Outrage

Your editor will, on occasion, sheepishly admit to being a fan of conspiracy sites. For the most part, they’re a form of entertainment that I find…well, entertaining. They can be dark and dank, but many of them are written by very smart people with startlingly fresh and creative perspectives. You probably know the kind of sites I’m talking about. Some of them are hugely successful.

In this deepening “Greater Depression,” many of these sites are starting to prove themselves to be more than just fantasy and fiction. The terrible things they’ve been predicted are, in more than a few cases, starting to appear to us in our day to day world, and that makes us take a harder look at the other predictions and issue they discuss, to see if those things are coming down the road toward us, still just over the horizon.

For that reason, I sometimes feel like I have to avoid publishing what seems absolutely true to me. I no longer believe it’s impossible for American citizens to be rounded up in the middle of the night for opposing the power structure in this country. The unbelievable fiction I see playing out on the news channels these days suggest to me that the men and woman who have hijacked our Government are dropping all pretense about what they are doing. When I see Barney Frank berating the new ($1 per year) CEO of AIG for paying bonuses that the TARP allowed, and demanding the names of the people who did not return them, is it unreasonable to imagine doors kicked in at 2am?

Am I the only one who is disgusted by the holier than thou attitude of a man who was a regulator of this industry demanding justice for things that happened when he was watching? Am I the only one disgusted by this attitude from a man who had a gay prostitution ring being run out of his house by his live-in lover not that many years ago?

“We get the government we deserve,” the old saying goes. At what point will enough people who don’t live in states clueless enough to elect the likes of Barney Frank and Christopher Dodd say no more?

Then, things will get really interesting.

The Fog Ahead

Jim Kunstler once again nails it, with the post “State of Cringe” in his “Clusterf**k Nation” section of Kunstler.com.

Discussing the two forks in the road ahead, deflation or inflation, Kunstler agrees with those who suggest (like myself) that it’s not an either/or proposition:

Some of us see both outcomes in sequence: the deflationary “work out” of bad debt currently underway — of loans that will will never be paid back, of acronymic paper securities revealed as frauds, of “non-performing” contracts entering the swamps of foreclosure, of banks pretending to still exist, of hallucinated “wealth” rushing into the cosmic worm-hole of oblivion — can only go for so long before everyone who can go broke will go broke. Then, just as we find ourselves a nation of empty pockets, the tsunami of shoveled-in “money” designed to “reboot the consumer” (created not from productive activity but just printed recklessly), will start churning through the “economy,” chasing products and commodities that became scarce during the deflationary phase — and the result is hyper-inflation, the eraser of debt, destroyer of fortunes, and suicide pill of feckless governments.

Make no mistake about it. We will see a one-two punch that will level this economy, leaving our new President and his administration holding the bag. Did you notice that the Dow yesterday rose while Gold not only held its ground or rose a little, but in fact broke through $900? Sure, most technical analysts were calling $880 an important level, but $900 is a symbolic number that can’t be ignored.

Prices will continue to fall. The faltering demand that is killing retail and wholesale business is bringing prices down. Energy, durables, even food is some cases. But that’s a short-term situation. The TARP’s failure is a sobering glimpse into just how serious the situation is, because it gives us some sense of just how big the “black hole” we’re pouring this newly printed money into is. Eventually, our government will dump enough in to see the result, and that result will be devastating and unstoppable. Our economy and currency is doomed. The hyperinflation caused by this idiocy in Washington will inflate the dollar out of existence.

Many are drawing comparisons in what’s going on right now to the First Great Depression, and that’s a valid exercise. Our civilization’s timeline unfolds in cycles, to be sure, and in terms of human lifespans, those cycles are long. If we leave sufficient records, a civilization looking back on us in a thousand years will probably see these two depressions as one event, the second a direct result of the first. Since we humans live a lifespan of 70 to 100 years, and the last depression began over 70 years (a “lifetime”) ago, we see them as distinct events. We and our future observers are in truth, both right and wrong about it.

The “fog” that keeps us from seeing exactly what’s going on, and what we should individually do about it, is made thicker by the fact that our future isn’t unfolding exactly as our past did. But there are patterns that are important to look for.

