Another dose of financial methamphetamine

As I noted in my post of Sept. 26th, Wall Street and the political aristocracy are hooked on financial meth.  This morning, another heavy dose of meth was delivered, since they are having problems getting and keeping high these days.  World-wide, central banks cut their interest rates.

At the moment, the US markets are up a bit, but elsewhere (Europe, Asia), the news isn’t so good.

This action of course made everyone who has actual money in the bank a bit poorer.  As the fed lowers its interest rate, banks and money market fund managers follow suit.  This penalizes savers, and rewards speculators.  Once again, we take from the Main Street ants and give to the Wall Street grasshoppers. This constant finagling of the interest rates is one of the structural supports for Wall Street.  The government actively discourages people from keeping their money in the bank (the prudent choice), and gives financial incentives for putting it in the stock market (the speculative gamble).

So it comes to pass that the rich get richer, and everybody else gets poorer.

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Getting ready for poverty.

It looks like we are approaching “punctuated equilibrium” — a time when events and changes move rapidly – the “old” crumbles and a new way of doing things settles into place.

Only one thing seems certain about the present financial mess.  We will come out of this punctuated equilibrium much poorer than we were when we went in.

For decades, we’ve been in the business of subsidizing the Wall Street grasshoppers and penalizing the Main Street ants (if you need a reminder of the details of Aesop’s fable, read it here). 

The parasitical Wall Street economy has been sucking the life-blood of Main Street for a long time, with the regular assistance of the US Congress and the various presidential administrations.

But now comes the piper presenting his bill and demanding payment.  As a Kondratieff winter looms, the Wall Street grasshoppers are wailing for a rescue, and the government is obliging by taking all that it can from the Main Street ants and giving it to Wall Street grasshoppers to keep their cozy party well stocked with the finest wines and the best drugs.

The political mantra of the hour is “this economy is fundamentally sound.”

Well, no it isn’t. If it was, we wouldn’t be seeing panic in the financial markets.  Our economy is characterized by serious misallocation of resources driven by insane and irrational economic policies and a corrupt and decadant political aristocracy.

Here in Oklahoma, we’re building a half billion dollar bridge to nowhere, the I-40 Crosstown Freeway Relocation Project.  Instead of investing in an improved public transportation system that will meet the challenges of peak oil, we decided to spend $120 million to become a “Big League City” and steal the Sonics from Seattle.  Like, party on, dudes.

I suppose when the next gas crunch comes upon us, somehow our NBA team — the “Thunder” — will magickally produce oil to fill our cars since we won’t have a bus system to take us anywhere.

I guess it won’t matter, because we are a Big League City.  We even have a nice Potemkin Village downtown.

Like Mugabe in Harare, we will drive the poor away from our glittering new downtown area.  He crudely used soldiers and earth moving machinery. We will be much more civilized, we will use a due process eminent domain riot that will be completely legal, just like we did 20 years ago when the OKC Chamber of Commerce teamed up with the City Council and ODOT to ethnically cleanse the historic Deep Deuce area next to downtown.  They had to drive out the black folk so that white people could use the land for development.

They also needed some of that land to build a freeway between Edmond and downtown. This freeway was necessary since many white people were leaving OKC because of the integration of the schools and were moving to mostly-white Edmond so their kids wouldn’t have to go to school with “those kind of people”.

The present financial crisis is what you get when you elect pretty boys to local, state, and federal office based on their ability to manipulate people’s fears and greeds for their own private gains.  When this is over, we will all wish we had made much better political and financial decisions. But we didn’t, and so we have made a bed in which we must lay, uncomfortable as it may be.

As the Bible says, “Sow not in furrows of injustice, lest you reap a seven-fold harvest.”

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Blood in the streets

How ungrateful of the markets.

Here comes Congress and the Federal Reserve, who for all practical intents and purposes are dumping cash from helicopters all over Wall Street, and yet the market continues its stubborn way downward.

Which just goes to show that nobody at the White House, the Congress, the Treasury, or the Federal Reserve really knows what is going on and what should be done.  Their standard response (throw money) doesn’t seem to be working. 

I suspect part of the reason is that our money is increasingly worthless.  But the major reason is that market irrationalities will only be tolerated so long by the marketplaces.  Sooner or later economic reality erupts to the future.  And that reality is the dismal news that the United States is effectively bankrupt.  We are a nation of grasshoppers, and the Kondratieff winter is on its way. 

Ash heap of history, here we come.

What am I doing?  I am taking my own advice.  Cell phones?  Cancelled on Wednesday. Credit cards?  All cut into shreds.  Food storage? Filling out the gaps in my present plan. Extra/back-up income?  Working on a part-time business making and selling bulgar wheat. Banking at a credit union? Been there for years.

