Facing the New Economic Reality: Dinosaurs of the Economic Collapse Die Hard
Spain has exhibited considerable economic denial about the state of its banks of late, saying it will need no bailout, in order to keep the drain in Spain from becoming plainly worse. The Spanish government is caught in a vicious circle as it spins down the debt drain, which it tries to offset with verbal counter-spin about its self-sufficiency.
“Spanish banks — already burdened with toxic loans and assets — have been buying up [Spanish] bonds, which are being used to help prop up the banks — trapping Spain and its banks in a vicious circle of debt.” (“Spain Sees No Need for Bailout as Rates Ease a Bit“)
Independent audits of Spain’s banks were due out this June, but the Spanish government said it would not release the information in the audits until sometime in September, indicating that the audits are expected to contain highly upsetting news that would worsen the Spanish government’s problems.
Yet, these kinds of problems, spreading rapidly in Europe, still have not stopped some market analysts from continuing to talk investors into believing the rosy hues of dawn are just on the horizon for Europe:
“We think the markets have gotten ahead of themselves,” says Jeremy DeGroot, chief investment officer at Litman Gregory Asset Management, a California investment firm, the New York Times reports. ”They’ve priced in so many problems for Europe that, on a relative basis, European stocks look very attractive for long-term investors.” (“Asset Manager: Now Is the Time to Invest in Europe“)
That’s a different kind of economic denial, and if you’re inclined to follow such advice, I have a transatlantic bridge to sell you. The markets don’t even know how to price in all of Europe’s woes because they don’t even know how deep Europe’s woes go. (Take, for example, those mysterious Spanish bank audits.) So asset managers like this are either lying or blind to the new economic reality around them. In which case, they are destined to extinction because they are not capable of economic adaptation.
Europe adapts slower than its new financial reality changes
More than any other part of the world, Europe needs to take an economic reality test. The leadership’s inability to comprehend the financial reality they now live in is evident in how the Euro crisis came to completely dominate last week’s news … once again. Has this become the tiredest story on earth or what?
Almost no one believes Europe will do anything that is any more effective than what Europe has done in the past three years. European leaders see the Greek crisis coming, but by the time they have a stop-gap solution, the gap has widened to twice the size of their solution, and it falls through … time and again. The leaders fumble every time, so no one believes them any more. The news this week is full of people in the financial world saying they do not believe Europe will do anything effective at this week’s summit.
The only thing that can be said for certain about Europe is that the faster its problems emerge, the slower it is to work toward solutions, having finally reached what appears to be a stalemate between Germany and the rest of Europe. Germany’s Chancellor Angela Merkel is deeply mired in the tar pits of economic denial. She is still talking about five and ten-year solutions. Apparently, she is silly enough to think the Eurozone will actually be around that long if she doesn’t find those same solutions now. She is addicted to German ways of thinking, which have worked well for Germany, and believes that all will survive well if they can just adapt to the German way.
The rapidly changing economic reality around Merkel is not going to give her time to get all Europeans to adapt their dancing to the German goose step. Merkel needs answers that can begin in weeks, but she stubbornly continues working on a time-scale of years. The one in control of Europe has no economic vision. She can see only the old ways that have worked well for her own people, but it is impossible to institute those ways fast enough. She will not institute solutions without German control over them, and control will not be (and should not be) shifted that readily.
In the end, Germany, like all nations, will look out for its own interests first, so it will not become the strongman savior of the European world because strongmen demand control, and individual European nations will not yield such control to Germany. Let’s face it, Germany has always wanted to control Europe, and the rest of Europe (at the end of each day) remembers that. So, those nations will not yield their sovereignty to Germany in exchange for German financial support.
Merkel holds to the dream that she can keep the smaller nations in a stranglehold that will get them to submit to the German way. She is wrong. The two sides of Europe are caught in a death match.
