Just say no!?

I like this bold message in regards to the $700B bailout:
http://www.scoop.co.nz/stories/HL0809/S00311.htm

I listened to President Bush's brief statement Wednesday night, and was underwhelmed to say the least. I figured it was something over $1 billion per minute of speech! Unbelievable!

I'm leaning more and more with the pessimists, with whom I'm always in league with in the abstract, but in practically, I usually prefer to negociate with reality, make the BAD choice between bad and worse.

I just don't know this time. There's a MONSTER popular uprising against this bailout, easy enough to conclude its all bluster for those in power so they can agree in the end and pretend they compromised for bad over worse.

I guess the trick comes down to the fact that debts exceed market value, and firesale prices can't save these huge financial companies/banks. I despised Bush for even hinting that these "toxic debts" might eventually make a profit. It's an insult to the intelligence of the American population. I mean SURE WE'RE DUMB, no question. We're just crossing our fingers and hope the "experts" know what they're doing. It might be enough if they knew, BUT they don't know shit. The only thing the EXPERTS know is the more light is shined on this crisis, the more likely their bailout solution will be rejected.

I would vote a "delay and reform" position - accept ONE LAST BAILOUT, and hopefully give everyone ONE LAST CHANCE to reform our ways, pay down our debt, and stabilize our households to handle the REAL DEPRESSION that must come.

Just think of a world where (1) Unemployment quadruples (2) Income reduction for those to keep their jobs, and multiply that into a downward spiral of reduced spending, reduced consumption, reduced demand for goods and services, into a seemingly never ending cycle of positively reinforced downsizing.

I see no other outcome however much the details are uncertain. Myself, I'm in denial as much as anyone, at least I live frugally, but my dependence upon a high income remains as long as I have any debt at all. I'd rather just keep my head in the dark and keep playing along, pretend problems are solvable until my debt is cleared.

So do we really want to "just say no?"

I give up wanting to answer. I have no will to fight. The madness has gone on too long to pretend we can stop it now, just because it's the right thing to do.

I'm disappointed Boone Pickens things we should go forward with the Bailout. He's a poor old man with $3 billion in assets, looking to make a difference. ALL HIS POWER evaporates in a depression world, at least power to keep building. WHatever wealth he'd keep, would be better suited to patching up the 100 million holes in the viability of 100 million households in our country.

We're all impatience. We all want to FLY NOW, and hope it makes sense. Mother nature knows better. She gives us winter, so we can go to sleep, reflect, heal and start again in the spring.

The winter of Human's misery is at our doorstep. What shall we do to prepare? Does anything matter now?

I don't know, however puffed out my chest can get at ourrage at the madness of it all.

How to Fell a Giant

There's a saying in war, "United we stand, divided we fall." It can apply to many thing beyond war, including economics as well as any addictive grasp for greed and power.

No, REALLY, I'm serious here. The problem of "unity" is always "united for WHAT"?! Might makes right? is that a sound ethical response to life's choices? Look for whomever has the apparent power and serve that master, regardless of what's right, submitting to "what works for me" and just hoping it all make sense in the bigger picture.

Being a "soldier in a war" or a "citizen of the empire", each are equally unacceptable places to try to judge the bigger picture. Self-interest is survival first and within the hierarchy, if you're at the bottom, you're trying to rise up high enough to "judge for yourself", and yet when you rise, self-interest continues to keep your perception away from the failings of the collective. You might believe in tweaking the system, improving security and justice and fairness and opportunity to all within the collective. But if the system itself is slowly rotting out from the inside, there's NEVER any clear point to "jump ship" except in the very hours before the ship sinks.

In times of success, there's going to be no chance for reform from within, beyond the most basic ethical truths that can be expressed solidly within the system. In times of crisis and failure, like our economy now, many of the failings become apparent, and something must be done.

The current government bailouts for all the bad mortgages is a huge responsibility, and apparently a failure to pick them up would mean a complete failure of the U.S. economy because so many giants within would fall like dominos that there'd be nothing left to continue what's we've know.

A Depression is a sort of revolution. Letting the giants fall, letting thousands of smaller companies to fall as a result, and letting tens of millions of people lose their jobs. Perhaps the cost of real reform. BUT of course in the chaos of a revolution, power is never wielded fairly for the collective, but back to scrambling self-interest. When a vacuum of power occurs after giants fall, like in Iraq after the U.S. disabled Saddam's government, the looting begins, and laws become irrelavent.

Wendell Berry talked about the strength of a nation being held by millions of soundly run independent households and businesses and local governments, each with degrees of self-sufficiency, and self-determination, so if and when larger systems fail, the power structure can quickly reorganize downward to meet local needs. He considers agriculture as the root of this economic system - local food produced for local needs. And such a nation is more immune to military threats. Without centralized power, a nation can't be defeated.

