The Quiet Coup

August 14, 2009

Here’s a very good article written by the former chief economist for the International Monetary Fund dealing with how the US has been more or less captured by the financial elites while offering a way out of this mess.   It won’t be pleasant reading to many folks, seeing how the current US economic crisis neatly compares to past ones from countries we would make fun of in the past over their financial improprieties.  If you know people who still think we’ve hit the ‘bottom’ and that recovery is on the way, this article would be a good corrective.

Mr. Johnson’s proposed plan isn’t fun, but it sounds like it would provide the ‘come to Jesus’ moment that this country really needs to start clearing this mess off the books.  Naturally it’s therefore political dynamite to our two major political parties who thrive on donations from the financial sector.

The Quiet Coup


Hail to the Chief

January 20, 2009

It’s been a busy January for me, so I apologize for the lack of posts.

Today is a momentous day in America.  We inaugurate a new president.  He’s well-spoken, educated, telegenic, has an attractive wife, two cute kids and a mandate for change.   The main differences from past presidents?  The color of his skin and an exotic name.

If nothing else, Obama’s installation as president should give hope to every child that they can achieve pretty much anything they want to if they are willing to work hard enough to get it.

I approach today’s transfer of power as a good thing and as a historic event, but without the sense of jubilation that many in this country have.   I’m very glad to see Bush gone.  From the standpoint of the average American citizen, his policies have ranged from mediocre to terrible.  The best thing one can say about his administration is that there was not another terrorist attack on US soil after 9/11.  How much of that is due to his policies is a matter open for debate.  With Obama as president, it will be hard for him to not improve foreign relations with most of the rest of the world.

My main worry with the incoming Obama team deals with the economy.  We’re still in serious trouble here, and I don’t think continuing to shovel debt at the problem will work.   That is the approach being forwarded by the Obama economic team, though.   We may see a short-term economic bounce, but over the longer haul I don’t think it will have lasting effect.   The measure of the man will be in how fast Obama recognizes this and changes policy because of it.  If he follows the Bush/Paulson plan of just continuing to throw bad money after worse money, then I will be sorely disappointed.    I voted for Obama because under all of the ‘change’ claptrap he seemed to be thoughtful, intelligent, and pragmatic.  If he cannot break out of the Keynesian economic approach if that fails to work, then we’re all in for a turbulent ride.

I fear that the historic impact of Obama’s election may be swept away by both current events and extremely elevated expectations for his administration.  Some folks are simply happy to have a new face in the White House while others seem to be expecting that we’re all going to have  our money problems magically go away and we’ll get a free pony to boot.  We have dug ourselves into a deep hole, and getting out will be long, hard and messy.

Those are worries for another day, though.  For today, I’m content that the old regime is being swept out and we have a chance to move forward in many areas.  Enjoy the day.

Obama’s Environmental Team: Status Quo We Can Believe In?

December 18, 2008

If anyone needs a reminder that despite the rhetoric, President-Elect Obama is still beholden to the Democratic Party and it’s benefactors, I think this week’s picks for his environmental team should clear things up.

I’ll preface this by saying up front that I know little about either person, but from what I’ve been reading & hearing, environmentalists are unhappy with Obama’s nominations of Tom Vilsack for Ag Secretary and Ken Salazar for Interior Secretary.   Publicly, they are giving hesitant support while hoping that they will be willing to work with them.    Their actions in the first year will probably determine how long a honeymoon Obama has with the green wing of the Democratic party.

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Looming Trade War with China?

December 5, 2008

It appears that China is slowly starting to devalue the yuan in an attempt keep it’s export economy humming along.     As the article notes, the Chinese are behind the 8 ball to a certain degree.  If they devalue their currency enough to make a difference, it could trigger even more deflation around the world, pissing off both their neighbors and their trade partners (read: the USA, among others).   If they don’t the internal rioting and strife affecting inland China right now will only continue to worsen.

So, the Chinese are looking to make the best of a bad situation and are trying to save their own bacon… which is exactly what we’ve been trying to do as well with regards to our financial woes.     The actions they take to try and make their situation better ends up making ours worse.  One possible result?  A new trade war.

For those into economic bear porn, the Ticker Forum has a nice long thread filled with both insight and angst over this new situation.  The consensus among the financial bears there is that this is a “very bad thing” and will only get worse if tariffs and new trade laws get thrown up.  Like it or not, we rely on China for both ample supplies of cheap manufactured crap and their ability and willingness to buy up boatloads of Treasury debt.   A new trade war could lower both the inflow (goods) and outflow (bonds) of crap from here.