My advice to everyone is to “go and do likewise”.  The ash heap of history is not going to be a fun experience. Congress has betrayed Main Street.  We need to work together at the grassroots to save ourselves and our local economies.

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OOPS! Congress votes, market drops

Something seems to be wrong with this picture.

Congress just voted to cave to the Wall Street blackmail.

But almost immediately after the vote — the market, which had been generally up all day — began to fall.

One thing to remember about this.  If those folks in Congress and Wall Street were smart, we wouldn’t be in the present mess.  Since it is the same people designing the rescue, who designed the crisis, low expectations are in order all around.

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BETRAYED by Congress

Once again, we the people have been betrayed by Congress.  News is coming across the wires that the House has passed the Senate version of the bail-out of the corrupt thieves, thugs, and swindlers on Wall Street.

Thus illustrating once more the truth — “Those who do not learn from the mistakes of history are doomed to repeat them.”

Congress seems determined to repeat all of the mistakes of 1929-1932 that created the Great Depression.

The sad evidence of history is that nations choose to rise or fall.  This day will go down in American history as the day Congress voted to accelerate our fall onto the ash heap of history.

Here’s a reminder of the grassroots “Protect yourself from the coming financial collapse” checklist from earlier this week:

  • Slash household spending,
  • Curb your consumption,
  • Super-insulate your house,
  • Practice energy conservation until you get good at it,
  • Save money,
  • Grow some of your own food,
  • Pay off your debt,
  • Live well below your means,
  • Move your money to a credit union or a locally-owned bank,
  • Support locally owned businesses, and
  • Get ready for a Category 5 financial hurricane.

 

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Finding Main Street Good in the Wall Street Crash

A friend of mine showed up, in a new pickup.  I asked him, “Where did you get the money for that?”  He said, “I borrowed it of course.”

But isn’t there something wrong with that picture?  We are being assured every minute of the day that the “credit markets” are drying up.  No credit is available. The government must immediately steal $700 billion from Main Street and give it to the nice, smart, rich folks on Wall Street. This will clear the clogged debt marketplaces and happy days will be here again.

So I asked my young friend, “Who gave you a loan?”

He replied, “Weokie, of course.”  Weokie is a credit union, and like all credit unions, it is owned by its depositors.  Weokie does not sell its loans to NY banks or securitize them for the derivative market.  It holds its loans, and in the (by Wall Street standards) quaint, old fashioned way, collects the interest, and puts that money back to work in the local economy.

And so it comes to pass that unlike the nice, smart, rich folks on Wall Street, its balance sheet is not loaded up with junk mortgages and toxic bonds and risky derivatives. 

Hmmm. . . do you suppose white collar Wall Street could take a lesson from blue collar Weokie?  Well yes, they could, but pigs will fly before that happens, especially if they are successful at blackmailing Congress for $700 billion.

If the big international/trans-continental banks stop loaning money, maybe there is an upside for our local economy. 

  • Every penny invested in the speculative bond, mutual fund, and stock markets is money that isn’t available to invest in the local economy. When people shift their money from trans-continental banks to local banks and credit unions, their money goes to work in their own neighborhood and strengthens the real, local economy where they live and work.

 

  • Retirement plans invested in stock market mutual funds and money market accounts benefit Wall Street by beggaring Main Street.  If workers demand new retirement plans, invested in insured CDs at local banks and credit unions, then their retirement money goes to work immediately in the real, local economy.

I have long thought that the primary political justification for 401-k plans was “welfare for the stock market”, not a secure retirement for workers. Perhaps this crisis will help others come to this same realization. 

  • There is a difference between savings and speculation.  “Savings” refers to money in the bank or credit union. 

Savings are loaned out by banks and credit unions to fund activities in the real economy – business operations, construction, house mortgages, car sales, etc.  

  • “Speculation” refers to money in the stock market, where you buy stocks or mutual funds on the speculation that they will eventually go up in price. 

Money invested in the speculative stock, mutual fund, and bond markets goes to other speculators, and doesn’t necessarily furnish even one dime to the real economy. When you buy a share of a mutual fund, the money isn’t divided among the companies represented in the stock portfolio, for them to use for real economic activities. No, it goes to some other speculator, who sells you some of his or her shares. No real work is ever done with this money. 

The speculative market is therefore a parasite on the real economy, because the real economy is where the wealth is created. Parasites weaken, and often kill, their hosts.  Ask any dog with worms about that. The effect over time of our present financial system is to strengthen the parasitical speculative markets, and weaken the real local economies. 

