As I have said since the beginning, this downturn is a journey beyond the limits of conventional economic theory. Beyond the known space of modern economic history. This marks the end of the post-WWII era, and the global financial regime which one of its supporting pillars. To see this, obscured as it is by the confident analysis and forecasts of pundits (almost all of whom were wrong in 2008 or 2009 and 2010), it helps to remember what we know in 2007. Most of this is directly from or an extrapolation from the work of Richard Koo (see the links at the end).
We faced this downturn with confidence, based on our great success during the past 60 years — plus our strength and wisdom.
- Our banking system was strong, perhaps the best shape ever going into a recession.
- If we did have a financial crisis, we’d act like men (unlike Japan since its 1989 crash). Weak banks would die and the strong prosper, with FDIC protecting depositors. No Zombie banks for us
- If we did have a recession, we’d spend our stimulus wisely (unlike Japan). Fiscal spending would improve public infrastructure, not channel public money to politically powerful private interests.
- If we did have a severe recession, our adaptable and resilient economy would quickly bounce back (unlike Japan). No 20-year rolling recessions for us!
Richard Koo and a few others called these delusions. Correctly so. The first three facts proved disastrously wrong.
(1) Our banking system proved itself a house of cards, collapsing with incredible swiftness.
(2) In the 1990’s we bravely closed tiny S&L’s, too po0r to have invested in congressmen. The big banks more wisely spent their profits. Their congressional retainers and moles in the Fed and Treasury lavishly rewarded their sponsors: a steep yield curve, cheap loans on easy terms, loosening of the already-lax regulations, and unlimited government guarantees, and a plethora of other programs.
(3) Our stimulus programs would have made a medieval monarch beam with pride by its trickle-down economics. Politically powerful groups feasted on hastily (but carefully) written stimulus programs and bailouts, all falsely justified as for jobs jobs jobs.
Three accurate forecasts does not guarantee that the fourth is wrong, but suggests our confidence about it is unwarranted. Koo forecasts that our economy will remain stuck in sl0w-motion until households and businesses reduce their leverage to manageable levels. Only then will spending and investment return to normal levels. Only then we remove the government’s fiscal and monetary stimulus programs (misnamed, as they only stabilize the economy). Japan has struggled with this process for 2 decades (combined with other problems, such as its demographic collapse), during which every attempt to reduce fiscal stimulus and raise taxes sent the economy back into recession.
What’s next?
After a year of confusing government-funded stabilization with organic recovery (aka green shoots), the moment of truth approaches. Only a substantial recovery — including job creation — can save the Democratic Party from severe losses in the November elections. Already polls show a large loss of confidence in the Obama Administration and Congress. While the Republicans spin this as public enthusiasm for their policy hobby-horses, it is in fact the American electorate’s long-time practice of voting based on economic performance in the year before the election. Obama had the misfortune to gain office in the equivalent of 1930, not (like FDR) 1932 — when the Depression had hit bottom. Perhaps large-scale and bold action would have preserved Obama’s reputation, but we now know that bold action does not come naturally to Obama (no matter what lies conservatives circulate to pain him as the second coming of Lenin).
So the recovery must appear by March or April, the last opportunity for Congress to enact another round of stimulus programs. If no strong recovery, it will be a depression for Congressmen (in a recession you lose your job; in a depression I lose my job).
But conservatives have convinced a substantial fraction of the American people that stimulus programs do not work. That’s like a stroke victim demanding that his respirator be turned off (or parents refusing to have their children vaccinated). So Congress might be unable to pass a stimulus package. The Republicans have adopted Lenin’s tactic of the worse, the better. Unless the Democrats in Congress stick together, they’re doomed. For details see Republicans have found a sure-fire path to victory in the November elections).
The bad scenario
That’s the good news. Since we cannot reliably forecast events, we must sketch out scenarios. Such as another leg down in the economy. A double-dip recession (quite common). In the third year of this recession the reserves at all levels are drained — households, businesses, and governments. We are weak, as was the world in a physical sense after WWI — vulnerable to the 1918 influenza. Another downturn might be worse than the first. Failure to promptly enact another stimulus program might have cataclysmic — even historic — consequences.
What about the government’s debt, and the deficits?
That’s a problem when the economy recovers. Survival requires handling each problem in turn. Cutting government spending does no good during a downturn, as it weakens the economy — increasing expenditures and reducing revenue (Keynes paradox of thrift). Net: a larger deficit. Putting America’s idle resources to work during a recession not only mitigates the downturn, but provides an opportunity to rebuild our infrastructure at minimal cost.
