Re: the money, honey — and more

November 16th, 2007

I promised the economic picture today and I’m including that, last — times ain’t good; they’re going to get worse. Creating a “new thing” cannot happen if you’re still trying to give mouth-to-mouth to the old thing … and that’s all a learning/experience curve that lies ahead. I don’t know how it will all shake out but shake it will … so I think getting our financial sea legs will become more a matter of learning how to manage the shakeout than how to cushion against it.

Metaphysically, there is no lack … THAT is a truth we can depend on, and proceed individually to experience a universe that meets our needs. Wobbly finances will create more fear than Osama … we do NOT have to participate in that consciousness, but we DO have to listen and know when to adjust ourselves to whatever comes up to meet our feet, as we step confidently ahead.

The visionaries will rise to the top — they must; be sure to read the last piece on a “restorative economy.” We’ve come to that place where our old illusions about what the US of A is all about are melting down to actual facts … and that will free us to actually CREATE that dream. But first, it will be messy … and make no mistake, it will be Divine.

To counterpoint “bad news,” you’ll find a couple of Morford reads first — laugh out loud, as I did with the first. It’ll do you good. Get fired up, as I did with the second. Also good … also REQUIRED.

We’re moving right along … welcome to the adventure!

Jude

ps — here’s the link to my weekly piece, On The Playground

Bush Death Watch: Countdown!
It’s official: Less than one year until history slaps Dubya to the curb. Can you feel the tingle?
Mark Morford, SF Gate Columnist
Friday, November 16, 2007

It’s just that kind of feeling, that sense of hesitant, embryonic optimism, the sense that says, oh my God, we as a culture and a smash-mouthed, war-hammered society really are fast approaching something possibly, potentially, heart-achingly new and different and — because it cannot get any worse — just a little bit better.

Here is my suggestion: Mark your calendars, set your watch, program a celebratory ringtone well in advance, because the countdown has officially begun.

It is now less than one calendar year until the next presidential election. It is less than one year until the country finally takes a deep breath and flexes its atrophied muscles and opens its bloody, Cheney-punched mouth and lets it be known to the world, to the universe, to its own numb and dejected soul just exactly how unwell it has felt, how much pain has raked its heart, lo, these past seven (eight, by then) years, by ushering in an entirely new political era, as we all exhale a massive sigh of long overdue relief that — praise Jesus, Allah, Buddha and the devil all at once — the long national nightmare of George W. Bush is finally over.

It is now safe to imagine. It is now becoming increasingly easy to actually dare to think that, in less than one year’s time, Dubya will begin packing his bags, jamming into his Spongebob duffel his map of the world coloring book, English-to-English translation dictionaries, mangled pocket edition of the U.S. Constitution, Bibleman action figure set and a “Mission Accomplished!” sweatshirt, and heading off to face his destiny as one of the bleakest, most morally repellent chapters in all of American history.

You think maybe it’s too soon? Too early to let the tingle of positivism and hope take hold? Far from it. After all, the signs of decay and utter GOP desperation keep pouring in. For example, it has now been officially recorded in history what everyone already knows: Bush is nearly exactly as unpopular as Richard Nixon was at his lowest point, and no president in history has had as long a streak at the bottom of the job-approval rankings as Dubya. Heckuva job, Bushie!

What’s more, the glorious collapse of the evangelical Christian right marches on apace, as Pat Robertson, now a dejected, lonely widower after the death of secret boy-toy husband Jerry Falwell, has officially endorsed pro-choice, pro-gay, thrice-married, massively unbalanced moral pit bull Rudy Giuliani for president, which is a bit like a militant vegan endorsing Hot Dog on a Stick for the title of Lord of the Food Court. Desperate times indeed.

But wait, it gets better. While it’s easy to focus on Shrub and Cheney and to gleefully, achingly imagine their dreary march out of office on that happy day, it is also vital and heartwarming to note that this time next year will also mark the demise of an entire army of toxic leaders, federal department heads, gay-bashing appointees and misogynist directors of every stripe and scandal and spittle, a simply huge array of right-wing Bushies who are still entrenched in all manner of powerful federal bureaus and organizations and policy-making bodies.

It’s true. Despite how a huge hunk of hideous GOP policymakers lost their seats during the last congressional election, plenty more appointees are still around to poison the well. From Kevin Martin, the lackey who oversees the FCC, to noxious Idahoan and rabid anti-environmentalist Dick Kempthorne of the Department of the Interior, to anti-choice Republican Mormon knucklehead charity scammer and Department of Health and Human Services overseer Mike Leavitt, and on and on — in a year, all on their way out.

