Thursday, January 7, 2010

Dark clouds over America - what happened to the Vision?

You have to go deeper than the mainstream media to get an idea of what is really going on in the US. If you listen to the mainstream media you may think that now is the time to get back into the market, the recession is behind us, the government has handled the crisis well and has the situation in hand and things are looking up. If you believe all this I urge you to visit some of the blogs and sites that I follow.

Remember my post last year, A Vision for America , about President Obama’s inaugural speech? Remember these lines?

As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us, watching to see what we do with this moment, waiting for us to lead.
It is time to put in place tough, new commonsense rules of the road so that our financial market rewards drive and innovation and punishes shortcuts and abuse…

What happened? Via Danielle Park’s Juggling Dynamite I found this article at Rolling Stone by Matt Taibbi:

Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." (…)What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

Then he got elected.

What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.

Read the full article Obama’s Big Sellout.

For knowledgeable and detailed information and no punches pulled commentary and insight on the financial crisis and government’s action and non action in the face of it, you must read Karl Denninger’s The Market Ticker. For a great overview of 2009 and what 2010 holds (not pretty) do yourself a favour and read Where we are, where we’re heading 2010. Here is an excerpt:

If you take nothing else away from this Year in Review Ticker, it should be that singular chart above and a decent understanding of what it means:

To come back into equilibrium, assuming we do not decrease debt in the system at all, we would have to shrink GDP by about 20%. But shrinking GDP means that money available to pay down debt would also decrease which would generate even more defaults.

This is how deflationary depressions happen - years, even decades of playing Ponzi by layering debt upon debt. Bernanke and Geithner, along with President Obama, are well-aware of these facts which is why they are all pounding the table demanding that banks "loan more."

The problem with such a prescription is that the wise person won't borrow, for he knows what's coming. The unwise has no collateral to pledge, and thus can't borrow.

If the government forces (either by persuasion or legislation) lending to those who can't pay they only extend the Ponzi and in doing so make the inevitable collapse WORSE.

Before you get a headache, I will just leave you with a video I found through this post at Shocked Investor. It closes the loop on the opportunity that existed for Obama and that he seemed poised to seize in his inaugural address to reform the banking industry. Instead we are simply back where we started but when this bubble bursts there will be no more stimulus, no more money and no more bubbles to save us.

The eyes of all people in all nations are upon the US alright but what they see, including these eyes, is not good.

Bill Moyers speaking to Simon Johnson of the Peterson Institute for International Finance and representative Marcy Kaptur:

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Discover The Tale of Genji, the 11th Century classic of Japan (click image)

Discover The Tale of Genji, the 11th Century classic of Japan (click image)
Kiyomizudera Temple has a large veranda looking out over Kyoto and beyond