Such must be the end times as Jesus said before His return, we would have earthquakes, and famine, floods, and so it is happening it seems more and more. Thailand has the worst flooding in 50 years, and it continues, with not much relief in sight from it all. The crazy weather that Europe and North America has had in the last few years is unbelievable, certainly for the record books.
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We have come 3 years now since the 2008 money/economic CRASH. If you are like me, not really "into" the finance and money game as to knowing or even understanding how it all works or does not work since 2008. If you have read a few books on the subject like Michael Lewis' "The Big Short" - you will read all the technicalities of it all; you'll know the man knows the inside of it all as to how it works or does not work or how it will, if done certain ways, blow up eventually in your face; yet if like me most of what was written in "The Big Short" just went right over my head.....could not understand a lot of what Lewis was saying. I've just never been into the "money game."
Well if you are like me then what Mark Steyn has to say may help you see the overall of it, how it works or really how it does not work.
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What do we have to show for the political class' disruption of every field of endeavor? From education to energy, health care to homeowning, the Conformicrats bungled everything they touched. You can see the impact of the regulatory state in the structural transformation of the American economy. From 1947 to the start of the downturn in 2008, manufacturing declined from 25.6 percent of the economy to 11 percent, while finance, insurance, real estate, and "professional services" grew from 13.9 percent to 33.5 percent. Much of that last category is about the paperwork necessary to keep whatever it is you do in compliance with the Bureau of Compliance. Of the remainder, the financial sector ballooned in support of the Age of Credit, and real estate was the one thing you could always rely on - "safe as houses," right?
So how are those growth "industries" doing today? A headline from the New York Times:
Real Estate's Gold Rush Seems Gone for Good
Which is a problem. For all the novelty junkies twittering about the Internet age and virtual reality, the principal asset of most Americans remains the most basic of all: the bricks and mortar of their rude dwelling. For all the analysts proclaiming society's transition from manufacturing to the "knowledge economy," for the majority of Americans the surest way of building wealth at the dawn of the twenty-first century involved neither knowing nor making anything: you bought a house, and, simply by doing nothing but eating, sleeping, and watching TV in it, your net worth increased.
Not anymore. Dean Baker, of the Center for Economic and Policy Research, calculates that it will take two decades to recoup the $6 trillion of housing wealth lost between 2005 and 2010. Which means that in real terms it might never be recouped. In the early Seventies, the United States had about 35 million homes with three or more bedrooms, and about 25 million two-parent families with children. By 2005, the number of two-parent households with children was exactly the same, but the number of three-or-more-bedroom homes had doubled to 72 million. As the Baby Boomers began to retire, America had perhaps as much as a 40 percent over-supply of family-sized houses. As Mr. Baker puts it, "People shouldn't look at a home as a way to make money because it won't."
Oh. So what does that leave?
The "financial sector"? In the Atlantic Monthly, Simon Johnson pointed out that, from 1973 to 1985, it was responsible for about 16 percent of U.S. corporate profits. By the first decade of the twenty-first century, it was up to 41 percent." That's higher than healthy, but the "financial sector" would never have got anywhere near that size if government didn't annex so much of your wealth - through everything from income tax to small-business regulation - that it's become increasingly difficult to improve your lot in life through effort - by working hard, making stuff, selling it. Instead, in order to fund a more comfortable retirement and much else, large numbers of people became "investors" - albeit not as the term was traditionally understood. Like homeowning, it was all very painless: you work for some company, and it puts some money on your behalf in some sort of account that somebody on the 12th floor pools together with all the others and gives to somebody else in New York to disperse among various parties hither and yon. You've no idea what you're "investing" in, but it keeps going up, so why do you care? That's not like a nineteenth-century chappie saying he's starting a rubber plantation in Malaya and, with the faster shipping routes out of Singapore, it may be worth your while owning 25 percent of it. Or a guy in 1929 barking "Buy this!" and "Sell that!" at his broker every morning. Instead, in both property prices and retirement plans, an exaggerated return on mediocre assets became accepted as a permanent feature of life.
It's not, and it never can be. In Sebastian Faulks' novel "A Week in December," set during the great unraveling of 2008, the wife of a hedgefundy type muses:
"The essential change seemed to her quite simple: bankers had detached their activities from the real world. Instead of being a 'service' industry - helping companies who had a function in the life of their society-banking became a closed system. Profit was no longer related to growth or increase, but became self-sustaining; and in this semivirtual world, the amount of money to be made by financiers also became unhitched from normal logic."
It's one thing to have a financial sector that provides a means for wealth creators to access equity to advance economic growth. But, by the time you're using the phrase "credit default swap" without giggling, by the time you're trading not only in derivatives of derivatives but in derivatives of derivatives of derivatives (seriously), you're several links unhitched from any tangible reality. Tom borrows money from Dick, who turns a nice profit by selling Dick's debt to Harry, who covers himself against the risk of Dick's failure to repay by insuring the debt with Nigel, who mentions it over lunch to Peregrine, who writes it up in his Moneywatch column as a sign that confidence is returning to the markets. Only when Peregrine brings it up with Ahmed, the affable imam who lives next door, does anybody rain on the parade. The Prophet Mohammed, among his many strictures, enjoins the believers to have no truck with the frenzied infidel trade in Xeroxed IOUs. Which may be why (in the financial sector's in-house version of the demographic Islamization of Europe) the Age of Credit also saw shariacompliant finance plant itself in the citadels of the West.
