Good News! The Rest of the World is Even More Screwed Up Than Us!

Dollar Steers World Economy into Telephone Pole--

But Is Only One Wearing Seat Belt

Don't start converting to euros yet.

In an ironic twist to the global financial crisis it looks like the the good old greenback is back on top. We got the world hooked on bindles of high risk head rush real estate derivatives. But now that the inevitable telephone pole of reality has jumped in front of the car we have our financial Betty Ford Clinics already built. The rest of the world does not.

We've been there before. FDR and friends had to nurse the financial system back after it had gotten way too high and crashed hard in 1929. The first couple of tough love years that followed saw a third of Americans lose the money in their bank accounts and a 25% unemployment rate. Like today's Europe and Asia they had no net. The FDIC and other "socialist" institutions FDR built to dry out a wasted economy are still in place, thankfully. But the rules that hold the European Union together specifically restrict the kind of emergency "injections" we are giving our junkie banks right now. Their Ad Hoc solutions directly challenge the system which is the basis of their currency. And Asian markets are still learning how to drive the capitalism car out of a ditch. Once again everyone wants dollars.

So we are saved by our own schizophrenia. We tossed out all the rules so we could snort up all the subprime mortgages we wanted, but we never moved out of Mom's house, so she can clean us up and put us back on our feet now that we smashed up the family car. But where does that leave us? Do we go right back on a bender as soon as our strength returns, or stay safe in Mommy's arms?

Greenspan the freemarketeer is humbled now. It turns out you do need some rules after all. And Galbraith the "socialist" is correct to point out that our system of "wealth distribution" is the net that will save us from 1930 happening all over again. But let's hope the bailout doesn't turn us into a lockdown economy, with federal intervention at every step. And let's hope we learned, along with Greenie, that even a free market needs some rules.

http://www.pbs.org/moyers/journal/10242008/transcript2.html
http://www.nytimes.com/2008/10/24/business/economy/24panel.html?_r=1&hp&oref=slogin
http://www.nytimes.com/2008/10/05/business/worldbusiness/05euro.html
http://www.bloomberg.com/apps/news?pid=20601087&sid=aF6npULt3NT8&refer=home

Flip This Economy

I can tell you the first person who knew in his guts that something in this economy was terribly, terribly wrong.

He was slumped over the wheel on I-80, stuck in a gridlock, halfway into the two hour daily lemming run into the city.

All around him, far as the eye could see, were people just like him. Blinking in traffic next to empty latte cups, idling away gas they couldn't afford to get to jobs they might lose, vainly trying to keep up with expanding mortgages on houses a hundred miles away from where they work. All because every single converted clothes closet in the city was going for a million bucks.

As he sat there looking over at the shadow faced driver in the lane next door, nodding, like himself, to the "Dink and Dork in the Morning Show", he must have thought:

"This can't be right. How much can one crappy apartment in San Francisco really be worth?"

Somehow, in between the "Flip This House" type TV shows and the late night no money down infomercials, we were convinced that selling real estate back and forth to each other at exponentially increasing prices qualifies as an industry. The entire ponzi scheme is based on the idea that someone even stupider than you will come along with a bigger wheelbarrow full of money and cash you out. That guy then paints the porch and waits for a bigger idiot, perhaps someone in a clown suit driving up the driveway in a shiny dumptruck full of money.

Yes, it was glorious. A balloon payment, fee encrusted, high interest, high profit gold rush--all paid for by the next guy. But if all those real estate players had no jobs, no credit ratings and no cash, then where exactly did all the money come from?

Enter woolen skinned men in tall glassy cubicles. Specifically AIG, the investment wizards to whom the US taxpayers are now handing our wallets. Only recently they liked to brag that they invented the investment vehicle by which both their fantastically wealthy clients and the banks where we all put our money made unbelievable profits on the real estate idiot chain. All you had to do is bundle up the "risky" high interest home loans (often mixed with safer stuff like your municipal bonds for schools and sewers). Then you just keep pouring money on them, kind of like gasoline on a nice toasty fire. Just put enough loose money into the hands of clowns pulling dumptrucks into the driveways of recently remodeled McMansions and the whole system works wonderfully. The money you dump onto the idiot chain comes flowing back to your investors from the unbelievably high interest rates on the loans. Meanwhile fees and consultation services and sales commissions can keep a company like AIG in the spas six months out of the year- good spas too, where young girls whip you with eucalyptus branches while they recite lines from "The Art of War".

Yes the whole system works beautifully until that last clown never comes up the driveway. You don't want to be the last idiot in the idiot chain.

Like every pyramid scheme it finally collapsed under its own weight.

If there's anything to be proud of in all this it is that we apparently suckered the entire planet in. Yep, its the biggest scam of all time.