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August 04, 2011


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"As things stand, China is in the driver's seat, even if its bubble pops."-Rogue

This isn't entirely true; China's bubble will pop due to unrestrained expenditures dependent on selling more and more of their cheap goods to Americans.

If the American economy stalls and eventually fails, as many on this blog believe, Chinese progress completely stalls. A scary thought for a nation of over 1 billion will no national safety net. China also has the scariest record of environmental pollution. This will eventually lead to disastrous rising health care cost but the inability to provide that care. Especially to the rural populations will bare the brunt of the fallout; though China is employing renewable energy sources, their fastest growing source of power is coal and petrol. This will continue unabated and at record pace. Leading to extremely polluted air and water which is already causing the cancer rate to grow exponentially.

On the bright side, maybe China's pollution (sulfur) will continue masking global warmings effects on the planet:

We should stop using China as an example of success (because it hasn't succeeded in created a sustainable middle class) and focus on issues at home. Mainly tax loopholes that allow cheap, Chinese labor to manufacture innovative products that were invented here.

As much as I blame our political system for our current demise (especially for underinvestment, the abandonment of Bretton Woods, and the deregulation of Wall Street), I can't help but wonder how much of our current situation is the unavoidable result of the rise of the developing world.

For example:
- As Japan and China started buying Treasury bills in order to keep their currencies artificially low for the sake of maintaining a US import base, this created a huge trade deficit, one that helped spur the financialization our economy.
- As companies moved manufacturing operations overseas (due to lower worker wages and a lack of union protections), Rust Belt cities crumbled.
- As developing countries have acquired a taste for automobiles and other goods, commodity prices have risen exponentially.
- As investors in the developing world looked for higher and higher returns, Wall Street created CDOs and other exotic financial instruments to meet this demand.
- As returns from investments in the developing world have started to dwarf the possible returns at home, domestic firms have shifted their focuses overseas.

One of the oddities here is that Wall Street waited until after the debt-ceiling resolution to register its dismay. You might think that they would be pleased to know that their tax rates are being protected by the Randian goobers in Washington. You might assume that the financopaths who engineered the global economic crisis would love seeing their ideological constructs put into practice. Sadly, no.

Let's be clear: that lack of "certainty" that was supposedly spooking capitalism had nothing to do with a "socialist" president otherwise drooling with eagerness to serve financial titans. It has everything to do with a globalized economy flush with contradictions that can no longer be papered over with tax cuts or trade deals. All the bromides and all the good intentions are empty words. Next to the reality of Peak Oil, unserviceable toxic debt, and unregulated financial instruments of doom, our efforts are meaningless gestures.

I have no idea how we will get through this crisis or even if it's possible. I tend to think the apocalypse can be delayed by not denied. This nation is now tethered to its economic co-conspirators like Ahab to a whale. We've behaved very badly and the tendency will be to think we can save ourselves with something like "fiscal rectitude". No, we can't. It's much too late for bullshit.


Whenever I'm in Vancouver, I relax to the MAX.

Just relax for the remainder of your trip, then you, cal, eclec and I will meet for coffee when you get back and we will do some serious venting. Deal?

Would it be at all possible for Obama to run on the Republican ticket next year? Would that be the only hope to free up the current "conservative" stranglehold on Washington? A third party never seems to be able to maintain momentum, by design I'm sure.

Azrebel, I'm off to Stanley Park for some wine sipping and bruschetta munching. Then it's some musical diversion at the Roundhouse. If there's a tomorrow, I'll fly back to Blobville and regale all of you with tales how Canadians think we're crazy and that they're insulated from the antics of their largest trading partner. Delusion defines the human condition.

Soleri, please bring up these facts to your Canadian friends: Canadian oil sands, new natural gas and oil pipelines in BC meant to transport crude to barges in the Hecate Strait, and the possibility of environmental disaster in the PacNW due to these developments. These new pipelines are an attempt to quench the thirst of the Chinese for oil.

Jon, thanks for the historical context of the current economic and political situation. Where have the critical thinkers in the US gone?