It's a nice dream, and comforting to imagine, knowing we're still all interdependent and hardship and failure in one region affects all others to degrees. Neighborliness spreads out naturally from self-interest of a strong whole.

In the world as we know it, we're much more fragile, most of all for our great need for energy and material resource imports to keep our economies running. So because of our fragility, the lacking of local resources to keep our households, and communities functional, we're left with bailing out the giants when they fail, and keep the dominos from falling.

It is nice to believe in continuity, in the idea that times of crisis are times of opportunity where problems can finally be addressed, and corrected, and thing can return to the way they are. I'd almost have hope this could be done, EXCEPT for two primary observations (1) Unsustainable use of resources (2) Unequitable distribution of resources.

In the long run, we'll either run out of cheap energy OR pollute our way into failure. And just in case anyone thinks those problem are solvable, that we can continue avoiding reducing our energy consumption, avoid reducing our pollution, the rest of the world will continue trying to copy our success, until the whole thing falls down under its own weight.

Remember the other saying "The taller they are, the harder they fall." considering the giants around us. We keep proping them up, feeding them so they can get strong and stand again, and they just get taller again, guaranteeing the next time they get tipsy, it'll be that much harder to stop the fall.

When does the madness end?

I don't know. The great depression happened because we let the giants fall. And the depression was lifted by the accidental centralization of power by the war industry for WWII, and now we know we can lift giants by force-feeding them. The next fall will be different. I just can't imagine it. I can't imagine how long the giants can be held up.

IDEALLY, moments like now are "warnings", and they tell us why things can't grow forever and why risk can't be delayed forever, and perhaps individuals and companies may choose this time to "pay down debt" and build up local support systems, so NEXT TIME we'll be ready.

Maybe next time the giants fall, we'll be strong enough to allow them their much needed rest. I'm sure it's tough to feel responsible for the whole world.

Well, not a lot of hope, but it's the only hope I can find. We've all been warned, and we're lucky for that.

So the answer to: "How to Fell a giant?"

The answer is clear: "They'll always fall in their own good time. Your only requirement is to be ready to get out of the way!"

Well, we still don't know WHEN, so that's the mystery we prepare for.

Worst Crisis Since '30s, With No End Yet in Sight

http://online.wsj.com/article/SB122169431617549947.html
"...Fed and Treasury officials have identified the disease. It's called deleveraging, or the unwinding of debt. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can't pay back the loans, a problem that is exacerbated by the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth."

I can understand how this might happen. What I can't understand is what gives people the courage to borrow money to invest it.

WELL, I can imagine for something like a small business - borrow money against your house so you can start a business and hopefully pay off the loan. If your business succeeds, you win. If your business fails, you DROP IT, and hopefully can go back to your "day job" and still make payments to pay off the failed business debt!

Well, so, as risky as that sounds to me, investing in the stock market seems doubly so. If I have a SPARE $10k in cash sitting around in a 2% interest bank account I MIGHT throw caution to the wind, and invest it in something risky like stock. But to BORROW money against my house and INVEST THAT MONEY? NO WAY!

I accept that I live my life in a point of privilege, made it through a 4-year college with no debt, and good job to pay for what I need. I don't need debt.

WELL, I did get pulled into the "low interest rates" of 2003, and purchased rental property, having a friend on Section 8 housing live in it. Being $230k in debt was definitely outside my comfort zone. Taking an adjustable rate mortgage equally so, but I could use a spreadsheet. I could project 5 years fixed interest and test various scenarios of increasing interest. What I found is, even with rental income that FAILS to cover 100% of costs (I'm a poor businessman I guess), I can cover all the bills PLUS extra payments to convert TWO 30 year mortgage into ONE 5 year mortgage (now paid), and perhaps another 5 years to pay the other. At least that assumes I keep my job and income. Risk yes, but small compared to 90% of the population - people with a much higher spending than me, with families to support and all. And worst case, I sell the rental property at a lost, but still have enough equity now to cover any sale price.

It is pretty amazing - technically my debt to income ratio was 3:1 in 2003, but now is down to 3:2. My interest payments now are under 8% of my income, and as long as I have the income, I'm putting something like 35% of my gross income into my mortgage. Smart, not 5 years ago apparently, but gives me security in my future, when I can support a lower income if I want to go back to school or whatever!

So I don't know anything about how financial people think, except not like me! I despise my 401k, stuck in Fidelity Investments, so I contribute the minimum needed to maximize contributions by my employer. So it's all nonsense to me.

I remember when I was a kid (in the 70's) my dad excitely talked about the power of compound interest, how you could retire a millionaire by investing money at a fixed interest rate. I never believed him then, not disbelief in the math, but in the economics of it all.