Everybody looks smart during a boom. A downturn provides a stress test for a nation. Can we pull together, showing wisdom and cohesion, in difficult times.? Japan has failed that test. Now it’s the turn of the US and Europe.
For a deeper understanding of these events, I recommend reading Richard Koo’s work
Richard C. Koo is Chief Economist of the Nomura Research Institute, Tokyo.
- “‘Plan B’ for the Global Financial Crisis“, presentation at the Center for Strategic and International Studies, 22 October 2008 — Here is a PDF of his slides.
- Interview of Koo by Kate Welling, Welling @ Weeden, 11 September 2009
- “Financial markets rocked by ‘Obama shock’”, Richard Koo (Chief Economist), Nomura Research Institute, 26 January 2010 (also on Scribd)
- The Holy Grail of Macroeconomics, Revised Edition: Lessons from Japans Great Recession (2009)
For more information from the FM site
To read other articles about these things, see the FM reference page on the right side menu bar, including About the FM website page. Of esp relevance to this topic:
Posts about causes of the crisis:
- The post-WWII geopolitical regime is dying, 21 November 2007 — Why the current geopolitical order is unstable, describing the policy choices that brought us here.
- Diagnosing the eagle, chapter I — the housing bust, 6 December 2007
- Death of the post-WWII geopolitical regime – death by debt, 8 January 2008 – Origins of the 1982 – 2006 economic expansion; why the down cycle will be so severe.
- Let us light a candle while we walk, lest we fear what lies ahead, 10 February 2008 – Putting the end of the post-WWII regime in a larger historical context.
- A vital but widely misunderstood aspect of our financial crisis, 18 September 2008 — Too many homes.
- A picture of the post-WWII debt supercycle, 26 September 2008
- Debt – the core problem of this financial crisis, which also explains how we got in this mess, 22 October 2008
- Causes of the financial crisis (no, its not the usual list), 29 October 2008
- Government policy errors and the Great Depession, 1 November 2008
- Economics is not a morality tale, 14 January 2009
Afterword
Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 word max), civil and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
Also — you can now subscribe, receiving posts by email — see the box on the upper right.
Ave, Fabius.
Truer words about our economy could hardly be written. Likewise your words concerning Republican strategy cuts to the quick. If the vox populi buys into the Republican “no” with all the hypocrisy that accompanies it, then also truly they receive the government they deserve. Did not the old praetorian, Benjamin Franklin, say something to that effect upon the conclusion of the Constitutional Convention?
Vale,
Publius Cornelius,
Amicus
I suppose this is a follow-on to your post this morning about our ignorance of economic theory. Koo is certainly right in pointing out that the dismantling of Glass-Stegall (under the guise of “liberalizing” banking services in order to make them more competitive) played a significant role in the recent financial collapse.
However, I wonder if economic theory is what needs our attention now, rather than empirical awareness of the disfunction of our democracy. Senator Bayh made the point this morning, alluding to only part of the issue. What’s the point of arguing about trickle-down or trickle up economics, or small versus big government, when the government we have is almost wholly run by graduates of Goldman Sachs.
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FM reply: Agreed. Without political reform, economic theory cannot help us. From a different perspective, knowing a little economic theory is useful. Deep understanding is IMO less useful for almost everyone than knowledge of languages, literature, and art.
A littleoff topic, but in follow up to Senecal:
I thought the Bayh thing was very interesting. While FM regulars all know that the government has been getting more and more dysfunctional, when someone from inside the beast says: “For some time, I’ve had a growing conviction that Congress is not operating as it should,” Bayh told an audience at an Indiana University-Purdue University campus in Indianapolis. “There is much too much partisanship and not enough progress; too much narrow ideology and not enough practical problem-solving. Even at a time of enormous national challenge, the people’s business is not getting done.” it should be a wakeup call for the so-called mainstream. His disgust was leveled at both sides. I don’t want to put too much significance on it, but look at the Republican response, proving Bayh’s point:
Bayh’s announcement was greeted with a partisan blast by Republican National Committee Chairman Michael Steele, who said the retirement was an example of Democrats “running for the hills.”
“The timing isn’t a coincidence either,” Steele said. “The fact of the matter is, Senator Evan Bayh and moderate Democrats across the country are running for the hills because they sold out their constituents and don’t want to face them at the ballot box.”
