:(

:)

But hyperbole. Difficult to define 'collapse.' Again we will see, but if I had a dollar for every time we were at a crossroads, or the end of history, or the imminent collapse, chaos, end of the world. You know, you just hear it so many times. Remember y2k?

I really don't see the barbarians at the gate. The Rhine won't be freezing (global warming). I see it more as a Greek style decline, where we stop having so much impact in the world, but we can all sit down in great coffee shops and continue to complain about everything, like the Greeks after Rome took them over.

Is that really so bad?

the extreme ghettoization of France. But in Miami and LA such riots have occurred.

I was there. Indescribably eerie. Prior to that there was no problem going to Black clubs and enjoying the rich night life and great music anywhere in the city. Afterward, forget it. Too bad, I remember once sitting in a small club with only a few people there listening to a jazz quartet. I was sitting at the bar and a big lady was sitting next to me. The band leader got up and asked Ella Fitzgerald if she would like to sing a song. The lady sitting next to me got up and belted out a few. Very cool. Big loss after the riots.

about the rifles. That's very interesting.

Sarkozy is making them his scapegoats. He denies that their complaints have any real legitimacy or that the police did anything wrong (and it appears, from initial reports, that they did.)

Scapegoating is pretty common in economic bad times. I have at least one gay friend in the US who has told me that he is ready to leave if things get bad, and he would be walking away from a lucrative career where his connections wouldn't carry to a new country. He's that concerned.

I'm unsure about Americans and mass violence. I really don't have a feel for the US in that regard. US reactions to events always feel "tamped down" to me. I can predict what will happen in a place like Somalia far better than the US.

But I think that there's a lost of nastiness just underground in the American mass psyche and that when Americans start losing the American dream en-masse in ways that can't be tamped over or denied that things could potentially get really, really ugly. I'm not sure who they'll get ugly against, mind you. Right now brown people and gays seem to be who the right is trying to scapegoat, but that may not work out.

http://www.guardian.co.uk/france/story/0,,2218138,00.html

people in other countries, especially developed ones in Europe, are so much more willing and able to strike, riot, or act for political and economic change. Not that it doesn't happen here in America, but its relatively uncommon and doesn't get much attention on the national level.

Of course, I have lots of theories to explain why--eroded safety net, increasing surveillance, larger intra-class divisions (racism, for example), the cult of the individual, etc. But I can't be sure that any of these explain it. Could it just be that the spoils of empire have flowed in at a high enough rate to keep most people happy despite some hardship? If that's the case, and if that spigot soon turns off, then we may actually see some widespread violence and protest.

But I think that there's a lost of nastiness just underground in the American mass psyche and that when Americans start losing the American dream en-masse in ways that can't be tamped over or denied that things could potentially get really, really ugly. I'm not sure who they'll get ugly against, mind you. Right now brown people and gays seem to be who the right is trying to scapegoat, but that may not work out.

I've been reading Orcinus for almost 5 years now. Dave Neiwert is invaluable in categorizing and explaining political extremism in America--particularly of the right-wing kind, since we have relatively little else around here. I think I've noticed a trend in both the topic and the tone of his posts over that time period, especially recently. The examples he's bringing to light are becoming more and more alarming, imo. Coupling this with Arthur Silber's recent analysis of the reaction to the Andrew Meyer tasering incident and various other posts of his and... I'm getting worried.

The support for Ron Paul worries me as well. Neiwert has mentioned that he and others who track far-right groups have never seen so many of them line up behind one candidate before--and they're frightened when they also see that candidate embraced by many normally "mainstream" people. Someone so far to the right is garnering support from libertarians and liberals mostly because he's different than the rest. Just because he talks openly and frankly (never mind that Kucinich does too... but that's a rant for another day). It's highly unlikely that he'll have enough support to win the nomination, but still...

Almost everyone I know wants change. This is simultaneously great (we need change, desperately) and frightening (most people don't know exactly what kind of change they want). I do think that America has a giant undercurrent of nastiness--although the only reason I can call it an "undercurrent" is that I simply don't feel it on a day-to-day basis. And that's only because I'm privileged--white, male, straight.