News like this just reinforces the feeling I have that the economic fun times are just getting going now.   With the economy visibly slowing down, possible bankruptcy for the big auto manufacturers, more financial implosions, falling tax revenues, rising entitlements and other obligations, and a possible run on the US dollar, 2009 is going to be interesting in a bad way.

Back to Doom & Gloom

November 30, 2008

Hope you all had a nice holiday weekend… now back to regularly-scheduled programming…

Very interesting blog post by Charles Hugh Smith here, discussing the impending recession/depression/whatever that’s coming our way.   The slow death of the FIRE economy like a slow-motion tragedy of sorts, and it has yet to truly affect many American households.

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Citi Will Not be the Last Bank Bailed Out…

November 24, 2008

More bailouts for large banks, and more burden put on taxpayers… Happy Thanksgiving!

The government has guaranteed around $300 of bad debt in Citibank and has also given them $20 billion in a direct capital injection.  And, from the sounds of it, this will not be the last bailout of this sort.  From the linked article:

Citi and the US government made it clear that the Citi arrangement would be extended to other banks that pose risk to financial system stability, if need be. That is why the arrangement included broad swathes of Citi’s assets but was not tailor-made to suit Citi alone.

Anyone else think the other major banks aren’t going to line up, hands held out, asking for similar treatment?   This is particularly interesting coming right after Congress showed some spine and told the Detroit auto makers to get a valid plan in hand before coming back to ask for funding.  If there were any doubts about what the pecking order is with regards to who gets money from DC, this should help clear things up.

Looking at the largess being handed out right now, I can’t wait to see what kind of stimulus package will be delivered to Obama when he takes office in January.  Anything south of a trillion dollars or so won’t be seen as game-changing I’m thinking.

Not Throwing Fuel on the Fire

November 15, 2008

Interesting open memo by Hirsch Report author Robert Hirsch, in which he more or less tells peak oil proponents to shut up… at least for a while:


The world is in the midst of the most severe financial crisis in most of our lifetimes. The economic damage that has already been wrought is considerable, and we have yet to see the bottom or the turnaround. Against this background, I suggest that the peak oil community minimize its efforts to awaken the world to the near-term dangers of world oil supply. The motivation is simple: By minimizing our efforts in the near term, we may not add fuel to the economic fires that are already burning so fiercely.

We are all aware of how disoriented governments and business are right now. Our leaders, leaders-to-be, and best minds are disoriented and seeking pathways out of the current morass. The public is in a quiet panic mode — those who were reasonably well off are less well of, and their options for action are limited. Those that have lost their jobs and/or homes are desperate. Businesses and the markets are in what might be called a free fall. If the realization of peak oil along with its disastrous financial implications was added to the existing mix of troubles, the added trauma could be unthinkable.

Like many of you, I’ve devoted my recent efforts to trying to wake the public and governments to the impending horrors of peak oil. As much as that awaking is urgently needed, continuing to press forward now is almost certainly not in the broader interest.

Many may be tempted to directly challenge the recent IEA World Energy Outlook. I am among those who were very disappointed. Pressing those concerns at this time might further the peak oil “cause,” but it could well do much more damage than any of us really intend.

Please keep up your studies and thinking, because helping the world realize the dangers of peak oil is an absolute must. In the near term, keeping relatively quiet is likely the better part of valor.

Mr. Hirsch has a point… many people are freaking out right now about losing their jobs, houses and means to secure food & other essentials for their family.   Hammering home the point about declining output of global oil production is only going to make those people freak out even more.

An imperfect analogy would be to go back to the last time the world’s economies simultaneously went into the shitter… back in the 1929-39 timeframe.   One of the things that dragged the world out of its prolonged economic slump was the breakout of World War II.  Global war is at least part of the ‘added trauma’ Mr. Hirsch is referring to.   War can be a very effective way to jump-start the economy, mobilize the populace and also thin out the number mouths to feed somewhat.  Our modern forms of warfare are particularly effective at this.

I have no desire to see the globe plunged into another cycle of global warfare if it can be avoided.  I usually limit my peak oil screeds to this site and a few other online fora… so I’ll just continue to do that.  There will be plenty of time for illuminating others down the road.

HT:  Energy Bulletin