In Washington, it is not about policy. It is ostensibly about two teams in a political death match. The problem with the picture is that both sides are receiving boat loads of cash from the same interest groups (military-industrial complex, medical groups, finance, etc.). I find it hard to believe that they are not fundamentally on the same side, and the whole dog and pony show is a farce. I mean, you don’t see any “mainstream” politician from either side calling for an end to wasteful foreign wars, or a reduction in military spending, or even a “public option” which would set medical price controls.
Its going to be extremely difficult to fight the entrenched apparatus of the only two political parties that have any power. We need to end this Hobson’s choice. It would be fantastic if the parties could be brought down and splintered. However, how can that happen when they are both propped up by massive amounts of corporate money and supported by the “mainstream” media?
And who even knows what the mainstream really is? Does it exist or is it a fabrication of the media and the narrative they want to create (I almost puked during the presidential election when those clowns kept saying Wall Street/Main Street/Wall Street/Main Street, as an example of a fabricated narrative).
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FM reply: I don’t understand this. These are generalizations, inprecise but useful nonetheless. Without concepts such as these, all communciation would be like academic journals. We’d all die of boredom during casual converstations.
I don’t believe the problems we face are fixable within existing frameworks. That’s why I support ending all bailouts and stimulus. I think I would prefer a rapid, cataclysmic collapse and reformation to a long, drawn out lost decade(s).
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FM reply: There is a long history of “big bang” reforms. Such as Russia’s. Most fail. The task is too complex, doing so in one operation allows errors in diagnosis and treatment to quickly become fatal. Cutting stimulus programs during the downturn is like turning off a patient’s IV and air during surgery.
Sofa King remarks “That’s why I support ending all bailouts and stimulus. I think I would prefer a rapid, cataclysmic collapse and reformation to a long, drawn out lost decade(s).”
How about both?
Been there, tried that — it was called “shock therapy” and the economic genius and current head of Obama’s council of economic advisors Lawrence Summers tried this in Russia in 1990. The results proved so catastrophic that the median Russian lifespan below 50 years, most of the Russian population submerged into grinding poverty, 7 oligarchs bought up the entire economy, and the Russian economy still hasn’t recovered. Rusia is now in a death spiral losing 750,000 people a year because its death rate surpasses its birth rate. Chronic alcoholism is destroying the fabric of Russian society, and the rule of law is now a distant memory as Russian mafiya have taken over essentially all the basic functions of society, including utilities and internet service. Source: Wall Street Journal article “Why Russia Won’t Be A Superpower Anytime Soon,” 2009.
If this sounds attractive to you, go for it. I doubt you’ll like the results.
One piece of good news: in terms of massive societal dysfunction, the political paralysis and social collapse we’re seeing in America seems to be limited to American society. The effort to export America’s craziness to Britain has failed conclusively. Glenn Beck’s show recently debuted on British TV and it seems to have been conclusively rejected — it has been forced to run for the last 5 days with no ads at all. (Meanwhile, Glenn Beck now qualifies as one of the five most admired men in America, just behind Nelson Mandela.) So the good news, presumably, is that the lunacy and massive societal dysfunctional isn’t global, it’s restricted to American society. Small comfort, perhaps, but it does suggest that when America melts down and disintegrates, at least the remaining 95% of the planet’s population will stay sane and functional.
At a certain point, you have to stop pointing the finger at the American political system or the American ponziconomy and start looking at the real culprits here…the American people. If the American people keep buying into dementia and lies and if the American people keep electing obviously incompetent sociopaths, they’re going to get what they voted for.
Recent polls show that “Asked how they would vote in the November House elections, Americans split evenly — 46 percent siding with the Democrats, 46 percent with the Republicans. As recently as four months ago, Democrats held a 51 to 39 percent advantage on this question.”
Source: A new Washington Post-ABC News Poll.
Let’s be clear on what the American people are supporting: nothing. They’re supporting Republicans who have no plan. Here’s a typical website for a GOP congressional candidate — his economic plan? “Deregulation — offshore oil wells.” That’s it. That’s how this congressional GOP candidate proposes to revive the U.S. economy. More of the same deregulation that let giant banks and brokerage houses steal trillions of dollar and shove the entire American economy into collapse, and “Drill, baby, drill!”
That’s the Republican plan.