Eh, I could go on with pessimistic scenarios, but my final conclusion is simply this: I think the potential is there for lots of nastiness to come out, but there's no guarantee. In fact, that's a pretty good slogan: "Welcome to the crisis. There are no guarantees."

Neiwart is extremely anti-ron paul, but also quite tellingly he accuses anyone who thinks the Federal Reserve sucks of being an anti-semite because it is just a prettified 'usurious Jew' argument, a transmission belt from the racist fringe to the mainstream.

But Neiwart won't admit the Fed sucks, instead saying its the best conceivable central bank arrangement. I don't buy that at all. horrible finance practices are killing the dollar. That's not just a sugarcoated charge against "Jews." Neiwart seemed like he was really reaching via guilt by association. I respect that he's keeping tabs on these groups, but harping on an anti-tyranny candidate just doesn't track.

Of course the militia fringe was always hostile to the federal government, and so is ron paul, so he goes talking to them. The fact that everyone else is becoming scared of it too, doesn't discredit everyone else.

It reminds me of what Paul said when someone was quizzing him about being tight with those John Birch Society cats. He sorta joked it off, saying something like 'whoaa these guys are too weird.. They're nice guys, what's the problem?'

Also for that matter, neo-confederate racists are more deep into the American Legion and the GOP mainstream anyway. The establishment is all in tight with narcotics launderers, assorted crooks and everything. Ron Paul's angles really don't compare it seems to me. Lou Dobbs and the leading GOP candidates seethe and pander with far more authoritarian, militant racism.
--
Hongpong.com

but harping on an anti-tyranny candidate just doesn't track.

That's the catch--Ron Paul is not an anti-tyranny candidate. He is only against certain forms of tyranny but gives other forms an enthusiastic thumbs-up (restrictions on reproductive freedom, banning flag burning, removing anti-trust and anti-monopoly legislation, pro-capital punishment [by the states, not the Fed], anti-gay marriage [and generally anti-gay], etc.).

If the Fed does it--whoa! stop right there. If the states do it.. well, that's for them to decide and who are we to tell them what to do? He's no Guiliani, but he's still authoritarian.

thats why i aint votin for him. but i want to see an anti-police state sort of message in the electoral mix, ya know?

indeed the subtle irony may be that in principle he's the most corporatist of all!
--
Hongpong.com

Scanning Wikipedia's List of Riots (nearly 500 since 1700), and admitting that there's probably a good deal of location bias in the list, still, the USA accounts for a lot of them:

1700s 24%
1800s 76%
1900 - 1929 61%
1930s 53%
1940s 31%
1950s 0%
1960s 69%
1970s 67%
1980s 22%
1990s 34%
2000 - 2007 12%

(China seems to be taking over this century).

I have been my entire adult life. I've been a political cartoon character in my home town newspaper for almost 20 years. I'm not exactly sure why. I seem to have a knack for pissing people off. The town went through some hard economic times in the 80s and I was singled out as someone who was giving the place a bad name. Apparently the well-attended David Duke rallies they'd had in the early 80s had nothing to do with the town's reputation.

I've smoked a fair amount of weed and drank my share of beer in my day but not an exceptional amount. I've never been addicted to anything or arrested for anything. People can just latch on to you and the whole thing takes on a momentum of its own.

It's no big deal for me, though. I'm old and don't have much to look forward to anyway. So what happens to me from here on out doesn't matter much. If it starts up again in earnest I'll just have to make sure I get out before my kids suffer by association.

the problems are far more systemic than you do, basically. I think most banks and most financial institutions are very overexposed to a lot of overvalued paper that is very illiquid, and when it gets properly valued that they aren't going to have enough cash/near cash to cover their reserve requirements and aren't going to be able to raise it. Since I expect a general and severe slowdown with stagflation (in large part because the $9.99 coffee pot isn't going to stay $9.99 because of problems with the dollar, but also because I believe Bernanke is an inflationist) I expec that to cascade into general business health, thus, commercial real estate goes down, unemployment goes up, etc...

If I'm wrong about the severity of the problem, or if somehow they manage a bailout through another bubble (though I don't see what it could be this time), then most of what I predicted won't take place.