The 512 point drop in the DOW today has much to do with the coming Lehman moment of the European banking system. Given the behavior of US political leaders during the debt ceiling circus, we are assured that there will be no assistance when the implosion occurs. The Europeans have no independent central bank or treasury to take necessary steps when the panic ensues.

With the recently revised downward GDP figures and unemployment situation we can only slide more.

At this point martinis are the better choice rather than coffee. It will be our last chance before Prohibition and bathtub gin return. Looking forward to the next meeting tho.

I'm figuring Wall Street will let the market decline for a few more weeks (QE3 anyone?). So my bet is on crony capitalism, after all, we knew already it has won big. When the house of cards finally is blown away is anyone's guess.

Well, I just hate braggadocio MFER’s but WTF? At 71 I feel pretty smug as from 1958 to 1962 I argued with Ken and Shirley the commies, a bunch of philosophy teachers and on the other side all those Arizona construction capitalists about the state of the world. One, I said the key was population growth. Two, China would be the elephant in the Jungle trying to stomp out the fires of the rest of the planets burning nations. Now we are here if all you smart guys are right. I agree with you all for the most part on your dour predictions and what a great last entry by Soleri in “Did Light Rail fail.” Let her burn baby. I didn’t comment on light rail as in 56 I was advocating that Arizona should have built a rail from Nogales to Flagstaff, but no one was listening. That way I could take the train to Rosie’s whore house in NOGO and sleep off the Agave on the way back. Plus the current light rail is too little, too late and too ugly. Thanks for another great article Jon, you’re the man. , I heretofore add you to my short list of the last of the good guys, Ed Abbey and Chuck Bowden.
I know old guys repeat themselves a lot but the 5000 robber barons will survive and everyone else is a commodity. Jon, I think I gave you a copy of the City by Simak. Maybe reading it instead of watching Mad Max movies might help you relax, with a Martini of course, shaken not stirred.

People like me are DEAD. I have to work for a living and the Tea Partiers and Republicans and corporatists are going to starve me to death.

Holodomor is here!!

This is what the Republicans and rich folks wanted. They want slave labor. They want to starve working Americans to death. Now everyone sees the oncoming train.

We need a revolution. It is the only way to save ourselves and the United States as we used to know it. We need to replace our government immediately.

We can revolt or we can starve to death.

Here is what will happen in the short term.

Unemployment is going to go up, especially if the government really starts cutting and starts to fire workers.

If government programs are cut, consumers will have less to spend, and will become even more terrorized.

This will create a downward, self-fueling cycle, and the job market will get worse and worse.

The Tea Party's answer will be to abolish Food Stamps and to cut the minimum wage, which will be like adding fuel to the fire. They will demand more tax cuts for billionaires.

Eventually, we will see mass starvation in the United States. The Tea Partiers will call the victims "losers" who did not have the gumption to start their own business.

Laid-off engineers, nurses, mechanics, and schoolteachers will be called "losers" and they will be mocked and taunted while they starve to death.

"A third party never seems to be able to maintain momentum, by design I'm sure."

No, rather by inane mantras similar to, "A third party never seems to be able to maintain momentum, by design I'm sure."


"One of the oddities here is that Wall Street waited until after the debt-ceiling resolution to register its dismay."

All part of the game to milk the suckers blind. Lock in the gains by selling in sync for a profit, then watch it drop like a stone. Eventually buy low in sync again. Let the news of the rebound permeate the corrals of las vacas. Sit back and wait for myriad automatic paycheck contributions to raise the udders to flatulent again. And then re-milk the middle class that's foolish enough to play a game rigged with the supercomputers of billionaires...

As an aside:

Please note that just as "bitcoin" is an internet revolt to eliminate the banksters, and Friedman's "American Elect" (actually run by a billionaire) is an internet revolt to form a third part in opposition to Hoover and the Hooverettes, I have not seen any attempt to reconstitute a stock market that will once again work for Americans and the American economy. That seriously wants doing...

@Jon Talton: Brilliant post old son..

@Joanna: Brilliant wry question: "Would it be at all possible for Obama to run on the Republican ticket next year?" Touche.