If the American people vote for that, knowing that it’s what gave us this entire mess in the first place, then they deserve what they get. At a certain point, you can’t do anything about peoples’ stupidity. If they vehemently insist of throwing gasoline into a raging fire when their house is burning down, and fight you like wild animals to do it, beyond a certain point you can only do so much. If the American people are blindly set on destroying themselves, they will do it, and there’s really not a lot you can do to change that beyond arguing and explaining and citing facts and using logic. If the American people don’t care about any of that and want more deregulation and more tax cuts for the rich and more oil-dependence on the wealthy repressive middle eastern emirates, then that’s their own lookout.
The rest of us warned ’em. We told ’em what would happen. But in the end, if people are absolutely dead set on destroying themselves, whether it’s a chronic alcoholic who absolutely will not stop drinking even when his liver is destroyed, or some chronic gambler who just can’t stop hitting the roulette tables even after he’s lost his house and his family and his job, or whether it’s a druggie who just can’t quit doing crystal meth even after his teeth have fallen out and he’s curled up in an abandoned house freezing to death…well, you can only do so much to help people. In the end, if people don’t want your help, you can’t live their lives for them. If the American people absolutely positively want to destroy themselves, they will do it. I only have one vote. Beyond a certain point, I can only stand by and watch the slow-motion suicide of America.
What Koo, and posters zemtar and mclaren are suggesting is what Koo might infer as an American version of the Japanese solution to economic/political dysfunction. Except that the American version could in all likelihood, be even more fatalistic than what has happened in Japan, because Japanese institutions are more culturally entrenched toward stability. While in the (multi-cultural) U.S. there is considerably less cultural consensus, and as a result, the primary mediator is American exceptionalism, which is itself grounded in individuality and laissez-faire capitalism – which is a combustible combination (when deregulated) we seem locked into, no less than how the Japanese are locked into their own kind if institutional drags. It seems that this exactly how societies flame out in history, by becoming the victims – and locked into – of their own worst cultural instincts, and fail at adapting.
Sofa King: “I think I would prefer a rapid, cataclysmic collapse and reformation to a long, drawn out lost decade(s).”
Do you have any idea of what you said in this phrase? It fascinates me when people say things like this. It seems so simple, so easy, so painless. A rapid cataclysmic collapse and reformation. On Monday everything collapses, on Tuesday we all stay home, on Wednesday a popular movement sweeps the country demanding reform, on Thursday a complete reform plan is presented and unanimously voted on and on Friday things are all back to normal just in time for the weekend. Beautiful, marvelous but it don´t work like that. Or maybe you prefer the action movie version? Rapid cataclysmic collapse comes. No food, no energy, no law – the ravenous hordes march destroying all in their path but our hero saves the day blowing them away to keep his family safe until the forces of good rise up and conquer, reform the government and the economy and once again by Friday things are all back to normal just in time for the weekend with the added benefit of being able to blow away those sub-humans of the ravenous hordes that our hero fought off.
Come on think just a little. Collapse means pain, suffering, hunger, misery, no work, a breakdown of our social order and that includes police, medical, fire fighting, fuel distribution, food distribution, etc. Collapse is neither quick nor painless as people seem to think. Definitely not fun. Look at what is happening now – unemployment, some homeless, some people forced to make do and this in a generally working system now multiply by 5 instead of 10 – 17% unemployment think 50%, 60% without our safety nets – that is collapse so don´t think it is going to be easy. You will not prefer it when it happens.
Re: #3 It would be fantastic if the parties could be brought down and splintered.
I think you’re going to get part of your wish. The Democrats have been fraying at the edges for some time and Bayh’s withdrawal seems to me to indicate that things are going to get rapidly worse for the Democrats in the near future.
Bayh is a very intelligent and accomplished politician who fully understands the political process. His choice to announce his lack of interest in running for re-election at a time that will force the Indiana Democrats to run a primary without a candidate indicates deep disillusionment or anger with the Democratic party.
I wonder whether his decision was sudden or developed slowly over time.
The Republicans have been preparing for this disillusionment for some time within their own ranks, purging anybody who isn’t a true believer and focusing exclusively on style rather than substance.
Looking at the bigger picture, do you think we will be better led by one party of true believers than the current dysfunctional two party system?
Neither do I.
Furthermore I submit this prediction: We are going to see all US troops removed from Iraq and Afghanistan by 2016 because they will be needed to quell American unrest. See #9 for a good description of what may well be coming.
