Crashes: A History of Financial Crises by Charles Kindleberger
Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor
The Great Crash 1929 by John Kenneth Galbraith
The Crowd by Gustave Le Bon
When Genius Failed: The Rise and Fall of Long-Term Capital Management
The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities
Fiasco: The Inside Story of a Wall Street Trader
Web of Debt
Financial Armageddon: Protecting Your Future from Four Impending Catastrophes

Reader Essays:

A 70 Trillion Dollar Counterfeiting Ring(Zeus Y., September 23, 2008)
According to several sources the market for so-called “credit default swaps” last year alone was nearly equal to the total global GDP, around 70 trillion dollars by some estimates. Yet these derivatives have no discernible “origin” or value.

The MacRib is Back!(Chris Sullins, Septmber 23, 2008)
I want to assure you this is not a viral ad campaign. There is going to be a point to the title because it contains a small story within a much larger one. Also, the title contains a unique spelling for a reason.

excerpt from Weblogs & New Media: Marketing in Crisis :

3. The Kondratieff Cycle suggests that the global asset bubbles which are just starting to deflate have a long way to go before the next cycle of financially healthy/stable growth can begin.

The Kondratieff Cycle captures the cyclical nature of debt accumulation through excessive borrowing, and the inevitability of debt repudiation as the end-state of that extreme leverage/euphoria, which is then renounced in a lengthy crash/depression that lays the foundation for a new cycle of productive growth.

What is truly unprecedented is that this low point (which typically corresponds to global depression) coincides with a global crisis in energy supply and a demographic time-bomb in which the retired/elderly are so numerous that there will soon be only two or three workers for every retiree in an era of double-digit growth in healthcare costs.

No asset class which has experienced a bubble--real estate, stocks, non-energy commodities and even bonds--will be spared from severe depreciation as assets are sold to fund retirements and as the global "glut of savings"/low-cost lending of surplus dollars dries up in a global consumer recession/depression.

Pensions both public and private which were once considered well-funded will be revealed as woefully underfunded and unable to pay out the benefits and pensions which were expected.
As capital pools and consumer spending both contract, government's ability to borrow or raise ever-larger sums from taxation will decline even as demands for promised entitlements increases sharply in both developed and developing nations.

Thank you, Strawgold ($25), for your wry, witty and much-valued support of this site. I am greatly honored by your friendship and readership.

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