Certainly I've been wrong in the past (in terms of timing) the question now is whether I've got the magnitude of what's happening right.

If Iran happens, it'll just make things worse. Best case scenario is that Iran just takes it, in which case it won't be /too/ bad. If Iran decides not to "just take it" and retaliates, then you're look at a shock like the in 70's, and staglation is a certainty. They absolutely can shut down a huge amount of oil traffic if they choose to and the US absolutely cannot stop them from doing it short of nuking Iran into glass.

Of the resource constraints, other than oil, the one that really concerns me is water. After that on your list, the grid would be my next concern. It hasn't been maintained properly and there isn't enough excess capacity.

Gasoline is part of why I expect stagflation, actually.

where we differ. I see fluidity in all the structures that allow rapid responses to change, and this has a way of keeping things very sound for the US, though often at the expense of other countries. I also see the amazing fluidity provides tremendous incentive to innovate so that the problems we face today can be solved by things that cannot be seen right now.

The way out?? Well, first I see higher gas prices as a good thing. I want $10 gas because then the innovation can begin in earnest. Water. Less sure. Global warming has to be reversed, but the fix is in. So resource constraints really really hamper. But then water is wasted, so there is conservation. But Atlanta?? Everything really is getting hairy and with that I agree.

I just don't see the system as broken. Not yet, you are very good and keep convincing me. I am almost to the point where I see that the Clinton push toward globalization has created a lot of problems - some that could not have been fully foreseen back then. But the Rubin model of the 90's appears flawed. I definitely am moving, and it actually makes me less of a Hilary supporter. But at that point I realize there is NO ONE who gets us off this cliff right now, and that in itself is kind of scary. As far as Edwards, I heard him the other day saying that the answer to oil was to release from the strategic reserves, and I thought - man what a politician.

So where to turn? I am more unsettled than I have been in a long long time regarding economics, environment, globalization, etc. Thanks alot Ian.

But at that point I realize there is NO ONE who gets us off this cliff right now, and that in itself is kind of scary.

Welcome to my world :). Though I do think Kucinich would be a good choice. Or (and I hate to say this) Ron Paul might actually pull us back too. But he comes with a boatload of baggage that might just push us right back to the edge at a later date.

to make my answer into a post:

and the dollar decline. But my record on timing sucks. I'm not a good prognosticator when it comes to timing. Things usually take longer than I think they will.

Haven't predicted the outcome of a war wrong yet, though. Doesn't do us much good here, however.

... that gave me enough advanced warning and time to leave the US while the going was good :)

is a strong possibility and will skew economic forecasts in the event of an outbreak. It seems a worldwide polarization is already underway.

One of my brothers keeps a close watch on Russian politics. He called me this morning just to give me the heads up about an upcoming program on CNN called Czar Putin, supposedly to air Friday.

China is making inroads into Latin American-- Latin leftist leaders are aligning with Iran. Pakistan and India are time bombs. Everywhere you look...

I did inhale.

Miss the overshoot factor. Very typical. In my business we had literally been writing about the imminent housing decline for two years before it began and everyone thought we were nuts.

Peak oil is the same for me. I been talking about peak oil for, hell, eight years now.

Just about any economic forecast will come true eventually. If you don't know when it will happen, the information is not actionable.

About two years ago The Economist predicted that the housing bubble would burst over the course of the next two years and that if you were smart the time was nigh to sell. They had the timing just right.

Understanding and seeing the trend is just as important. Many people (most people I talk to, honestly) don't understand the larger trends that dictate the course of their lives. To them, the housing bubble is something that is just happening. Same with the decline of the dollar.

Some people understand the mechanics of what's going on, but they don't have enough data or enough imagination to put everything together and assemble the big picture. And its from that big picture that you extract your timing information.

So, I'd say getting to everything but the last step--even if that last step is pretty important--is an enormous accomplishment.

Just about any economic forecast will come true eventually. If you don't know when it will happen, the information is not actionable.