The articles by Richard Koo about the long recession in Japan and the parallels with the current situation in various countries are enlightening. I am wondering about two aspects, though.
The fundamental idea is that, during a balance sheet recession, the excess savings (that are directed towards repayment of private debts) are borrowed and spent by the government. Income inequality is substantially higher in the USA than in Japan: a larger fraction of the national income accrues to higher income classes (median GINI 1989-1998 in Japan: 31.2; median GINI 2000-2004 in the USA: 46.4; World Bank data). Since people with higher income have a proportionally larger propensity to save, does that not imply that fiscal approaches risk being inherently significantly less efficient (even if effective) today in the USA than 15 years ago in Japan — a proportionally much larger fiscal intervention being required to maintain the GDP at the same level?
Of course, the government could target its interventions towards specific categories of the population (say, by creating a public works agency directly hiring unemployed persons), but the current mode of operations relies upon subcontracting, which means that income redistribution ultimately follows the overall inequality patterns of the private economy at large.
The second fundamental idea is that, during a balance sheet recession, private economic agents continue enjoying a positive cash flow (firms)
or income (households), although the difference in value between their assets and their debts is negative (they are theoretically bankrupt). Hence, corporations and households quietly continue to operate, using their positive cash flows to reduce their debts progressively. What if cash flows are structurally decreasing? This would happen if the country is already getting poorer, in which case debt deleveraging is unavoidable
if the debt service ratio is not to increase. Countries can get richer, they can also become poorer because of issues other than financial
crises or bubbles (plug in favorite cause such as international competition and consequent reduction of labor income, unfair trade
conditions, squandering of resources, wars, etc).
Just wondering.
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FM reply: Why would rising inequality (and increased propensity to save of the total population) mean that ” fiscal approaches risk being inherently significantly less efficient”? That would be true of tax cuts, but not necessarily of direct spending. Infrastructure projects, for example.
As for your second point, the national income of course decreases during a recession. So most people and businesses continue to have income, but many have less — and some have far less.
“What if cash flows are structurally decreasing?”
That insight brings us to dark questions. Problems often travel in packs, and a balance sheet recession might not be our only problem flaring up today. My big fear (or one of them) is structural changes in wages. Destroyed private sector unions, immigration, and foreign competition causes flat (or falling!) wages. With even slight inflation this will have severe consequences on white collar and blue collar workers — washing away the foundation of the middle class.
“Collapse means pain, suffering, hunger, misery, no work, a breakdown of our social order and that includes police, medical, fire fighting, fuel distribution, food distribution, etc. Collapse is neither quick nor painless as people seem to think.”
I am saying that collapse is inevitable at this point and our only choice is to do it quickly or slowly. And there’s no reason we have to assume a total collapse into anarchy. Absent a functioning federal government, I think it likely that state governments would take a primary role while a federal government is reformed. It would not be pleasant but there would be at least a reasonable chance of getting it over with quickly. I’m relatively young and I’m willing to take that chance to avoid a lifetime of confiscatory taxes with minimal return.
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FM reply: You’re just guessing when saying “collapse is inevitable” and the form collapse would take, and if it would allow refrom amidst the chaos. Wagering so much on wild guesses is nuts.
All predictions are guesses, no? Mine are nothing more than extremely reasonable extrapolations from the status quo, with bias towards the state of affairs towards previous inter-federal periods in our nation’s history. The country did not collapse into anarchy between 1776 and 1781.
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FM reply: All predictions are not equally speculative. Guess what would happen in a collapse is like guessing what the last digit of your bank balance will be on December 31. Forecasts like that are several steps beyond unreliable.
What happened in a war 230 years ago means little. It’s one data point.
FM: My big fear (or one of them) is structural changes in wages. Destroyed private sector unions, immigration, and foreign competition causes flat (or falling!) wages. With even slight inflation this will have severe consequences on white collar and blue collar workers — washing away the foundation of the middle class.
Your fear is probably closer to fruitition than you think. If you check out ShadowStats.com’s alternate data page you’ll see that he shows inflation running at about 10% last year (he uses pre-1983 standards to arrive at that number which overstates inflation by about 0.5%) while wages shrank as employees took paycuts to keep their jobs.
One year of this is very bad news for individuals, more than one year is very bad news for the entire middle class. Hopefully the trend will reverse itself this year.