Oh, and one more deserves special attention. Because one year from now will also be the glorious political end of one Dr. David W. Hager, the rabid evangelical Christian gynecologist (I know, so wrong) who currently advises the FDA on women’s health issues and who was largely responsible for delaying the approval of Plan B, opposed RU-486, is in fact against all contraception, stem-cell research, premarital sex, and (quite naturally) women’s choice, and whose own ex-wife claims he anally raped her, over and over again, in her sleep.

Intelligent women nationwide still shudder that this man is allowed anywhere near a living vagina, much less permitted to touch and probe and offer advice. But there is one noteworthy aspect to Hager; he is the perfect incarnation of the Christian right’s view of women as subordinate, lesser-intelligent sluts who cannot control their own bodies and therefore need men, God, and the government to do it for them. Hager is a deep shame to the male gender, and his return to the private practice of ruining the sex lives of unfortunate women in Kentucky cannot come soon enough.

But why write this column now, so far in advance of Bush’s limp-tailed departure? Simple enough: Because it will take a full year to get ready.

It will take every month and every week and every single day from the moment you read this until November 2008 to compile, to gather, to list all the names and all the horrors and all the deeply entrenched policies that are still clawing at the face of America as a result of Bush’s reign, to fully get your mind around just how deep is the disease and how widely it has spread, so we may begin to excise the policies one by one like the malignant tumors they so very much are.

What, too strong? Not even close. Go read up on Hager, and get back to me.

Ah, but perhaps you are one of the jaded ones, the non-believers, that certain type of political bitterball who says, oh please, what does it matter, they’re all criminals and cretins and powermongers anyway, no matter which party or president they work for? Get rid of BushCo and a new slew of cronies and cretins take their place, and who can tell the difference?

To which I say, well, yes. But also, no. Sure, the system is corrupt and lopsided and full of backstabbing and backslapping and backroom deal-making. So what? Has been since the first cavemen voted to see who gets to run the mammoth hunt.

Truth is, it’s just far too easy to let the ennui wash over and not give a damn, to lump all politics into a phlegmball of nasty negativity and be done with it, thus entirely disregarding the efficacious issues, the things that truly effect change and affect lives and improve or degrade the health of the planet.

Outrage fatigue is simply unacceptable. Intellectual apathy is the refuge of the lazy and the spiritually malnourished. Do not let it happen to you.

Now is the time. The coming year will slide by rather quickly and the feeling of urgent change and upheaval will only build and it doesn’t really matter if it’s Hillary or Obama or Edwards leading the shift, because no matter who gets the nod, they will require — from me, from you, from anyone who professes to care — a roiling tidal wave of progressive momentum behind them to help them cleanse and haul away the overwhelming mountain of moral fecal matter Bush has left behind.

Mark your calendar. Set your ringtone. Take a deep breath, feel the wave build, and then dive the hell in. Right now, it’s the only option that really matters.

Outrage fatigue? Get over it
Are you sick of being sick? Suffering way too much Bush-induced nausea? Well, tough
Mark Morford, SF Gate Columnist
Wednesday, November 14, 2007

I know how it is. You’ve had it up to here. There are only so many stories about blood and death and pain you can take, only so many times you can hear about random shootings and corporate malfeasance and how BushCo’s squad of scabrous flying monkeys have, say, supported torture or endorsed wiretapping or gouged the nation for another $200 billion to pay for a failed war. Your nerves are raw and your heart is tired and the media will just not shut the hell up already about the sadness and the war and the mayhem and the Cheney and the doom doom doom.

It is outrage fatigue, and it is epidemic. It’s that feeling that we are being hammered unlike any time in recent history with so many appalling and disgusting and violently un-American incidents and scandals and manipulations that our b.s.-detectors are smoking like an old V-8 engine on a hot summer’s day and it’s all we can do to get up every day without screaming.

What’s more, it’s not the mere quantity of moral insults, either. It’s the bizarre absurdity of the subject matter, the things we are being forced to consider, or reconsider, that seem to make it all so horrific.

Torture? Are you kidding? Allegedly the most civilized, the most morally aware nation on the planet and we are still debating, in the highest courts and government offices in the land, about whether the United States should strap human beings to gnarled metal benches in rancid foreign bunkers and inflict such inexplicable terror and fear upon them that they confess to things they didn’t even do just to get us to stop? Is this the Middle Ages? Are we regressing back to the goddamn cave?

Oh my, yes, plethoric are the reasons you should be outraged indeed, and torture just might be one of the most incendiary reasons in the past few years. If nothing else, its disgusting return to U.S. political dialogue certainly means it’s no time to be laying down arms in exhaustion, no matter how tempting it might be.

Take this fine example: Keith Olbermann, as is his wont, executed another pitch-perfect bout of outrage recently on his excellent MSNBC show, taking BushCo to task on the issue of waterboarding like you never hear in major on-air media anymore.