Adapting to the new economic reality
While Europe is clearly thinking too slowly to adapt, some in the U.S. are actually thinking in reverse:
Dick Bove, a banking analyst at Rochdale, says that in order to stimulate growth, we need to scrap excessive banking rules. (MoneyNews)
Oh my gosh! Is that denial of financial reality or complete cortex collapse? Perhaps, rather than ridicule the man, I should call 9-1-1. A chimpanzee with an abacus could tell you that deregulating banks is the same growth formula used through the last thirty years to the brink of economic extinction. Giving the greedy bankers who created the Great Recession more free reign is like entrusting law enforcement to four-year olds in belief they’ll do what is best for the economy. And, while it is true gangsters are excellent at self-regulation, it is only when the regulation is their own self-interest, society be damned.
Bove (above) concedes that the Fed’s actions are not working:
It also appears to be just as evident that lowering interest rates to zero and printing more money are not effective options. (“Bove: To Fire Up Growth, Scrap Excessive Bank Rules“)
But he only does so only to score his point:
“It is possible that the regulators are beginning to understand that by taking the banks out of the financial system, they are crippling the economy and pushing unemployment rates higher. If they do understand this they might reverse the absurd actions they have taken and assist the economy.”
Even an extended economic crisis cannot dissuade these gluttons from returning to the now-dead ground that they killed by over foraging. They tell us that the only reason this ground is not recovering is because we are no longer letting them stomp all over it to their heart’s content as they once did. Apparently some people are inclined to believe that human nature is so noble that fat bankers would never hurt the general economy in serving their own short-term self-interest. No, there’s no way they’d do that! They would never put their depositors (or taxpayer’s) money at risk! The financial dinosaurs of this world remain addicted to the easy feeding they once had in the tropical forests of lush credit and they are incapable of adapting to the new economic reality around them.
Economic evolution must happen from the bottom up
In the same article quoted above, another dinosaur, who was the chairwoman of the President Barak Obama’s Council of Economic Advisers, says,
“We need more effective fiscal and housing policies. But neither is likely to happen, at least not before the presidential election.”
Translate that as, “We do not need to evolve economically. We need to revive the old economy.” There is no ability at the top to think creatively about a whole new world of possibilities. There is merely the desire to return to the easy answers that worked in the past by looking to restart the old driver of the moribund economy.
It’s like saying, “What we need to do in order to save ourselves from the housing bust is to get the populace to go back to buying more and bigger houses than they really need. We must do all we can to encourage the consumers of the ancient forest that is now gone to consume endlessly.”
Is there any real shortage of houses in America such that we need to build more? Is anyone crying out for housing who cannot find a house? If there are, then with the massive flood of foreclosures still coming downstream toward us, they need merely sit by the river bank and wait for them to arrive in mass.
Economic extinction happens at the top of the food chain. The heavy top feeders are the ones least willing to adapt their large structures to the new financial reality. Their walnut brains can think only of reviving the glorious past. Perhaps this is one reason both Democrats and Republicans hate to curb rampant immigration. If they’re going to drive your economy by building lots of new houses, they need to rapidly expand our population in order to find enough people to fill those houses. They cannot get people to produce more babies, and that takes too long anyway; but they can bring in people from other countries in droves to fill more apartment houses, which is where most of the building is happening now anyway.
These tired beasts have not wakened up to the new financial reality, and they are doing nothing to create a better life out of what remains from the past because they have no idea how. They are fearful to the point of inaction or to retrying old actions that left us bankrupt. One would hope politicians would want more than ever to do what is right for the economy in an election year in order to prove they know something, are capable of actual leadership, and are worth re-electing. Sadly that is not the case.
Because we are no longer driving our economy with rampant new home construction, this former presidential advisor goes on to say,
“As a result, the Fed is the only plausible source of immediate help for the American economy. It was set up as an independent body precisely so that somebody can do what’s right when politicians can’t or won’t.”
God save us from our politicians if that is the best the president’s advisors can come up with. Let us hope this is why she is a former advisor. If her “only plausible source of immediate help” is the Federal Reserve, which is run by bankers, then this statement is admission by Obama’s own advisors that we’re doomed. The Fed, itself, has said it has done all it can and that it is now up to politicians to make much bigger changes. And the politicians are saying the Fed is our only hope for help. The European Central Bank has also said that they can do no more; it is up to European politicians to start forging deeper changes. Clearly no one has any idea what to do.