Goldman McEldoo (the Clancy Brothers and Tommy Makem)
There was Goldman McEldoo, AIG, and me
And a couple of two or three went on the spree one day
We had a bill or two, which we knew would get through
And the debt and credit flew and we all felt gay
We visited Iced lands, Dubai sands, Athens bands
We then went into SPAIN, our stomachs for to pack
We ordered out a feed, which indeed, we did need
And we finished it with speed, but we still felt slack
Goldman McEldoo turned as blue as a jew
As a plate of Irish stew he soon put out of sight
He shouted out “Encore!” with a roar for some more
That he’d never felt before such a keen appetite
We ordered eggs and ham, bread and jam, what a cram
But him, we couldn’t ram, though we tried our level best
For everthing we brought, cold or hot, mattered not
It went down him like a shot and he still stood the test
He swallowed tripe and lard by the yard, we got scarred
We thought it would go hard when the waiter brought the bill
We told him to give o’er, but he swore he could lower
Twice as much again and more before he had his fill
He nearly supped a trough full of broth says McGragh
“He’ll devour the tablecloth if you don’t hold ‘em in”
When the waiter brought the charge, McEldoo felt so large
He began to shout and barge and his blood went on fire
He began to curse and swear, tear his hair in despair
To finish the affair, called the shop man a liar
The shop man, he through out and no doubt, he did clout
McEldoo he kicked about like an old football
Tattered all his clothes, broke his nose, I suppose
He would have killed him with a few blows in no time at all
Mceldoo began to howl and to growl, by my soul
Through an empty bowl at the shop keepers head
It struck poor Mickey Flynn, took the skin from his chin
An eruction did begin and we all fought and bled
Acountants did arrive, man alive, four or five
At us they made a dive for us all to march away
We paid for all the mate that we ate, stood a trait
And went home to ruminate on the spree that day
[youtube=http://www.youtube.com/watch?v=tubTC3Xcmbg&hl=en_US&fs=1&]
FM remarks: “My big fear (or one of them) is structural changes in wages.”
We’re already seeing that. It’s occurring because of global wage arbitrage. Engineers and doctors and programmers in China or India are willing to work for a lot less than engineers and doctors and programmers in America or Europe or Canada, because the cost of living in China and India is a tiny fraction of what it is in the developed world.
We’re seeing this with white collar professions across the board in America. Accounting, programming, graphic design, and now we’re starting to see medical tourism to countries like India. The final wage in the developed world at the end of this process will wind up somewhere between the median wage in the third world and that in Europe/America — but much closer to the wage in the third world. If we’re talking about 50 cents per hour in China and 20 dollars per hour in America, the final wage for the typical white collar profession in the developed world won’t be $10.25 per hour, it’ll be somewhere around 75 cents per hour.
One way of explaining the behavior of American political elites is that they have concluded that this process of global wage arbitrage is inevitable and will soon erase the U.S. middle class. Actions like eliminating habeas corpus and doing away with trial by jury and using the government to socialize corporate losses while privatizing corporate profits make sense in that context, because without a middle class you’re going to mget assive social unrest which will have to be dealt with by some form of martial law. Lacking a middle class, only giant coporations directly supported by the U.S. government will be able to create any real wealth in the American economy. And those corporations will have to be artificially sustained (in order to prevent predatory foreign corporations from gobbling them up) because they won’t have an American middle class to make money from: those corporations will have to make money primarily from the terrorism-police complex.
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FM reply: Yes, we’re seeing early signs of it. If not arrested it will be the end game for the middle class.
A decade ago futurists expected slowing population growth to empower labor. Instead the share of national income going to business is at a post-WWII high (all we have records for), the share going to labor at a record low.
It’s “Back to the Ancien Regime” versus “Hitler was just ahead of the curve.” Place your bets. While you still can.
Read Matt Taibbi’s piece about the bailout hustle in the current edition of Rolling Stone. Then try figure out what will we do to prevent total collapse when this hustle needs to be “bailed out” again. No amount of political reform, or political courage can prevent the collapse as long as the “corporation as individual person” exists as per SCUSA dictate. We are in for a very bumpy ride.
I have been poor so I know how to survive. But for the generation xwers and the millenials, I doubt they have the moxie to survive when they are really impoverished.
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FM reply: Bumpy ride, very likely. Collapse, perhaps. Let’s not exaggerate either the danger or the odds of severe outcomes.