Olbermann only barely held on to his trademark fierce hyper-articulation against the sheer disgust he/we have to endure at the idea that a sitting American president obviously thinks medieval torture is a gul-dang swell idea, no matter what psychologists, military experts, ethicists, the United Nations, the Geneva Convention and Jesus himself all say.

It was wonderful, powerful stuff, a razor-sharp, highly informed media pundit who dares to presume an unusually high level of intelligence among his viewers, speaking truth to power in a way most liberal media-haters complain never really happens anymore. And of course, his subject was one of the most deserving of our moral outrage in recent history.

But then I read some of the reaction to Olbermann’s diatribe on various political blogs and on some news-aggregate sites, with many saying, gosh Keith, lighten up already, who cares, enough with all the outrage and the spittle, wow I’m so sick of all this ranting and raving and gosh I’m tired of these smarty media people telling me how to think and hey maybe torture is good let’s kill us some more, haw haw haw snort.

On the one hand, it is, you can argue, generally the way of the meaner-than-thou blogosphere, with all but the most professional and intelligent and positive-minded of outposts seeming to suffer an undue percentage of reactionary chyme in their comment areas, hordes of Net-drunk twentysomethings and extremists and shut-ins who have way too much free time and merely chime in to see their sneers “published” and to prove how much more jaded and apathetic they are than the next person, while adding zero to the conversation.

But maybe it’s worse than that. Because this is where it can happen, where you can get sucked into the vortex of whining and bitterness and where you might feel part of yourself wanting to wallow too, desiring to avoid doing the actual moral and spiritual work of dissecting and researching and analysing something as politically messy and morally ugly as torture for yourself, opting instead for the easy path, for closing your eyes and sticking your fingers in your ears and going, nyah nyah nyah shut up shut up SHUT UP! Hey, it sure beats thinking.

Or maybe we can flip it around. Maybe, with the right intent, the exact reverse can happen, and you see this ocean of nasty ennui, this pile of oft-misspelled, poorly punctuated reactionary effluvia as, in and of itself, something to be a bit livid about.

Maybe, in other words, you can enjoy, as one blogger put it, a big dose of “fatigue outrage,” the feeling of disgust you get when faced with all those people who think mental lethargy and laziness is, like, way funny, dude.

In other words, enough with the childish, frat-boy-grade complaints about media overload and too many rants and outrage fatigue. You have to earn that sort of thing. If you never give a crap about engaging the world, if you never want to think deeply about complex issues and care about ramifications and see what truly resonates with your own informed spirit and then stand up for what you believe, this pretty much eliminates your right to sneer at others who do.

It is, for me, all about modulation. It is about remembering that outrage does not necessarily equal misery. Outrage does not mean you must wallow in fear and fatalism and yank out your hair and wake up every morning hating the world and hating yourself and hating humanity for being so stupid/numb/blind and wondering how the hell you can escape it all.

Outrage is rich with humanistic understanding. It is not some evangelical Christian parent “outraged” that her kid saw a woman’s nipple on TV. It is not some right-wing Family Council “outraged” that someone put S&M outfits on Barbie, or that some art gallery is displaying Jesus as a woman, or that scientists dared to say that stem cell research does not equal abortion, or that the mayor isn’t taking care of all the potholes and stray kitties. That’s not outrage, that’s reactionary whining.

True outrage, like Olbermann’s, like (occasionally, hopefully) this column’s, like what you should ideally be experiencing on a daily basis while Bush is in office, is honed and sharp and poignant. It contains a powerful sense of deeply informed decency, and therefore has a true feel for when that sense has been violated. Outrage has meat and substance and intellectual nourishment. It is actually healthy.

Smart, informed outrage engages you and fires your heart, your mind. It is fuel. It is the reason you claim you enjoy being an American, to question malevolent government actions and take a stand and demand accountability where there has, for the past seven years, been none. Bottom line: We simply cannot let them convince us, by way of an all-out assault on science, sex, love, et al, that the good fight just ain’t worth fighting.

After all, the flying monkeys are far from done raiding the closet and stealing your babies and making a mockery of everything wise and calm and open-hearted people hold dear. And baby, if you ain’t outraged about that, something is very wrong indeed.