But the point is that while predicitons of the exact timing (this year, next year) are off, it's at least known that the forecast's predictions are happening at some rate. If you're in an out-of-control car, the most important thing to know is that it's out-of-control--buckle up, hold on tight. The exact moment you're going to hit a tree is good to know, but it's not entirely necessary in order to take the proper precautions.

isn't part of a normal economic cycle, and many people denied one even existed. So being correct about that (and I was writing about it in 2002, as Stirling Newberry and Mahabarbara of the Mahablog can attest) was important. Timing matters if you want something actionable if you're playing the markets, absolutely, and is very important generally, no question. Hopefully, learning from my past experience I'll predict timing better in the future.

But, that said, from a policy point of view, knowing what is happening is very important, and seeing it early is important. The developing bubble would never have gotten out of control if people like Stirling and me had been listened to 5 years ago.

However, if you want actionable market signals, I'm the wrong person to take them from, and I've always been very clear on that.

Global Warming was being warned about in the late 1960's if I remember correctly. Silent Spring is the same thing. Hubbert predicted peak oil in the US in the 1950's and almost lost his job. Talk about being out on a limb then. It takes TIME for the really important forward looking ideas to become 'actionable.' So wouldn't worry about timing too much.

The view itself is one of the great flaws in the US frankly. Not everything is a market to make money. There are actually human factors at stake, people, dreams, kids - not just money.

The Economist either although I did consider the up and downsides of it. In the end since none of my real estate is leveraged and my experience is that these things tend to run in cycles, the reasons for holding were more compelling than those to sell.

and a well-positioned investor can make a killing with three hours head start.

An oceanographer and a meteorologist look at a series of waves with different eyes than a surfer uses. It seems self-evident that forecasting with an eye towards merely exploiting a trend for fiscal gain requires a much shorter timescale and different resolution than forecasting with an eye towards undertanding - let alone attempting to mitigate.

But when a person who is better informed and has deeper understanding of a subject than me says something is going to happen, and that something affects my financial well being, I don't think I can be faulted for asking when it will happen. Ian says he honestly can't say when with any accuracy and I respect that and need to look elsewhere for the "when" insight. He is to be credited for forecasting the the demise of the bubble. Had others realized this, much of the current credit crisis might have been avoided.

Yeah, when the wheels come off, you do your best to just hang on and ride it out.

Dodd’s website states that “The current foreclosure crisis is rooted in shameful predatory lending practices on the part of unscrupulous lenders.”

False.

The current foreclosure crises is rooted in the stagnation of wages and earnings the past 30 years. If, since Reagan took office, average weekly earnings had continued to grow at the same rate they had grown from 1964 to 1980, the typical household in the U.S. would have had around $30,000 more in income than it does now. That's right, nearly twice the income. There would not have been a “market” for sub-prime mortgages in those circumstances, and the opportunities for predatory lending would have been much less.
http://agonist.org/ian_welsh/20071127/an_excellent_basic_look_at_what_subprime_is#comment

The problem with mainstream thinking now is exactly this: people are blaming predatory lending. That is merely addressing the symptom. To get a cure, we need to address the problem of stagnant wages and the consequent polarization of incomes and wealth. And to address THAT, we need to confront the shibboleths of 1) free trade 2) post-industrial society and 3) financialization.

You're right, but you're in proximate cause vs cause in fact territory.

I read a little over there the crypt and I don't quite get it. Mind writing a couple sentences on it?

the amazingly vibrant renewable energy venture capital that is going on right now back in Silicon Valley. It is palpable the energies coming out of there. Stuff we haven't ever even thought of.

So like I say, we will see. In all my years I have heard the US written off every single decade, only to see some reinvention.

I continue to be an optimist for that reason alone.

That might be our savior in 5-20 years, but the truth is we must first pay the bill on the credit bubble we've already enjoyed. And that is going to be long and painful. I do believe as you do that renewables and switching to a "pro-green" type of culture/economy will revive the US manufactoring base and eventually set the stage for a great renewal of our nation and planet. But there is no room for that new culture in tandem with the old. In effect, the old king must die so that the new king can rule. The only way to kill that old king is through severe economic hardship and some very bitter pills to swallow.