We're in a worse state than Jonathan Swift's banker - we cannot reliably say who has our bonds and therefore our souls. Thanks to the packaging, repackaging, subcontracting, and outsourcing of even routine mortgages, millions of home "owners" have no idea who really holds their property or the terms by which they can be expelled from it. And nor do the banks. According to the Office of the Comptroller of the Currency, by 2010 the U.S. financial system "owned" more than 230 trillion dollars' worth of derivatives - or about four times the entire planet's GDP.
It was Polonius who advised, "Neither a borrower nor a lender be;" and America at the dawn of the Obama era was approaching that blessed state. A man who borrows $400,000 for a house he cannot afford isn't really a "borrower," is he? After all, by 2008 every politician agreed that the priority was to keep people in "their" homes, and the Congressional Progressive Caucus was soon calling for a "moratorium on foreclosures," which is a polysyllabic way of saying there's no need to make your monthly payments. In what sense then is such a man "borrowing"?
And the banker who loaned the 400 grand isn't a "lender" of anything terribly real, is he? Not in an era of banking as performance art. "We refused to touch credit default swaps," the author and investment adviser Nassim Taleb said. "It would be like buying insurance on the Titanic from someone on the Titanic." But a lot of people did just that. The Canadian commentator Jay Currie, waxing lyrical, put it this way: "If two people make a bet on the fall of a raindrop and each puts up, say, their shoes, the bet is a real bet. If they put up cash it is very close to a real bet. IOUs are not much of a bet. Someone else's IOUs? Still less of a bet. A good deal of imaginary money is going to money heaven, which is sort of like saying that your stuffed animal is dead."
Except that many people made real-world decisions with their dead imaginary money. You thought the house you bought for a hundred grand was now worth a quarter-mil and so you took out a home-equity loan to buy a camper or to send your kid to private school. Your stuffed animal has died, but you've still got a real vet's bill to pay.
And then, just to pile on, the government steps in to replace all that dead imaginary money with real (or realish) money. Having, in effect, colluded in the destruction of meaningful risk-evaluation, Washington decided it was obliged to act - not to prevent a Thirties-style "credit crunch" but to prop up an unsustainable form of mock credit that had led to the crisis in the first place. The state's response to the downturn was to insist that we needed to re-inflate the credit bubble. If someone punctures your balloon, you can huff and puff into it all you want, but you're never going to get it up in the air again. The Obama administration blew a trillion dollars of "stimulus" into the punctured credit balloon, and it flew out the gaping hole in the back, dropped into the Potomac, and floated out to sea.
"Borrowing," continues Polonius, "dulls the edge of husbandry" - and that goes double for government, whose husbandry is dulled in the best of times. The state spends too much. So the individual spends too much. The state hires too many people on whom it lavishes too many benefits. So those foolish enough to remain in the private sector have to pay for the benefits of the public sector, and fund both their basics (housing) and their baubles (plasma TVs) through debt. At the start of the Reagan administration, America was the world's largest creditor nation and its citizens had a 10 percent savings rate. Not today: By 2007, the average U.S. household had debts equivalent to 130 percent of income. Keynes' view of the economy derived from the premise that a government treasury was not a family purse, and so the state, unlike the household, could borrow to "invest." Now, the family purse has caught up: Governments and individuals alike borrow extravagantly - and to "consume" in the most transient sense rather than invest in anything meaningful.
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Well I think to put it all in down to earth language it all means the Governmants and money finance people for decades were playing a fools game with fools money, pretending to you it was real money, so they could get you to overspend, while not telling you the game they were playing was putting money in their pocket, but eventually the money man would come knocking on your door, to tell you the game now had new rules, for money you did not have, and so for you the game was over. But by this time the money mess was so huge it broke the piggy-bank of nearly all Western nations.
Well again if you are like me you may have to read what Mark Steyn wrote above a few times also, to get the picture clear.
But one thing we do know is that all of that TRILLION or more dollars of so-called "stimulus" money did not stimulate much at all but the printing machines as they printed off the paper money. The USA still has over 9 percent unemployment, and all the politicians cannot agree on how to create jobs. We know the roads need fixing, the bridges need repairs, but somehow knowbody seems to know how to give the keys for the cement trucks etc. to Jack and Jill to cimb the hill and work to get fixed what needs fixing. I mean this is real simple you'd think: We have all this stimulus money to create jobs, like fixing the roads and bridges, we have the equipment, but knowbody in any kind of authority can figure out how to hand Jack and Jill the shovel or pick or keys to the cement truck.
And those in authority as supposed to be some of the most "educated" people in the land - I mean coming from some of the top ivy league Universities of the nation, but with the stimulated money they have, they cannot stimulate themselves to stimulate people back to work, for the stimulated jobs they know are there to strimulate the economy .... well for people to have the stimulated jobs so they can spend their stimulated pay-check back into a stimulated nation that is back at work again, fixing at least the roads and bridges of the nation.
We are so messed up, we are as much messed up in how to administer the stimulation money. It's like say pro Baseball players having all the equipment and bats, they have all the stimulated things but they do not know how to get the players out of the dung out and on to the field to get the game even started, let alone to the 9th inning. I shake my head, I shake my head, it's all just from planet Pluto (ya I know the scientists were stimulated to vote Pluto is no longer a planet, but that's crazy also, as you've got Jupiter as a gas giant with no surface you could land on, but Pluto is voted to no longer be a planet - maybe the authorities running the USA and the modern scientists came from the same ivy league Universities) - they're all puffy-putty headed Plutonians, who can't even land any of the stimulus money onto the hands of real physical solid people.
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