‘Storm On The Horizon’
Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, and Ali Frick, The Progress Report
November 13, 2007

Last week, Federal Reserve Chairman Ben Bernanke testified to Congress that the economy would “slow noticeably” this year and likely get worse before getting better. Yesterday on ABC News’s This Week, Sen. Chris Dodd (D-CT), chairman of the Senate Banking Committee, said of a possible recession: “[I]t’s certainly pointing in that direction. We hope that’s not the case, but there are many people who watch this minute to minute and would have drawn that conclusion.” America’s economic fundamentals have been weak for some time now. Since 2000, investment growth has been anemic, productivity growth has declined, and income growth has stagnated. Weak income and job growth and the decline of health care and retirement benefits have already squeezed the middle class and made Americans more vulnerable to economic downturns. When these trends are combined with the subprime mortgage crisis and the ensuing slowing of the housing market, the collapsing dollar, and the enormous cost of the Iraq war adding to the country’s ever-growing debt, the economic slowdown is likely to hit Americans quite hard. Sen. Charles Schumer (D-NY) found Bernanke’s testimony disquieting. “I’m very concerned that there may be a bigger storm on the horizon,” he said. Approximately 48 percent of Americans feel that the economy is already in recession, including 69 percent of black Americans. Another poll found that two-thirds of Americans worry that economic conditions are getting worse, “by far the highest number since 1992,” and four in ten say recession is likely next year.

THE HOUSING FALLOUT: Last spring, Bernanke downplayed the broader effects of the subprime mortgage crisis, suggesting that the effects seemed “likely to be contained” to the housing sphere. Last week, Bernanke admitted that “[a]lthough the problems with subprime mortgages initiated the financial turmoil, credit concerns quickly spilled over into a number of other areas.” He added, “A sharp increase in foreclosed properties for sale could also weaken the already struggling housing market and thus, potentially, the broader economy.” An October real estate report showed that U.S. home prices fell nationwide in August for the eighth consecutive month, in the ten largest cities falling five percent from a year ago, the biggest monthly drop since June 1991. Remarking on the falling housing sales, Dodd noted that it was “the first time since the Great Depression we’ve had two successive years of predictions of housing sales declines.” Housing had been the one sector through which many middle class families could get ahead through investment. A report released late last month by the congressional Joint Economic Committee, however, stated that “families, neighborhood property values, and state and local government will lose billions of dollars as two million subprime mortgage homes are foreclosed.” The housing crunch, dragging the whole economy down with it, demands the government’s full attention. The most President Bush will admit thus far is that “housing is soft.”

IRAQ EATING UP DOLLARS: A new report by the Joint Economic Committee estimates that the wars in Afghanistan and Iraq have cost the average American family of four more than $20,000. The government is spending $2 billion per week to wage war in Iraq, and a Congressional Budget Office report estimated that the total cost of the war in Iraq could equal $2.4 trillion. Though the White House has asserted that it is “not worried” about the cost of war, it should be. The war is draining finite resources away from needed programs at home and abroad. Approximately $2.4 trillion is enough to “provide every college freshman in the country with a free, four year education at a private college or university; provide health care coverage to every American for one year; [or] pay off 26% of our current national debt.”

THE COLLAPSING DOLLAR: The dollar fell to a new low against the euro on Friday, propelled by Bernanke’s glum economic forecast and by signals from the Chinese government that it would “readjust” some of its U.S. Treasuries holdings from dollars to other currencies. A weak dollar is likely to affect average Americans at the gas pump, since “crude oil is priced in dollars, and oil producers, especially members of the Organization of Petroleum Exporting Countries, want to be compensated for the dollar’s decline.” As oil approaches the unprecedented price of $100 a barrel, the average cost of gasoline continues to rise, surpassing $3 per gallon last week, a rise of over 81 cents from last year. Gas prices are expected to rise another 20 cents over the next two to three weeks, making holiday travel more expensive. Sen. Sam Brownback (R-KS) said, “When those gas prices get up to $3 a gallon, it seems to hit some sort of psychological point in consumer’s mind that ‘I have less to spend,’ and that’s a reality for them.” Before the holiday recess, Congress should pass a final energy bill that will establish a 35 mpg standard and require utilities to draw 15 percent of their electricty from renewable sources by 2020.

U.S. could face $2 trillion lending shock: Goldman
Reuters via Yahoo
Fri Nov 16

LONDON (Reuters) - The impact of the U.S. mortgage market crisis on the underlying economy could be “dramatic” as leveraged investors may need to scale back lending by up to $2 trillion, according to investment bank Goldman Sachs ( GS.N).

In a report dated November 15, Goldman’s chief U.S. economist Jan Hatzius said a “back-of-the-envelope” estimate of credit losses on outstanding mortgages, based on past default experience, was around $400 billion.

But unlike stock market losses, which are typically absorbed by “long-only” investors, this mortgage-related hit is mostly borne by leveraged investors such as banks, broker-dealers, hedge funds and government-sponsored enterprises.

And leveraged investors react to losses by actively cutting back lending to keep capital ratios from falling — A bank targeting a constant capital ratio of 10 percent, for example, would need to shrink its balance by $10 for every $1 in losses.

“The macroeconomic consequences could be quite dramatic,” Hatzius said in the note to clients. “If leveraged investors see $200 billion of the $400 billion aggregate credit loss, they might need to scale back their lending by $2 trillion.”