Those new techs could not possibly fill the void left by the huge global credit bubble as it collapses, it's like claiming our new boats made from fiberglass are going to survive an oncoming tsunami unscathed. This correction is going to be huge and ugly, no two ways about it.

Will life end? No. Will times never be good again? No. But it is going to happen...

I have always believed that the great depression was the result of the nations inability to absorb the then fantastic technologies of electricity, the electric motor and internal combustion engine.

These technologies hired people to make, but the resulting products displaced probably three jobs for every one they created.

---------

Fast forward to today. An electric car with 10% of the moving parts, a break down rate that is a fraction of the internal combustion engine and a life that is at least twice as long as traditional cars. No need to use gasoline station and all those convenience stores they support, 90% of parts at all those auto parts manufacturers, the supporting design industry, the aftermarket retail stores ALL gone. Oil, and the the requisite drilling, refining, delivery drivers, tankers.

I will tell you that when GM was developing the EV1 and did the math and realized the financial and labor displacement wrought by the electric car - they killed it. For every job created making electric cars, you will lose five.

One of the things that really pushed us into the new technological age was the REA. Up until 1935, if you lived on a farm, you not only didn't have electricity--no one would bring the wires to you. Most of the utilities were privately-owned or owned by municipalities who saw no return in stringing lines out to the sparsely-populated rural areas.

Consider the payback--farms could modernize; rural communities got radio and telephone service. People purchased appliances.

It was a stroke of genius.

So, how's the internet service out in East Jawbone, Nebraska? Ready for HDTV-over-internet yet? Probably not--a modem-over-voice-lines is about as good as it gets in some areas.

...and I'll wager that the internet service where you live isn't half as good as what can be gotten from the middle of a watermelon field in Hermiston, Oregon:

http://www.nytimes.com/2005/08/07/opinion/07kristof.html

As a contrast, I live in Oregon, but not in Morrow county. My telco just asked me to upgrade my DSL modem firmware. The result? WiFi is disabled. When I called to complain, I was told "We don't support wireless access." I went back to the old firmware and thumbed my nose at them. I guess they're terrified with the prospect of someone actually sharing their miserable internet service.

When you write that “the great depression was the result of the nations inability to absorb the then fantastic technologies of electricity, the electric motor and internal combustion engine.”

Franklin Roosevelt’s Fed Chairman, Marriner Eccles, wrote his memoirs, entitled, Beckoning Frontiers. Before becoming Fed Chariman, Eccles was one of the few bankers to actually manage and end a run on his bank. He gave speeches to other bankers about the danger of the widening gap in wealth, and they sneered at him and called him crazy. Here’s what he wrote about the causes of the Depression:

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. (emphasis in original) Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers' loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product -- in other words, had there been less savings by business and the higher-income groups and more income in the lower groups -- we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and withless profits to the corporations and the well-to-do, it would haveprevented or greatly moderated the economic collapse that began at the end of 1929.

The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

This then, was my reading of what brought on the depression.

END of quote from Eccles, pages 76-78

So, you are right, but only partially. There was a problem absorbing the new technologies of electricity, the electric motor and internal combustion engine. But the problem resulted from the inequitable distribution of wages and wealth, which curtailed mass consumption. There was not enough consumption – not enough demand – to fully absorb those technologies.

Not enough consumption?! If this makes your had spin, then you’re too much of an environmentalist to be of much use in the financial crisis. But think about it. For example: there is not a large enough market for electric cars. Why? Because an electric car is too expensive? Or because the average worker does not make enough to afford an electric car and is forced to make the socially poorer choice of sticking with an internal combustion engine?

See, the thing is to provide incentives for those things we want to have consumed – electric cars, buildings and houses that are hyper energy-efficient, solar energy – and penalties for those things we want to discourage – Hummers, energy-inefficient McMansions, coal- and gas-fired power plants. But first we have to whack the financial system back into line, and get wages and earnings growing again.

This whole wealth inequality / consumption angle is going to go down hard with a lot of progressives who have rejected our overly materialistic culture. So lets talk up some solutions!

Eccles was an interesting guy. And yeah, demand contraction caused by inequality. Lots of conservative attempts at rewriting history, but that's still my basic take, as it was those who lived through it.