(Clusterfuck Nation) -- As the West's industrial regime sputters toward a
cheap-energy-crackup conclusion, there have been attempts to recast
what our economy is actually about, how to account for whatever wealth
we manage to produce, and project what our society will actually be
organized to do in the years ahead.
For a while in the 1990s,
the idea was a "service economy," kind of like the old fable of the
town whose inhabitants made a living by taking in each other's laundry
-- only in our case it was selling hamburgers to tourists on vacation
from their jobs making hamburgers elsewhere, or something like that.
Then came the idea of the "information economy" in which making
things of value would no longer matter, only the processing and
deployment of information (sometimes misidentified as "knowledge").
This model seemed to suggest a yin-yang of software engineers who made
up games like "Grand Theft Auto" serving the opposite cohort of people
who bought and played the game. If nothing else, it certainly explained
how lifetimes could be frittered away on stupid activities.
That illusion yielded to the housing bubble economy, which
actually did produce a lot of things, but not necessarily of value --
for instance, houses made of particle board and vinyl 38 miles outside
of Sacramento. It was a tragic and manifold waste of resources, as well
as an insult to the landscape. But the darker side of the housing
bubble lay in the world of finance, where a vast empire of swindles was
constructed to support the Potemkin facade of production homebuilding.
Now we are in a strange period when those swindles are unwinding.
The people who run the finance sector -- the Wall Street investment
banks, hedge funds and ratings agencies, the Federal Reserve, and the
U.S. Dept of the Treasury -- in desperately trying to prevent the unwind,
have rapidly ramped up another new economy based entirely on the buying
and selling of risk. Risk, as a pure abstraction unconnected to any
real capital activity, is all that's left to buy and sell after all
other plausibly practical vehicles for finance have failed.
While a lack of transparency in the individual risk vehicles has
been an object of complaint over the past year, the system as whole is
transparently absurd. The system is also abstruse enough to prevent
most mortals (including many employed in the system) from understanding
its operations. But the general public and the news media are virtually
helpless to intervene in this last gasp racket, so the probability
increases that it will do tremendous damage to whatever remains of the
U.S. economy.
One feature of the risk economy is the Federal Reserve's new
willingness to absorb any sort of crap collateral in exchange for
massive cheap loans to insolvent companies and institutions. The Fed
has, in effect, made itself the world's largest financial shit-magnet.
It has already taken in a few hundred billion in securities based on
non-performing real estate loans, and has now opened the window to
securities based on non-performing credit card debt, car loans, and
other miscellaneous IOUs still drifting un-hedged in the banking ether.
It's a mark of our collective desperation to avoid the
consequences of so much reckless behavior that no credible authorities
have stepped up to denounce this racket -- no Fed governor, no
politician of standing (including the candidates for president), no
newspaper-of-record. The Attorney-general of New York, Andrew Cuomo,
may be quietly cooking up some cases in the deep background, but the
SEC and the federal banking regulators hung up their "out-to-lunch"
signs on this long ago.
Meanwhile, the basic situation is this:
the world is awash with bad investment paper. The standard of living in
the United States can't be supported on debt anymore. The people of the United States don't
produce enough real value to service their debts. Institutions can no
longer be supported on debt gone bad. Something's got to give --
meaning something has to bring the U.S. standard of living down to a
level consistent with our declining actual wealth.
Everything else going on right now is a dodge. The Fed maneuvers,
the "coordinated actions" of the western central banks, the
postponements of default, the non-disclosure of contents in bank
portfolios, the pretense that risk alone is a kind of fungible resource
that can be endlessly traded to generate fees -- all this fucking
nonsense will only make the eventual unwinding much worse.
Personally, I doubt that it can go on more than a few more months.
The velocity of everything is going up past the "red line" where things
really fly apart. The increased velocity of non-performing mortgages
and deadbeat credit card accounts is one thing that can't be hidden or
escaped. America will feel and see very vividly when the repossession
teams rush families from their homes, when the pickup truck is taken
away, and when the pink slip appears in the pay envelope. Meanwhile all
the higher-end banking shenanigans will only debase the dollar and make
it more difficult for people already in distress to buy gasoline and
food.
If the bankers and treasury officials collude to prop up one more
failing big bank a la Bear Stearns, the political fallout for Wall
Street could be lethal. In any case, I think we will have a way
different sense of ourselves as a society by the time the election
comes.
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My new novel of the post-oil future, World Made By Hand, is available at all booksellers.
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