As a government worker I know many co-workers are expecting contraction of their agencies, and they are expecting early buyouts to further reduce numbers of government workers. And this is in the name of what? so they can twiddle their thumbs at home so that some budget somewhere has been reduced?
But what will reduce the ever-widening gap between the petrified formerly middle class and ultra-rich? This will take far more than Obama trying to coax a change in the tax code!
People from all over the world come to the U S to get educated, yet it seems that we Americans are getting dumber by the minute! What over nation in the world could have re-elected George W Bush?

As developing countries have acquired a taste for automobiles and other goods, commodity prices have risen exponentially....That seriously wants doing...

Nice read on a topic not in the news lately:


@eclecticdog - thanks for that link.

@eclecticdog - I was going to do a post on that story, but caveats (with links) abound in the comments...

OT but worth noting: John Teets has died at age 77. He had been suffering from Alzeheimer's.

As CEO of Dial, he was one of the last corporate titans who figured prominently in local affairs. He was a headknocker and socialite who helped make Phoenix more than just a branch-office backwater.

I was living near Central & Palm Ln when the Dial building was built in 1990. It was part of Teets' stewardship ethic to make a big corporate statement close to but not in downtown. The original plan was to construct two towers, with one perpendicular to the other. As with so many real-estate dreams, this one was only partly realized. The result is a free-standing mountain of a building completely out of scale to its surroundings.

Teets spent lavishly on it but the tapestries he hung in the lobby, or the exquisite garden outside couldn't quite make up for the fact that it was another ostentatious project that seemed so much like the city it was built in: isolated and strange.

Then there was the restaurant he put not on the ground floor but on the second, thus removing any energy channel to Central Avenue. "Gabriel's" was sui generis, an upscale eatery that served Teets' favorite comfort food (meat loaf and mashed potatoes, e.g.). The wait staff wore kitschy vests and bow ties that Teets once saw and Italy and fell in love with. This odd chapter in fine dining lasted one year before closing.

Teets himself was a tough character, someone who liked to storm into his subordinates' office unannounced to deliver some corrective counsel. He drove himself hard as well. He would climb the stairs rather than ride the elevator to his office 250 feet up. I thought he'd live to be 100.

In the end, Teets couldn't save Dial from financial analysts who found gold in its parts but not its whole. Dial and its spin-off Finova moved to Scottsdale while the remaining part, Viad, remained in place. After that, Teets faded from view. The stewardship class he symbolized was fast fading, too. The big local banks had been swallowed up and their CEOs toppled until it seemed Jerry Colangelo was the last of the giants.

Teets was not exactly brilliant but he made our hometown seem important and consequential at his - and our - peak. The history of Phoenix seemed like a Roman candle where movers and shakers would come and go but the arc was ever upward. That's changed now and Teets' death is a fitting memorial to a dream.

In some future column, it would be interesting to probe deeper on Standard & Poor. I'm still pondering their role in vetting the banksters' junky Collateralized Debt Obligations. Didn't they give these mounds of crap a generally clean bill of health? Or am I thinking of Moody's?

Morecleanair, you're thinking of all the rating agencies. They essentially sold their AAA ratings to any investment bank that was footing the bill.

If you missed Drew Westen's piece in today's Times, it's must reading: http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html?pagewanted=1&_r=1&ref=opinion

Westen ponders the flaw or tic that makes Obama a compulsive compromiser. I tend to favor the explanation about money. It's what politics is about, first and last. And because this country no longer has a labor movement, Democrats have to cadge their contributions on Wall Street and K Street. The elected Democrats may be "liberal", especially about lifestyle issues, but they're not going to bite the hand that feeds them.

Obama is essentially a Republican-manqué because that's what our system will allow. Even with comprehensive campaign finance reform (dream on!), Wall Street would still buy Democrats wholesale.

The country no longer has a labor movement but it does have workers in need of a voice in Washington. In particular, rank and file workers in the private sector are without representation. Their situation includes jobs with no long term certainty, no reasonable way to build enough personal assets for retirement, rising living costs, and a government absolutely out of touch with their challenges.

Obama's campaigners are confident of his re-election not because his leadership has built voter support but because he has raised almost $1 billion in campaign contributions.

Any campaign reform legislation addressing political payments would likely be invalidated by the right-wing activist us supreme court.

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