Over the falls ...
"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!"
Charles Mackay
Over the past couple of weeks I've been intrigued by the counterproductive behavior of meddlesome politicians eager to 'rescue' or 'save' the global economy. They've fueled the panic driving the VIX to new highs. High-profile speeches and meetings have led to obscene amounts of public money being used to pay off the wealthy and prop up a patently defective system.
Perversely, the Americans paid the private sector to buy government.
While the fat cats might now gleefully bound off to their private banks, the system is all-too-obviously beyond resuscitation. It has been as dead as the proverbial parrot since the housing bubble burst to reveal a gigantic Ponzi scheme built on deceit, greed, and deception.
Wealth generated in real economies around the world has, though the abuse of derivatives, been leveraged and leveraged again to create an illusory prosperity sustained only by ignorance. It does not exist. If you handed your money over to people promising future fortunes, forget it. It's gone.
I know these things are sometimes difficult to swallow but, face it, you were had. Those same charming, sincere snake-oil salesmen boasting economic qualifications every bit as useless as outdated MCSEs or CCNEs took your money and spent it. You bought them their Mercs and houses overlooking Camps Bay.
In short, and bar a few trillion dollars worth of toxic debt still clogging up or sloshing around the system, the market has corrected itself.
That's all there is to it. Now get a life and get over it.
We are witnessing the great unraveling; a massive deleveraging of markets over-inflated with "funny money". For Paulson, Bernanke, and their global counterparts to run around like headless chickens in search of bulls capable of recreating the bubble that passed as the global economy is beyond criminal. It's psychotically absurd. These people — for that is all they are — have recited the 'crisis of confidence' mantra for so long they're incapable of letting it go.
In fact, I believe they believe they can revive the dead.
They can't. Nor is it a debt crisis. Or a credit crisis. It's a fucking implosion the like of which has not been seen before. Such is the nature of a crash. It's seldom undone at the speed at which it was engineered. Unraveling three decades of graft in a year is like walking into a wall at thirty rather than one kilometers an hour.
Serious injury or death is inevitable.
Ninety percent of the world's population could tell the remaining ten percent that you cannot spend that which you do not have. They could also teach them that when it's gone, it's gone.
Being poor has its upside.
Sure, the markets will regain some bounce. Today, despite consumer confidence and housing prices plummeting to record lows, the main indices took off like Indian moon shots — London, Paris, and Sydney have since returned to Earth, but Frankfurt, Hong Kong, and Tokyo remain right up there. Upswings may even gain traction and sustain themselves a while. But we're not looking at 14,000 on the Dow or 34,000 on the JSE anytime soon. That money has gone — chiefly because it didn't exist in the first place.
The recession starts now.
Bar notable exceptions, economic commentators have covered themselves in vainglory. The most amusing, yet irritating, are the so-called market experts dragged in from battered corporates still touting the bedraggled remains of disreputable wares now being beaten to death on trading floors around the world.
Our local radio station, 567 CapeTalk, uses Dawie Roodt, chief economist of the Efficient Group, to pontificate on matters economic. Whenever I hear Dawie's voice, I think "Enough already. Why can't this guy do anything but mouth platitudes? He's supposed to be an economic analyst, for Christ's sake."
He offers nothing substantial. Sometimes I get the feeling these commentators are drawn from the mob who were forced to take accounting at school. It was the intellectual equivalent of woodwork.
For now, and as market volatility and unreason rule, we will continue to have meaningless meetings about meetings. This morning, I heard the November 15 G20 crisis summit described as a meeting of minds. It's being chaired by George W. Bush.
When it comes to the Davos divas, irony is irresistible.
Mike Whitney and Michael Hudson have been notable among the notable exceptions to prevailing media idiocy. I've thoroughly enjoyed their writing since the economy ousted U.S. imperialism and its failed wars from centre stage some two years ago.
But these guys tend to write as informed journalists au fait with the intricacies of economic finagling and the jargon used to disguise it. We've long needed a concise exposition capable of communicating the casino nature of the markets.
BusinessWeek's Michael Mandel delivers it. If, like me, you're a fiscal dummy and, unlike me, have money invested in the markets, read It's Not a Crisis of Confidence before transferring that which you have left into your most accessible bank account.
It's the only sensible thing to do.
But what if the Bernanke-Paulson view is wrong? What if financial stress is a symptom, not a cause?
What if we face a wrenching readjustment of the global real economy rather than a crisis of confidence rooted in the financial system? What if Bernanke and Paulson are treating the wrong problem? What if investors, realizing that their long held assumptions about the global economy are wrong, are rationally bailing out of stock markets in almost every country, at least for now?
In fact, there's good reason to believe that the current crisis reflects a growing realization: Long accepted patterns of cross-border technological transfer, foreign trade, and global finance are simply not sustainable.
Michael Mandel | It's Not a Crisis of Confidence
Billions pumped in across the Dow saw a sustained two-hour rally stride inexorably 890 points up the board to close at 9066.95 (10.9 percent), a near all-time record-breaking surge.
The sheer brutality of the swathe carved upward through the mining, energy, manufacturing, consumables, transport, and automotive sectors — not to mention the NASDAQ (9.5 percent) and SPX500 (10.8 percent), leaves more questions than answers, i.e. "What the hell was that?"