You have to invest in something that beats the rate of inflation, and higher interest rates means higher risks! If my NET average interest rate (subtracting inflation) over a lifetime is 1%, my $1000 savings when I was 15 years old will be worth a whopping $1817 (inflation adjusted) when I'm 95 years old!

Einstein was right to say compound interest was the most powerful force in the universe, BUT it doesn't LAST! Nature supports compounding for a time, and then CRASHES it all away!

To me the ONLY sound fiscal policy is to INVEST in a lower cost of living in the future. Then whatever income I make THEN, I'll be more likely able to cover my expenses.

So, I'm a fish-out-of-water in the land of montery greed. I'll choose security every time, which means I might yet accidentally get rich, but it'll just be relative to all the fools who overspent and under-invested in security. Wealth is having more than you need.

NOW back to the financial failures, I suppose it makes sense to see if things can yet be cleaned up ONE MORE TIME, but I hope there's enough pain that more people see that there's no free lunch, and debt is a luxury that not everyone can afford to gamble with.

It is most scary to me for the young people graduating from college now, or worse IN college, accumulating debt. At least an education is defendable use for debt, but there's still no guarantees.

Time to give up?

With the bailout of the FM siblings, it's another domino in a pattern that would seem to have no end in sight. Along with this bad news, its reported the 2008 federal deficit will be around $407B, and $438B next year, and those estimates are before this newest bailout.

At a personal level I could judge I'm doing well. Whatever risk I hold, there's nothing more I can do but spend conservatively, pay down debt, and if I have anything left over, invest in things that can reduce my future expenses if I lose my job. So my personal living choices is already "in depression times". Sure, I throw out a couple thousand a year in "discretionary spending", but I know I can dry up 3/4 of that spending in an instance if I need to.

Today also was "primary day", a pretty boring election, voted in the Independence Party primary for Senate (Go Barkley!), and some city council seats. Anyway, I'll participate in politics, but mostly I feel hopeless anything can be done to change things for the better. Every "medicine" we want to take tastes "too bitter" to swallow willingly, so the "pretending" must go on longer, until all remaining distractions and false hopes evaporate.

So onto my title "Time to give up?" well "NO, if you've got a good job...", but it's time to think of the future where things MUST be different.

I know even in the "worst economic times" SOMEONE can prosper, and perhaps it'll be me if I happen upon a job that can keep the money flowing. Such people will keep their heads in the sand as long as they can, and they can get away with it. Well, since I don't know I could still question where I am, if there are BIG choices I could make now that will be harder in the future.

Basically I have to accept massive financial irresponsibility can have no final effect other than massive currency inflation, which MEANS holding onto money is a losing game, and holding onto "fixed interest debt" is a fun game, at least if you can keep your job. Well, I don't like either game, prefer "divestment", paying down mortgage debt now. Even if I can never sell my house for what it's supposely worth, it's a hard asset that had some functional value - people live in houses for instance! Gardens can be made, resources held, and even small businesses started. Whatever the future holds, if where I live will have people, a home is worth something.

I've read from Wendell Berry, and one book of essays called "Home Economics" which collectively suggest that communities are stronger when "home" means something more than a place to sleep or consume. Rather a home is a place of work in itself, and worth more than money, while modern households while liberating women from the druggery of housework and cooking, have de-stabilized them since they now require two full-time incomes to maintain. So anyway, I see there's some virtue in "unemployment" and "underemployment" if it leaves time for the sort of work and effort that reduces the need for money.

And of course a household doesn't exist in a vacuum, but as a part of a wider community. Consumer culture has taught us to ignore our neighbors, and buy the goods and services we need. There is a "time efficiency" of our system - the middle class can earn a lot more than they need, and rather than wasting time sharing and caring about the needs of neighbors, it's all dumped on the government, and assumed everything can keep going without paying attention.

If American was filled by true self-sufficient households, all conservatively living within their means, paying down debt, investing in the future, I'd not worry as much about the "fall of the U.S. Dollar". Whatever happened, it would ONLY be an irresponsible government to be "cleaned up", and communities could "take care of their own". Without debt, continuous employment is less vital and we could "handle" 20% unemployment. But the problem is when the government falls in our system of strained household FINANCIAL and TIME budgets, there's no safety margin. Too many households are "one lost job" or "one illness" away from bankruptsy or foreclosure. SO we expect the wider government to SAVE US, and this can ultimately done very inefficiently, at a very high cost.

I must admit I never much thought before why "unemployment" was such a big thing to the government, who policitians love so much to talk about "job creation". It's a GREAT thing if government can encourage new jobs to be created, BUT ultimately the government can't defend jobs without punishing some people with higher taxes (for being in the wrong job). All transitions are tricky and painful, and some will suffer more than others.