“This is a large shock,” he said, adding the number equates to 7 percent of total debt owed by U.S. non-financial sectors.

Hatzius said such a shock could produce a “substantial recession” if it occurred over one year, or a long period of sluggish growth if it occurred over two-to-four years.

One of a number of caveats outlined in the report was that baseline economic forecasts may already include significant reductions in the pace of mortgage lending.

But the conclusion remained a gloomy one regardless.

“The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized,” he wrote. “While the uncertainty is large, the associated downward pressure on lending raises the risk of significant weakness in economic activity.”

Reporting by Mike Dolan, editing by Mike Peacock

‘Hidden Costs’ Double Price Of Two Wars, Democrats Say
Josh White, Washington Post
Tuesday, November 13, 2007

The economic costs to the United States of the wars in Iraq and Afghanistan so far total approximately $1.5 trillion, according to a new study by congressional Democrats that estimates the conflicts’ “hidden costs”– including higher oil prices, the expense of treating wounded veterans and interest payments on the money borrowed to pay for the wars.

That amount is nearly double the $804 billion the White House has spent or requested to wage these wars through 2008, according to the Democratic staff of Congress’s Joint Economic Committee. Its report, titled “The Hidden Costs of the Iraq War,” estimates that the wars in Iraq and Afghanistan have thus far cost the average U.S. family of four more than $20,000.

“The full economic costs of the war to the American taxpayers and the overall U.S. economy go well beyond even the immense federal budget costs already reported,” said the 21-page draft report, obtained yesterday by The Washington Post.

The report argues that war funding is diverting billions of dollars away from “productive investment” by American businesses in the United States. It also says that the conflicts are pulling reservists and National Guardsmen away from their jobs, resulting in economic disruptions for U.S. employers that the report estimates at $1 billion to $2 billion.

The committee, which includes House and Senate members from both parties and is chaired by Sen. Charles E. Schumer (D-N.Y.), is expected to present the report this morning on Capitol Hill. Democratic leaders plan to use the report as evidence that the wars are far costlier than most realize and that a change of course could save taxpayers billions of dollars in the coming decade.

“What this report makes crystal clear is that the cost to our country in lives lost and dollars spent is tragically unacceptable,” Schumer said in a statement last night.

Brian Hart, a spokesman for Sam Brownback (Kan.), the committee’s senior Republican senator, said, “The Democrats didn’t bother to run this report by any of their Republican JEC colleagues or staff.”

“We’ll see what they come up with, but it sure seems that the Senate leadership is trying to protect their continual proclamations of defeat instead of working for bipartisan progress,” Hart added.

War funding experts said that the committee’s Democrats raise viable arguments but that some of the numbers should be met with skepticism. For example, it is difficult to calculate the precise impact of the Iraq war on global oil prices, and it is speculative to estimate how much the war will cost over time, as situations change daily on the battlefield.

Robert D. Hormats, vice chairman of Goldman Sachs (International) and a member of the National Security Council staff under Presidents Nixon, Ford and Carter, said he agrees that the war is far costlier than the publicly stated price tag but said some of the report’s measures are problematic. He said he thinks it would be hard to show that the Iraq war has caused oil prices to skyrocket or oil producers in the Middle East to falter, and he said he does not think there has been a closing-off of U.S. investment because of the war.

Oil prices have more than tripled since the U.S.-led invasion of Iraq in March 2003, the report notes, to a peak of more than $90 per barrel. “The war in Iraq is certainly not responsible for all of this increase,” the report states, but it estimates that declining Iraqi production “has likely raised oil prices in the U.S. by between $4 and $5 a barrel.” The report added that “because of the many factors affecting oil markets, this should be seen as a highly approximate estimate.”

Hormats said he agrees with the report’s finding that the United States is dangerously increasing its reliance on foreign debt and that Americans will be paying the price for generations. Hormats, author of “The Price of Liberty: Paying for America’s Wars,” said that in every other major war, the United States has financed the conflict.

“The wars will cost a lot more than the appropriated sums, and it’s certainly true our children will be paying for this for a long, long time,” he said. “I’m very critical of the way they have financed the war, but I always hesitate to try to quantify any of these things, to make these numerical judgments.”

The committee’s Democrats estimated that injuries due to the wars could add more than $30 billion in future disability and medical care costs, including billions in lost earnings for veterans who cannot work because of post-traumatic stress disorder.

Although war costs have risen each year and the fiscal 2008 funding request is the highest so far, the direct and indirect costs of Iraq and Afghanistan are much lower than the costs of World War II and are just passing those of the Vietnam War. World War II is estimated to have cost $4.9 trillion in today’s dollars. According to Congressional Research Service reports, the Vietnam War cost $600 billion in today’s dollars and the 1991 Persian Gulf War cost $80 billion.