So there may be a bright side to this crisis that the financial masters of the universe don’t like and is the real source of their fear-mongering:  the strengthening of the local financial markets and the real economy, and the beggaring of the parasitical, speculative markets of Wall Street.

  • Employees should contact the managers of their 401-k/403-b plans and demand the option of putting their retirement funds in CDs or other similar insured accounts at locally owned banks and credit unions.

 

  • Moving your money out of the stock and bond markets and the big national banks and into local/regional banks and credit unions is an important and effective way to strengthen your local economy.

Going forward into the peak oil decline years, strong local economies are all that stand between us and collapse. Wall Street may have been an amusing and tolerable parasite to the present time, but since one result of peak oil will be “less wealth”, we don’t have money to spare for the excesses of Wall Street.  One of the economic lessons of peak oil is — “beware of parasites on your economy.” 

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Au Contraire, Mr. Pearlstein

Au contraire, Mr. Pearlstein of the Washington Post, we on Main Street (not to mention those of us who live on side streets and back alleys), do get it. It is the Washington and Wall Street elites that don’t get it. They are like the French aristocracy in 1789, or the Russian aristocracy in 1917 — utterly clueless about what is going on with ordinary people, and totally unwilling to admit their responsibility for the problems they have created with their greed and corruption.

If the government and Wall Street wanted us to trust them at this late date regarding the bail out, then they should have been more trustworthy to start with. And they should have had a better plan.

I know its hard for people inside the beltway to understand this, but people’s willingness to buy “Big Lies” from government and Wall Street is limited. Wall Street’s sense of entitlement to everlasting profits, and socializing all losses, is economic infantilism, and calling upon Big Mommie government will only make the inevitable crash even worse.

Let them eat hamburger on Wall Street and inside the DC beltway for a change. It might do them some good.

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The Amazing Populist Revolt Against the Financial Masters of the Universe

I thought the fix was in.

So did the President and the Secretary of the Treasury.

But an amazing coalition of liberal Democrats and conservative Republicans discovered that they did in fact have spines, and in response to the by-all-accounts overwhelming opposition from Main Street, handed a major defeat to the financial “masters of the Universe” on Wall Street.

The main stream Democrats, and main stream Republicans, including both candidates for President, sold out and bowed to the Wall Street power grab, demanding that more financial methamphetamine be injected into the system.  Fortunately for us, they lost.

The battle isn’t over. The House goes back into session on Thursday, and I’m sure between now and then the movers and shakers will be harsh on the dissenting congressfolks.  They are already trying to push the fear factor even more, with dark hints of financial harm to Main Street.

Well, the truth is that the time to avoid financial harm to Main Street was decades ago.  The bailout would eventually have meant much worse harm, we have literally dodged a bullet.

So the Main Street folks, not to mention those of us who live on the back alleys and side streets, have to act to protect ourselves.  The prescription for financial self-protection is the same today as it was yesterday and the day before:

  • Slash household spending,
  • Curb your consumption,
  • Super-insulate your house,
  • Practice energy conservation until you get good at it,
  • Save money,
  • Grow some of your own food,
  • Pay off your debt,
  • Live well below your means,
  • Move your money to a credit union or a locally-owned bank,
  • Support locally owned businesses, and
  • Get ready for a Category 5 financial hurricane.

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Financial Methamphetamine Addiction and Withdrawal

Our problem is that Wall Street and Congress and the Fed and the White House are all on drugs. They are addicts desperately looking for their next high. 

At this point in the addiction sequence, there are no good options.  Some of the possibilities are worse than the others, and — surprise! — it looks like the political bailout plan manages to incorporate those proposals that will ultimately yield the worst results.

The financial system is in trouble because of a host of reasons, but “most recently”, the straw that broke the camel’s back were the “toxic loans”.

For years the government encouraged bad loans by finagling the interest rates to artificially low levels.

Their purpose was to stimulate/create/encourage more credit for political reasons.  (The artificially low rates also penalized savers, so we’ve been subsidizing the grasshoppers at the expense of the ants.)

If we create new credit, it must go somewhere. And so it came to pass that practically anyone with a warm body could get a Very Large Mortgage, plus a second mortgage, and a line of credit secured by the property. As big huge piles of cash were shovelled out the door into the real estate market, prices soared and the nation entered into a mindless orgy of material consumption unequaled by the worst excesses of the past.

So what’s the favored solution from the politicians?  Even more of the same policies that got us into trouble in the first place!  It’s the Washington way — if something doesn’t work, well, let’s just do MORE of it, and then maybe it will work.

It was a great party. But it’s about over.