As Ambrose Evans-Pritchard writes in the UK’s Telegraph, there’s a case to be made that we’re following a path similar to the 1930s, but the worst, by far, is yet to come.

Obama supporters see the President they elected as a new FDR. Sadly, students of economic and political history agree. So far, the new President is following Roosevelt’s path, a course that those who only concern themselves with slogans and icons believe is the path to salvation. Those who read, study and understand know that FDR’s path led to a longer than necessary depression, ended only by World War and over 400,000 American dead.

Given the weapons of today, a repeat of that sad history will yield far more flag-draped coffins, and will certainly this time,  include a horrifying number of American civilian dead.

Preparation Steps

Many things are cheap right now, but that’s a very short-term situation. Use your dollars’ spending power today to stock up on the things you will need when there are disruptions that make buying them impossible. But don’t just go to Sam’s Club or Costco. Make a list. Start here.

If you’re serious (and you should be), send George Ure of Urban Survival $40 and read (and print) his September 28, 2008 issue of Peoplenomics entitled “A Lifetime of Camping.” It’s the best place to start.

The TARP Has Failed

Predictably, the bailout has failed.

The Cutting Edge lays out the promises made, none of which have been kept. Treasury Secretary Henry Paulson, who should be held accountable for the fiasco he has needlessly piled onto the fiasco that this government’s economic policy has helped create, is apparently, as the site says “winging it.”

By any reasonable assessment, the Troubled Asset Relief Program has been a miserable failure and a complete waste of taxpayer money. The basis used to ram the bill through Congress was the purchase of the toxic assets off of bank’s books. Not one dollar has been used for this purpose. The main purpose for passing the $700 billion bailout was to restore confidence in the markets.

On October 3 when the TARP was signed into law, the S&P 500 was at 1,114. Today, it is 887. The 20 percent decline in the markets in six weeks doesn’t show much confidence in Paulson’s acts. Paulson changing course every few days has shown the world that he is “winging it.” He has floundered from buying toxic assets to jamming capital down the throats of banks to his current plan to support consumer debt. Did Paulson lie to Congress about buying toxic assets?

Paulson has handed out a grand total of $310 billion of the initial $350 billion tranche. He would have to go back to Congress for the 2nd $350 billion tranche. Congress was supposed to create a five-member congressional oversight panel, but hasn’t. The White House was supposed to nominate, and the Senate was supposed to confirm a special inspector general to audit and investigate where the funds are going. After six weeks, President Bush hasn’t proffered a nomination.

Poorly run automakers (GM, Ford, Chrysler), poorly run cities (Atlanta, Philadelphia, Detroit, and Phoenix), and poorly run states (California) are begging for a piece of the pie. The banks that received the first $179 billion have not made any loans with the special money. Indeed, some are using the money to buy other banks. It appears their goal is to become “too big to fail.” Others, like Citigroup, are using the money to buy back bad assets from off the balance sheet SIVs they created. SIVs are the “structured investment vehicle” instruments that Citibank invented in 1988 to become part of its so-called “shadow banking” system. The solvency of the SIV world is now in question.

Hence, TARP has failed.

But then again, maybe not. The TARP has obviously failed to do what we were told it would do, but were we told the truth about its purpose?

I don’t think so.

I believe the TARP may have been intended to provide a huge pile of cash to do two things:

1. Rescue the Wall Street gamblers who created this mess and who are in bed with the regulators. Remember, Paulson worked on Wall Street, so his buddies are his “skin in the game.” Also, remember the corruption that runs rampant through Washington, DC, like Christopher Dodd’s sweetheart loans from Countryside – he’s the head regulator of that industry in Congress now.

2. Keep the stock market bouncing around, and up occasionally, while the Bush Administration is still in the White House. Many think a group funded by Paulson’s TARP money is the entity creating these end of day rallies that in the last half hour of trading, prop up the DOW. Once the money (and the Bush Administration) is gone, these “economic commandos” will disburse, and a massive crash could occur.

At least that’s the theory.