So I've given up believing we can "save the dollar", but I recognize there must be safety nets thrown to those who are hurt, whether or not they deserve it. Well, so that takes me to Fannie Mae/Freddie Mac, and its a HUGE example where we had to SAVE something whose failure would hurt MANY despite also MOST helping those who have already benefited by the irresponsibility.

Inflation will be the result as I've said, because its easier to steal money by deflating its worth than to tax it away, so those responsible (and lucky) enough to save will bail out those who foolishly overextended themselves in debt.

It's easy to try to judge. I wish I had SOME solution that had an ounce of "accountability" and a sense of "collective sacrifice" to a better future. I'm sure people WOULD accept hardship if they thought it was working towards something better.

I suppose for me the problem is "something better" doesn't mean better than NOW, merely better than what WILL COME if we do nothing. If your choice is to lose half of your pay NOW, and find a comfortable frugal retirement 5 years later than you planned, OR lose three quarters of your income a bit LATER, lose your home a bit LATER, never retire, and live in a public housing apartment with 4 other families, WELL, I'm sure everyone will take the first, BUT who's to say what the future holds? Who's to say what financial responsibility looks like? And who's to say YOUR sacrifice now is sufficient if you're just a drop in the bucket in a sea of denial. WIll you take your half-income, delayed retirement sacrifice KNOWING others are still getting rich off the hard work and sacrifice of others?

Capitalism is a wondrous thing in empowering people to isolate their decisions, take risks in directions they believe can strengthen in the future. BUT unmoderated, and under too much fog of greed and self-interest, I'm sure it breaks down.

Again, easy to imagine nonsense, and I don't know anything except I don't like the idea of letting the "greed of others" hurt my properity. I suppose if I could believe the era of "cheap energy" would last forever, my pessimism might be moderated.

So mostly I write now, wondering if I'm really as pessimistic as I talk, ARE their choices I'm neglecting NOW that I ought to consider? I suppose it's most of all that I really appreciate all the freedom in this life, and will be sorry to lose it. I'm lamenting a world that can't be saved. I'd rather spend my energy "playing" with what time I have left, learning, challenging, than fighting for a positive future I could believe in.

What would give me hope is to hear a politician speak my speak "We're in for harder times. We've had it easy, and we've done some great things, but things change. The only bright future I can imagine can only come if we open our eyes to our excesses, trim back the fat of our laziness and expectations. There's no easy answers, and there's no one to blame but ourselves. If you've got a good job, feel lucky. Use all you can to pay down your debt and help family members, friends or partners less lucky than you. If you're underemployed, find family members, friends, or partners to reduce your living expenses. And if you're unemployed, do the same and more, and see what "unmet needs" exist around you that fit within your strengths to fill, money or not.

That's "depression era" talk, and its the only language I know that would give me hope. Anything short of that is lies and delusion, as great as the greatest alcoholic worshiping in the river of denial.

I know, my "hope" is limited. I mean it EXISTS anytime collective hardship appears, and it feels good because it empowers. It redirects ambition into caring and concern for others. It opens hearts and inspires creativity to the common good. I just don't know where the SWITCH exists, how to live in THAT world "a little bit". It's like something that is ALL OR NOTHING. Once the threats weaken, we all get back our wishes for personal fulfillment, and there's just so much time in the day.

I know prosperty is good. People who "feel secure" can be more easily generous, and its not even a virtue, but can be a nagging emptiness - to make sense of our good fortunes. Sharing is real, but its limited.

And I don't know how to reconsile the faith that the self-interest of capitalism doesn't help others as well. All of life seeks to expand and create, and we've done great things.

I have a belief we live "dishonest" lives for depending upon fossil fuels to carry us. Maybe a future can come where we further escape our dependence upon "unsustainable energy sources"? Maybe my delusion that we can ever "go back" to a time of "tribes" and rigid "gender roles" that closed choices for individuals for the benefit of the group.

Anyway, I just have to believe ALL experiments in democracy and capitalism are UNDERTESTED when we've only used them in times of growing power. The question to me is what supports us when our excesses finally catch up?

I have to believe "tribalism" must return - whether it takes the form of extended families, small businesses, religious communities, or small goverment associations, or all of the above in concert, hardship brings people together.

I suppose I think as well that "hard times" mean individual confidence is based partly on "what you have to give". We've lived a long time where a paycheck is our only measure of social rank. But money success doesn't mean communal success. We'd ALL better work on skills besides what keeps our paychecks flowing.

Doom and gloom are fun to imagine, and hard to live with.

The sun is setting, and we don't know how dark it'll get. What will you do before the evening light fades? What can wait until later? Hard unknowable questions...