We shot the system full of financial methamphetamine.  For those of you who aren’t aware of the effects of meth. . . At first, by all reports (I have no personal experience with meth, but I have known many meth users), it is a really great high.  You are finally Truly Somebody!  But then you come off the high — so immediately, more meth is required.  As time goes on, each individual dose of meth lasts a shorter period of time, so the user keeps taking more quantity more often.

Sooner or later comes the crash.

The longer you delay the crash, the worse the crash will be.

So as we approach a “financial meth” crash, what do our politicians and pundits advise?  MORE financial meth!  They say — “Let’s get higher, and higher, and higher!” It’s an addictive pathology, running rampant at the highest levels of politics and business.

This high will probably work through the election, maybe even through the next couple of years. 

But make no mistake about what will happen:  This will not be the last multi-hundred billion dollar bail-out of the imperial economy. There will be more and more financial meth until – as with the homeless crack smoker, crouched under a bridge toking on an empty pipe desperately trying to get one last rush – there is no place else for us to go.

We are in big financial trouble. 

Letting the system get rid of its bad debts through bankruptcy, foreclosure, and write-offs would be painful — but the alternative, most likely an inflationary depression, would be much worse, and last much longer. 

“We the People” would be hurt, but it will be even worse later when it becomes impossible to issue any more bail-outs and the final reality of the decade(s?) long Second Great Depression is upon us. That would bring “even more” bankruptcies, foreclosures, and write-offs.  In some counties of Oklahoma, during the original Great Depression,  85% of the property went through foreclosure.  “Compare this with” the 3-4% foreclosure rates today, and you can see we have much further to fall.

We do no favors for meth addicts when we help them get another fix to avoid the terrors and pains of methamphetamine withdrawal.  The only way towards healing is to confront the withdrawal and go through it.  I feel very sorry for meth addicts, but there isn’t any other way forward than the withdrawal. 

The same is true for We the People, the politicians, the bankers, and our collective financial methamphetamine addiction.  We made this financial bed where we now lay.  We demanded it, wallowed in it, lusted for it, voted for it, and willingly participated in it. . . but comes now the piper with his bill and he will be paid.  The longer we delay, the more excrutiating the payment process.

The present macro-economic situation makes it even more important to build/create/grow local economies of production and exchange to replace the failing systems in which we presently live, more, and have our being.  This isn’t just something pious that Bob likes to say (well, it is a “pious statement” and I do “like to say it a lot”, but it’s importance is deeper than my personal affectation). This is “personal safety net”, as in, “if you don’t have one, you may be seriously sorry” as all this unfolds around us.

Financial self-defense calls for all of us to think about a way to make a living in a local economy. Practice makes perfect, so start a small family/household micro-enterprise now, before it becomes necessary.

My advice to people with money in the stock market is to take the money and run to the safer financial havens of paying off your mortgage and other debts, energy conservation improvements for your living space and lifestyle, and developing a new job for yourself in a local economy.  Food storage is also a good idea.

If you are presently in a debt reduction program (making extra principle payments on household debt), think about this. The conventional wisdom is that you pay off your high-interest debt first, like your credit cards.  But in Oklahoma, the homestead exemption prevents the house where you live (your “homestead”) from being sold to pay any debt not actually secured by your property. 

Given the speed that things happen these days, folks may not have enough time to pay off their mortgage AND pay off their other miscellaneous debt, so if you live in a state with a homestead exemption for debts, it may be better to pay off your house first. Then you have a secure place to live, come what may in the financial world.  If you lose your job, you are not at risk of homelessness.  Paying off credit cards now, and then losing your home to foreclosure later, doesn’t get you much. 

The present financial system is neither stable nor sustainable, and there is no amount of lipstick that we can smear on that pig to make it anything other than what it is.  An unsustainable system, by definition, will not continue indefinitely.  It will collapse.

Financial methamphetamine withdrawal will not be pretty, easy, or fun.  We might as well accept that right now and act as best we can to protect ourselves.

In other words. . . Slash household spending, curb your consumption, save money, live well below your means, move your money to a credit union, and get ready for a Category 5 financial hurricane.

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OKC’s Walkability Score

Well, we aren’t at the very last place, but we are #36 our of 40 large cities ranked at http://walkscore.com/rankings/most-walkable-cities.php for our walkability factor.  Our score is 43, the #1 city is San Francisco with a score of 83.

My neighborhood, Gatewood, at least is ranked as “somewhat walkable”, with a walk score of 68 out of 100.  When you type in your address at the website, it gives you a score for your neighborhood, and it also gives you the distances between your house and various neighborhood amenities like parks, grocery stores, libraries, bars, etc.

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