The economic difference is also sizable, Hormats said, as the annual cost of today’s wars is less than 2 percent of the nation’s gross domestic product, a fraction of the cost of World War II. The nation’s economy is so large that it “disguises the costs and doesn’t impose any hardship on the American people,” allowing the government to sidestep normal budgeting processes, Hormats said. He said the country has borrowed all the money it has needed for the wars because taxes have been lowered and the wars have been funded largely by supplemental appropriations, with few budgetary sacrifices.

Jason H. Campbell, a researcher at the Brookings Institution who maintains the think tank’s “Iraq Index,” said it is clear that the costs of the Iraq war are higher than what Congress has appropriated but said they are often hard to quantify. He said he is unsure whether the costs of both wars total $1.5 trillion.

“It’s much higher than other estimations I have seen,” Campbell said. “A lot of it is debatable, but there are costs that will in the near future be attributable to Iraq that haven’t been accounted for yet.”

Staff researcher Julie Tate contributed to this report.

Bulletins from the Titanic
Mike Whitney, Smirking Chimp
Nov 14 2007

On Monday, Asian stock markets took another beating, on fears that the credit squeeze which began in the United States will continue to worsen in the months ahead. Every index from Tokyo to Sidney fell sharply continuing the “self-reinforcing” cycle of losses started last week on Wall Street. The Nikkei 225 average fell 3.3 per cent, India’s Sensex 2.9 per cent, Taiwan’s 3.5 per cent, and Hong Kong’s Hang Seng slumped 4.5 per cent. The subprime tsunami is presently headed towards downtown Manhattan, where nervous traders are already hunkered-down in the trenches—ashen and wide-eyed.

Amid the deluge of bad news over the weekend; one story towers above all the others. The yen gained 1.5 per cent against the dollar. (9 per cent year-over-year) That means that Wall Street’s biggest swindle, the carry trade, is finally unwinding. The over-levered hedge funds will now be forced to sell their positions quickly before the interest-rate window shuts and they’re stuck with humongous bets they cannot cover. The faltering yen is the grease that lubricates the guillotine. $1 trillion in low interest loans–which keeps the trading whirring along in US markets–is about to get a haircut. Cheap Japanese credit is the hidden flywheel in Hedgistan’s main-cylinder. Once it is removed, the industry will seize up and clank to a halt. Fund managers can forget about the vacation rental in the Hamptons. It’ll be sloppy Joes and Schlitz Malt-liquor on Coney Island from here on out.

Over the weekend Deutsche Bank announced that losses from “securitized” subprime mortgages were likely to reach $400 billion. The news sparked a sell-off in the Asian markets where investors have become increasingly eager to pare down their holdings of US equities and dollar-backed assets. Overnight, the greenback has become the leper at the birthday party; everyone is steering clear for fear of contagion. Foreign central banks are looking for any opportunity to dump their stockpiles of dollars in a manner that doesn’t disrupt their economies or the global financial system. Their intentions may be prudent-even honorable-but it won’t forestall the inevitable blow-off of US dollars that is likely to commence as soon as the financial giants reveal the real size of their losses. New regulations have been put in place that will require the banks to provide “market prices” for their assets. This will expose the degree to which they are under-capitalized. When word gets out that the banking system is underwater; there’ll be a run on the dollar.

On Sunday, the AFP reported that the Group of Seven richest nations (G7) is considering direct “intervention” in the dollar’s decline to prevent a “disorderly correction”.

“It is not too early contemplating the risk of coordinated interventions by the G7,” said Stephen Jen and Charles St-Arnaud of investment bank Morgan Stanley. “History shows that multilateral, coordinated interventions have been key in establishing turning points in multi-year trends in major currencies in the past three decades.” On Thursday, Treasury Secretary Hank Paulson, full fathom five under the waves on the poop deck of the Titanic communicated through speaker tube the news that “A strong dollar is in our nation’s interest and should be based on economic fundamentals.”

According to Bloomberg News: “More than $350 billion of collateralized debt obligations comprising asset-backed securities may become ‘distressed’ because of credit rating downgrades.”

What’s clear is that the situation is getting worse, not better. Honesty must at least be considered as one of many options, although the Treasury Dept avoids that choice like the plague. Eventually, the public will have to be told about what is going on. Last week, the Financial Times reported:

“In recent days, investors have been presented with a stream of high-profile signs that sentiment in the financial world is deteriorating. However, deep in one esoteric corner of finance, another, little-known set of numbers is provoking growing concern. So-called correlation - a concept that shows how slices of complex pools of credit derivatives trade relative to each other - has been moving in unusual ways ‘What we are seeing in the synthetic [derivative] markets is that there is a serious fear of systemic risk,’ says Michael Hampden-Turner, credit strategist at Citigroup. ‘This is not just about price correlation within the collateralized debt obligation market, but about a potential rise in default correlation and asset correlation.’ Until recently, traders often tended to assume that there was relatively little correlation between different chunks of debt, because they thought that the biggest risk to the world was idiosyncratic in nature - meaning that while one company, say, might suddenly default, it was unlikely that numerous companies would default at the same time. However, some regulators have been warning for some time that in times of stress correlation does not always behave as traders might expect.”

