Sunday, September 4, 2011

How ugly will it get?

As someone who believes in the primary social and economic importance of the Producers, I tend not to worry all that much about civil disorder.  The reason not to worry about civil disorder is that virtually all of the important economic activity continues on because it is in too many people's interests to keep going to work—food is grown, merchandise is distributed, meals are cooked and eaten, etc.  (Of course, if the Producers were the ones creating the civil disorder, then there would be something to worry about because Producers tend to get things done.  But most scenarios concentrate on the possibilities of angry unemployed youth confronting our over-militarized police forces and as with the recent riots in London, this really only affects those close enough to the action to hear and smell it.)

Because this is true, the petty vandalism the robocops are trained to stop is a minor annoyance compared to the real threats to the economy—running out of specified fuels, screwing with the atmosphere so it no longer provides the conditions for growing food, etc.—the stuff this blog is about.

But even if I am not losing sleep over the possibilities of civil strife, I am sure there are people who are.  There is an awful lot of raw material for unrest--billions on the verge of malnourishment if not outright starvation, hundreds of millions of young unemployed seething in frustration and anger, and the very real sense that the institutions that are supposed to deal with such problems are some combination of trained incapacity and rapacious corruption.  So folks predicting trouble are not crazy.

Surely your time will come, as in heaven as in hell
by Big Baby DougJ 
A friend of mine who’s a higher up at an investment bank—the same guy who told me in 2006 that there would eventually be a huge real estate crash and that it would destroy Bear Stearns first, then Lehmann Brothers—started texting me from Europe yesterday about how frightening the economic situation is over there. He says he thinks austerity will hurt Europe even more than people think, partly because the system there has more trouble adjusting to sudden government changes than our system does. As things get bad, he expects to see more and more immigrant-bashing (some of you don’t like it when I say this, and I know it’s a generalization, but Europeans as a group are much more xenophobic than Americans), with Eastern European/Baltic immigrants in western Europe getting sent home, which makes things worse, especially for Eastern European/Baltic countries. He thinks that in some places, the Strapping Young Bucks may turn on their Galtian overlords in a serious way, and that the best thing might be for some low-level Baader-Meinhoff-type activity to scare the Galtians straight before things get too dire. more
The following is amazing.  The banks that are so rich and powerful they buy presidents with their pocket change, have ZERO ideas how to fix the economy and so resort to advising their clients in how to cover their butts when the mathematically-certain storms hit the financial sectors again.
Even Goldman Sachs Secretly Believes That An Economic Collapse Is Coming

By Michael Snyder - BLN Contributing Writer   September 2, 2011 
Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse. On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details.

It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering. In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention. 
There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on. 
According to the Wall Street Journal, Brazil believes that “as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable.” 
Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe. 
For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog….

“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?” 
Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors. 
The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse. 
But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe…. 
Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world) 
Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off 
This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately. 
For example, prior to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and marketing them to investors as AAA-rated investments. On top of that, Goldman then often privately bet against those exact same securities. 
The CEO of Goldman Sachs has even acknowledged that the investment bankengaged in “improper” behavior during 2006 and 2007.
For much more on the history of all this, please see this article: “How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps“. 
So will Goldman Sachs ever get into serious trouble for any of this? 
No, of course not. 
Yeah, they will get a slap on the wrist from time to time, but the reality is that the top levels of the federal government are absolutely littered with ex-employees of Goldman Sachs. Goldman is one of the “too big to fail” banks and they are going to continue to do pretty much whatever they feel like doing. 
Sadly, the power of the “too big to fail” banks just continues to grow. At this point, the “big six” U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America’s gross national product
Goldman Sachs was the second biggest donor to Barack Obama’s campaign in 2008, so don’t expect Obama to do anything about any of this. 
We have a financial system that is deeply, deeply corrupt and all of that corruption is a big reason why things are falling apart. more
Liberals understand the connection between the economic frustrations of the young and rioting, but the overwhelming majority of them have NO ideas of how to put the mobs of unemployed to work either.  I mean, Random has a pretty accurate analysis here but demonstrates his utter lack of seriousness by beginning his essay with an obscure reference to (I believe) a punk-rock group.  Ah the Leisure Class!  It NEVER occurs to them that there could be a link between our biggest problems and going to work.  They were trained to be cultural warriors—NOT development engineers (etc.)—after all.  (sigh)
Civil Unrest in an Age of Austerity
London Calling

London calling to the faraway towns
Now that war is declared-and battle come down
London calling to the underworld
Come out of the cupboard, all you boys and girls

The Clash

To all those British intelligencia who attributed the recent riots that rocked the streets of London, Birmingham, Bristol, Gillingham, Nottingham, Manchester and Liverpool to hooligans, you’re as wrong as the myriad free enterprise economists who swore we had nothing to fear from a deregulated marketplace. You’re as wrong as the killing of an innocent man. You’re as wrong as holding the poor accountable for the errors of the elite. You’re as wrong as an economy that creates an ever-widening gap between the haves and have-nothings.

Prime Minister David Cameron finds fault with everyone but the policies of his ruling party or indeed the increasingly conservative policies of his predecessors in the opposition.

In the prevailing world of British politics, entrenched poverty does not fit into the equation of civil unrest. It has nothing to do with thirteen million impoverished citizens but rather to do with discipline in the schools. It has nothing to do with low wages and rising unemployment but rather to do with excessive tolerance for aberrant behavior. It has nothing to do with the deprivation of ethnic minorities and everything to do with moral depredation.

As income inequality rises to levels unprecedented in the modern era, Mister Cameron promises a crackdown on the rising turpitude of the ungrateful poor in Britain’s booming slums and the polite society applauds as if to acknowledge a fine golf shot.

What the Prime Minister and his colleagues are desperately trying to deny is the relationship between the riots in England and the events in Cairo, Tripoli, Damascus and Athens. The combination of inequity, inequality and poverty is a potent brew that leads inevitably to civil unrest. The only difference is a matter of degree.

London is calling and Washington should be listening. By every measure the circumstances are worse in America than in Britain. The poor are poorer, the disparity between the rich and the rest is greater, the social safety net is less intact and the burden of poverty falls even greater on minorities.

Everywhere across the globe the tide of suffering rises and governments have decided that the only solution is to shift the burden downward. The European Union has become an enforcement mechanism for an age of austerity. Budgets for relief of the afflicted and assistance to the poor are slashed to protect the corporate profit margin. In America a presidential candidate complains that the poor do not pay income taxes. Convinced by their own propaganda machine that the poor are unworthy leaches on society, legislatures in Florida and elsewhere order drug testing of to qualify for unemployment insurance. Increasingly draconian laws are passed to further stigmatize immigrants at the bottom of the economic spectrum.

Blame the victim has become the mantra of the financial elite, passed down to the working ignorant, spreading like a plague on the nation.

When we have punished the poor all that we can, when we have pushed the once thriving middle class into poverty, when we have evicted families from their homes, when we have forced the family business into bankruptcy, when we have stripped the undocumented of all rights and deported as many as we can, only then will we begin to realize we have been duped.

Civil unrest is the last recourse and the natural consequence of austerity. more

1 comment:

  1. It occurs to me, the weakest link in the corrupt institutions--gov't, banking, energy, et al--the one that could go away first and be missed the least--
    --is banking.

    If people want real change, they need to remove their investments from the banking industry, maybe put it into idle farmland or something tangible.

    I mean, if it is going to collapse anyway, shouldn't we be more active in moving away from these banks anyways?