As Bove said above, the Fed’s actions have brought little help in all these four years. Who can argue with that? Yet, one of Obama’s chief economic policy advisors sees the Fed as our only remaining hope? If that is not clear evidence that there is no light at the top of food chain, I don’t know what is.
The reason she says the Fed is our only plausible hope is because she knows what everyone is saying — that in an election year, the politicians will all do nothing. All the president’s men and women are dithering exactly as Germany is doing — acting as if time is on their side … as if they can wait until they are politically safe after the elections before they start testing ways to put the old economy back together. Time is not on their side, and they have no ideas of what a new economy would even look like.
Time is not on anyone’s side, and our nation will waste away while the dinosaurs await their re-election. The central banks have bought the politicians time, but they have done nothing with it. The banks can buy no more time. The next round of quantitative easing, if it happens (as it likely will), will be a puff of air against a wind storm. It’ll be blown back inside their mouths before it even escapes.
Financial evolution will not come from Congress
The U.S. Congress, too, never learns. Peter Schiff, an economic commentator and CEO of Euro Pacific Capital, said last week that he won’t apologize to congress for his recent testimony about FHA policy. Apparently he offended the dinosaurs, and they’re all stomping their cumbersome feet:
“I can apologize for shaking up what would have otherwise been a sleepy and forgettable proceeding, but I won’t apologize for trying to inject respect for the Constitution and free market capitalism into a venue that has been doing its best to destroy both.”
The subcommittee Schiff was testifying to was – like Obama’s former advisor – trying to decide whether to expand Federal Housing Association efforts to guarantee batched loans for apartment buildings.
“In other words, Congress wanted to replicate the very dynamic that helped create the bubble in single family housing, which ushered in the financial crisis of 2008, the great recession, and left taxpayers on the hook after the bubble burst,” says Schiff. (MoneyNews)
All the dinosaurs did not die the moment the asteroid hit earth. Some of them hid out in the sturdy capital building and remain with us today. Congress’s idea of economic evolution is to now try to do for multi-family housing what it did for single-family housing in the years that caused the Great Recession. That’s putting the ol’ walnut brain to work by repeating the policies of extinction.
The only revelation our politicians can come up with to stay their own economic extinction is to do more of the same thing that failed … but do it bigger. Both parties have solidly proven themselves unable to adapt to their new reality. Both advocate only more of everything we’ve tried before.
Evidence of this can be seen in the top candidates. When dinosaurs have no ideas of how to survive in a new world order, they betray their ignorance in groans. Thus, when President Obama sought stimulus measures last week that would add back some of the layed-off public workers in critical areas of service, Mitt Romney responded,
“He says we need more firemen, more policemen, more teachers,” Mr. Romney said, adding: “It’s time for us to cut back on government and help the American people.” (“Public Workers Face New Rash of Layoffs, Hurting Recovery“)
When did firemen, policemen, and teachers stop being “American people.” What an ignorant an unAmerican statement. But, you see, the only answer the G.O.P. has is their tired rubric that we can solve all our problems by just cutting back on government. It is not, however, as though Democrats have laid out any dazzling vision.
Sure, we need to cut expenses, but we’re cutting government at the wrong end. Given the completely ineffectual answers of leaders in both parties over the last four years of the Great Recession, I think our leaders should start with eliminating themselves as a service to humanity. All of them should volunteer their extinction as the dinosaurs did at the end of the Jurassic Period for the smaller creatures to feed upon. Then, at least, crows like me could survive on the carrion.
Governments are shrinking everwhere as layoffs in the public sector have soared. The G.O.P. notion that they will save us with their tired answer of shrinking government and deregulating ever further has by now surely reached its logical end: The U.S has aleady shed well over half a million public employees! It should be obvious to anyone that the recession is nowhere near ending as a result of this slaughter. In fact, it appears to have only made the recession worse by greatly diminishing buying power due to the vast number of people out of work.