The multi-trillion dollar derivatives industry-which has never been tested in down-market conditions—is now moving sideways. No one really knows what this means except that the most opaque and volatile debt-instruments are now threatening to unravel, triggering a cascade of unanticipated defaults and a colossal loss of market capitalization. Credit default swaps (CDS) are rarely thrashed out in market commentary. They are counterparty options which provide hedging against the prospect of default. They are, in fact, a financial equivalent of the San Andreas faultline which is quivering menacingly as foreclosures mount and mortgage-backed bonds continue to implode. As the Financial Times suggests, the shock waves should be sweeping through the Wall Street trading pits in the very near future.

There are also new developments on the sale of “marked to model” CDOs-the red-haired stepchild of the new structured finance paradigm. “The trustee of a $1.5 billion collateralized debt obligation managed by State Street Global Advisors has started selling assets, apparently starting a process of liquidation,” Standard and Poor’s said. The sale is a red flag for the other holders of $1.5 trillion of CDOs who’ve been waiting for market conditions to change before they try to sell their mortgage-backed bonds. The liquidation will assign a “market price” to these complex structured investment vehicles. If the price at auction is mere pennies on the dollar, then the banks, pension funds, and insurance companies will have write down their losses or add to their reserves to cover their weakening assets. Simply put, the State Street sale could turn out to be doomsday for a number of under-capitalized investment banks. Their revenues are already down; this would be the last stake to the heart.

Finally, Greg Noland, at Prudent Bear.com reports on the “looming disaster” at Fannie Mae where, the best-known Government Sponsored Entity (GSE) has entered into the current housing slump with a “Book of Business of mortgages, MBS and other credit guarantees of $2.7 trillion” which is backed by a measly “$39.9 billion of Shareholder’s Equity”.

That’s all?

As Noland concludes, “A devastating housing bust will bankrupt the mortgage insurers, while the solvency of their derivatives counterparties going forward will be in doubt in any number of scenarios. The GSEs are now integrally linked to what I expect to be Credit insurance’s and “structured finance’s” astonishing downfall.”

Amen.

The only thing looking up are oil futures. And they’ll be denominated in euros soon enough.

Standards for the New Depression
Michael Fox, Smirking Chimp
Nov 15 2007

We all have our own way of seeing the world. This writer needs the news to have a score. A musical score.

A Song for the veteran:

Once in khaki suits, gee we looked swell
Full of that Yankee-Doodly-dum
Half a million boots went sloggin’ through Hell
And I was the kid with the drum

Say, don’t you remember, they called me “Al”
It was “Al” all the time
Why don’t you remember, I’m your pal
Say buddy, can you spare a dime?

Gorney/ Harburg

CBS reports that for the last fully documented year, 2005, in a survey of 45 states, “there were at least 6,256 suicides among those who served in the armed forces. That’s 120 each and every week, in just one year… One age group stood out. Veterans aged 20 through 24, those who have served during the war on terror. They had the highest suicide rate among all veterans, estimated between two and four times higher than civilians the same age. (The suicide rate for non-veterans is 8.3 per 100,000, while the rate for veterans was found to be between 22.9 and 31.9 per 100,000.)” Indeed… And, by the way, Brother, can you spare a Prozac? Evidently, the VA hasn’t got it in the budget.

A Song for the displaced:

A room is still a room
Even when there’s nothing there but gloom
But a room is not a house
And a house is not a home
When the two of us are far apart
And one of us has a broken heart

Now and then I call your name
And suddenly your face appears
But it’s just a crazy game
And when it ends, it ends in tears

Bachrach/David

Realty Trac, an online tracking survey of real estate statistics is reporting that there are, as of the end of October, 650,000 current foreclosure and preforeclosure homes in the United States. That number is growing every week, but right now, here are a few startling facts from a few random metropolitan areas:

In the Riverside/San Bernardino area, one in 43 homes is in foreclosure. Right now.

In Las Vegas, that number right now is one of every 48.

In Miami, the statistic right now is one out of every 60.

There are many communities throughout the nation where the statistics are worse, but anything less than one per 1,000 is worrisome. One per 100 is a red flag.

At Foreclosurepulse, an industry site, the following understatement caught my eye:

“As foreclosures multiply in Los Angeles and Orange counties, it is too early to gauge the effect these properties will have on home values there, said Patrick Veling, president of Real Data Strategies Inc., a Brea real estate consulting firm.”