Though such cuts may have been necessary for towns and counties to avoid expanding their debt, they are not and will not ever be a solution to ending the Great Recession. It takes a positive vision, not a negative retort to adapt new economic abilities. Our problems cannot be solved on the back of public employees, though I would not issue a cry if the only public employees to be fired were members of congress. They clearly have done nothing to resolve this economic crisis in four years! They are the most obviously useless meat. When it comes to global warming members of congress consume good oxygen and give back nothing but hot air. They have accomplished nothing of value in four years and need to go.
Economic evolution must rise from the bottom up
Looking at all of the above, it appears that “more of everything we’ve tried before” is the only answer any of the world’s lauded experts has to offer. It doesn’t matter whether you go to Europe or the U.S., you find no financial evolution happening among the top feeders of society. They only want to recreate the banquet they have known and can only see what worked well for them in the past. Their teeth are so tightly clenched around the taxpayers in order to bail out their rich benefactors that their eyes are bloodshot. They will die of blindness, but they will die with their mouths full of the rest of us if we don’t rise in mass against them and vote them out.
Both the Fed and politicians are serving the banksters of Wall Street as if they were gods. The stock market now hangs on the words of the Fed, waiting as it did last week for the golden pearl that will slip from the Fed’s lips and offer some hope of relief for the big boys. This is because Fed relief is the only thing that has been propping up the stock market all along. (See: “Investors playing it safe ahead of Fed statement.”)
It is no different in Europe where Bank of England members verge on voting for more quantitative easing to stimulate Britain’s moribund economy. (“More Bank of England members support extra stimulus“) If it takes funny money to give Wall Street and London’s financial district what they want, the central banks will print more of it to assuage the groaning of the heavy beasts.
The dinosaur economy, in other words, is being saved from extinction only by the artificial life support provided by the money printing of central banks. We let the central banks feed the old dinosaurs so they don’t fall over on the rest of us, rather than letting them die so that new smaller life forms can emerge in a brave new world.
Everyone is waiting for a strongman to save them when it is abundantly clear that none of the world’s strongmen have any answers that have not already been tried and failed. Most of them are returning to the very answers that got us here and acting as if they will work once again.
The world does not need a Goliath. It needs a David. (Not saying this David, but a David as in new blood that doesn’t even know the old answers.) The world needs to turn away from its old economic experts, for they stumble down paths toward cliffs we’ve already fallen off of once before. You can follow them like lemmings to economic extinction if you want.
Congress and the president have already had four years to find a workable answer to the economic crisis. Yet, they both have nothing to offer, except “Please save us, Ben Bernanke!” I think that is why the Fed last week intentionally did the least it could. Bernanke, himself, has come to realize that politicians are doing nothing with the time the Fed has bought them and that temporary central bank responses are seen by politicians as final solutions, numbing them to their own responsibility to act quickly. Congress needs to know that no one is happy with ANY of them. They have had four years in which they have failed us completely.
I think there has never been a better year in U.S. history for voting all incumbents out of office. There is no possible way that doing so could do any harm … as clearly all of them sleep while waiting for the next election anyway, lest they do something that fails and so get voted out, or do something that succeeds and, so, help keep Obama in. They are playing politics with the nation’s very survival as though survival of the fittest party is more important than survival of the nation. Democrats are the vegetarian brontosauruses of the past, and Republicans the toothy tyrannosauruses, but neither of them for all their impressive size have anything to offer us other than the same old stuff. So, let them offer us, instead, their meat.
If you are foolish enough to think your leaders have answers, you have not been watching. Ask yourself why they have not put their answers to the test in four years if they have any. What great surprise do they plan to pull out of the hat after the next election leaves their jobs secure for a little longer? What have they said that you have not heard before for years? Isn’t it time to ditch the dinosaurs?
(If you liked this article on economic reality and want to see others as they’re posted, please click the RSS feed link in the left sidebar and subscribe. Also, please use the email button to pass it along to friends you think might be interested. They will not get added to any email list.)
Recommended reading on finding a new economic reality:
Leave a Reply
You must be logged in to post a comment.