I suppose, like every realtor or mortgage broker I’ve ever known, Mr. Veling must – in order to wake up and do their jobs - keep some degree of optimism. But I’d bet that deep inside, he’s got to know the jig’s up, wouldn’t you?

And some ruthless banker is showing someone the door every minute of every day, taking the keys, and cynically suggesting that you remember what’s important, after all is being with your loved ones (even if that’s under a bridge).

Song for the foreclosed-upon:

The way you hold your knife
The way we danced till three
The way you changed my life
No, no, they can’t take that away from me

No, they can’t take that away
Can’t take that away
Can’t take that away from me

(Gershwin/Gershwin)

Lyrics provided by www.songlyrics.com

$1 trillion to the rescue
If Iraq is worth $1 trillion, let’s allot just as much to benefit humanity.
Woody Tasch, Christian Science Monitor
November 15, 2007

San Francisco - Economists project that the cost of the war in Iraq, when all is said and done, will come in at $1 trillion or more.

I say: Let’s do it again!

Let’s allocate another trillion dollars – but this time for the good of all humanity and all species. Let’s do it with the same moral urgency and vision that has made America great at so many critical junctures in history.

There’s an emergency and an opportunity out there that calls for The Next Trillion.

It’s about more than geopolitics and petrodollars. It’s about more than the science of climate change.

It’s about the need for global economic institutions to evolve in response to the social and environmental challenges of our time: growth in population, accelerating technological change, accelerating capital flows, growth in consumption, increasing pollution, widening wealth gaps.

Today’s global economy creates a thousand billionaires and a billion thousandaires. It has created what venture capitalist John Doerr calls “the greatest legal accumulation of wealth in history.”

But it also drives China to add 65 gigawatts to its electric grid each year, most of which is produced by highly polluting coal-fired power plants.

And today’s global economy is driven by Americans, who use more energy, put more carbon into the atmosphere, and generate more waste than any citizen in history – and by a shameful margin.

The financial returns of the 20th century depended upon environmental and social trends that are unsustainable. The old worldviews and economic institutions are no longer adequate. We must begin to move, and move boldly, in a new direction.

The good news is that out of the current military, political, and environmental quagmire arises an unprecedented opportunity for America to leap into a new era of economic leadership.

Here’s how The Next Trillion should be invested:

• $250 billion for clean energy and energy efficiency;
• $250 billion for carbon sequestration and bioremediation;
• $250 billion for sustainable food and forests; and
• $250 billion for community development.

This is a wildly important moment. A tectonic shift is occurring beneath the culture of conquest and consumption. A tectonic shift is occurring in the consciousness of the consumer, the entrepreneur, and the investor.

We must seize the opportunity to accelerate the transition past “sustainable development” all the way to a full-fledged restorative economy, in which jobs, wealth, and economic vitality are created by enterprises that restore and preserve the common good.

For 15 years, I’ve been helping investors steer capital toward “triple-bottom-line” private companies, which aim to produce strong financial, social, and environmental results.

We at Investors’ Circle have begun to see the power of “patient capital” to support entrepreneurs whose companies are leading the way toward the restorative economy. Such companies include Farmers Diner, building new, local connections between organic-food producers and consumers. Or Verdant Power, pioneering submersible turbines for tidal electricity generation. Or United Villages, providing wireless internet access for villages in Africa, Asia, and Latin America.

Slowing money down, bringing it back down to earth, thinking longer term, recapturing money, and redeploying it as an agent of community and bioregional health, creating what some have called “virtuous globalization” or, even, localization – this is the next great work.

Let The Next Trillion, then, be the most urgently deployed patient capital in history.

If $1 trillion over five years seems like a lot, view it against the $2 trillion that speeds through Wall Street daily or America’s $14 trillion gross domestic product.

If we can spend $1 trillion on an Iraqi nightmare, then we can invest $1 trillion in a new American Dream.

The New Deal, Marshall Plan, Manhattan Project, Apollo Program – when America sets its mind to it, anything is possible.

Let us set our mind to The Next Trillion.

Deployed with requisite vision and courage, it will unleash forces of reconstruction, restoration, and healing, the likes of which the world has never seen.

Woody Tasch is the chairman of Investors’ Circle, a network that since 1992 has connected patient-capital investors with early-stage companies and venture funds that promote sustainability.

“So keep fightin’ for freedom and justice, beloveds, but don’t you forget to have fun doin’ it. Lord, let your laughter ring forth. Be outrageous, ridicule the fraidy-cats, rejoice in all the oddities that freedom can produce. And when you get through kickin’ ass and celebratin’ the sheer joy of a good fight, be sure to tell those who come after how much fun it was.”
~ Molly Ivins, 1944 - 2007

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