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S&P Earnings Down 90% Even as Market is Up
Ref - http://www.chartoftheday.com/20090515.htm
While the stock market is up sharply since early March, the economy as well as corporate earnings continue to suffer. Today's chart helps provide some perspective as to the magnitude of the current economic decline. Today's chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P 500 companies having reported for Q1 2009), making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative
>Great article by National Geographic.
Back to the “Old Normal” of Domesticity
Sunday, May 17, 2009
http://thespiritofthecity.blogspot.com/2009/05/back-to-old-normal-of-domesticity.html
This year I decided to learn how to garden.
My resolve wasn't just a notion for a new pastime or a move toward hip liberalism. Rather, it was my response to global warming and in particular, the depletion of fossil fuels, which has a direct effect on our food system.
The crops we grow and the way we grow them is determined by oil and oil by-products. Artificial fertilizers and chemical pesticides are made from oil just as farm equipment and irrigation systems are powered by it. Trucks transport our food an average 1,500 miles while fruit and other perishables travel in airplanes. Refrigeration provides storage for dairy, meat and produce that require electricity made from fossil fuels. Processed foods, which account for three-quarters of global food sales by price, are manufactured with oil.
The industrial food system consumes ten calories of fossil-fuel energy for every calorie of food energy produced (www.oildepletionprotocol.org). Such inefficiency hasn’t mattered before because cheap fuel has freed us from the “drudgery” of growing and cooking our own food. Nevertheless, the pervasive use of oil not only makes life on earth unsustainable, its low-cost, convenience and accessibility have led us to assume that someone is always there to feed us. This is the height of dependency, which disconnects us from our food, says Sharon Astyk and Aaron Newton in their new book, A Nation of Farmers.
The days of high-priced oil appear to be dormant right now, considering that it was almost thrice the cost last summer. Oil prices are down now because the world economy is stalled. But prices are bound to go back up as the cheap easy-to-get oil becomes more difficult and more expensive to extract. Prices will also rise because less oil is being produced.
Consider that 54 out of 65 oil-producing nations and 400 of the largest oil fields are in decline. Indonesia withdrew its membership from OPEC in 2008 because it became a net importer of oil; Mexico is expected to stop exporting its oil by 2014 (Association for the Study of Peak Oil and the International Energy Agency).
Oil price increases have occurred for many reasons: drought in many grain-producing countries; biofuels have depleted grain stockpiles; increased demand for oil from Asia’s expanding middle class; and the cost of the global industrial agriculture system.
The high cost of oil is affecting world food prices and availability. Last year U.S. prices increased 20-30 percent with several other consequences:
· Costco rationed flour, rice, cooking oil and other staples so that supplies would not run out
· One out of 11 Americans need food stamps while in Michigan and Washington, D.C. the rate is one out of seven
· Seasonal malnutrition appeared among lower class families in the northern United States in 2007 because they spent money on heating oil in winter rather than on food
· 30 million Americans can’t afford a basic, nutritious diet while more than 8 million children know hunger and 20 million are in danger of it.
High oil prices affected the rest of the world as well:
· Haiti’s food prices increased 65 percent
· Food riots took place in Bangladesh, Mexico, Ivory Coast, Uzbekistan, Pakistan, Thailand, the Philippines, Peru, Indonesia, Bolivia, Ethiopia
· The United Nations reported that food shortages were in danger of destabilizing 33 nations (including nuclear-Pakistan, Mexico, nuclear-North Korea, nuclear-India, Egypt, South Africa)
· Middle class people in many nations opted for food rather than medical care
· Elderly women in Paris fought over discarded produce.
But what’s to come is dire.
“Soaring food prices and their impact on hunger, malnutrition and development threaten to push 100 million people further into poverty,” said Robert B. Zoellick president of the World Bank Group. “For more than 2 billion people, high food prices are now a matter of daily struggle.”
To address these problems, Astyk and Newton advocate the return to small, sustainable farms, which was Thomas Jefferson’s idea long ago. They are calling for “100 million farmers and 200 million cooks.”
This seems a severe and incomprehensible scenario given that farmers comprise only 2 percent of our population and many people don’t cook anymore. However, household gardens can be a good start toward a new way of life that can not only provide a bounty of free food but encourage the desire to cook and eat it.
This year I planted three tomato plants, one pepper, one eggplant and four different herbs in a couple big pots on my patio. To learn how to grow and harvest vegetables, I’m volunteering at a local, subsistence farm once a week. Our neighborhood is planting an herb garden and later this summer we’ll hold a couple canning parties.
These are small steps but what I’m discovering at the outset of my gardening venture is my changing relationship to food. It truly takes a different kind of effort and conviction to get down in the dirt on my hands and knees to plant and weed, especially when it involves new aches and pains in my aging body. I also feel a new sense of accomplishment and joy in seeing newly-planted rows upon rows of raspberry bushes and mulched potato plants—with more vegetables to come! Caring for my seedlings before they are transplanted is bringing out my nurturing side.
In less than a month, gardening is also connecting me to Nature in a more intense way compared to enjoying walks in the woods in L.L. Bean wear. My thinking is being transformed at the visceral level about where food comes from, how it’s produced and what it means to me.
Meanwhile, my relationship with neighbors and fellow locavores is taking a turn back into the “old normal” of domesticity that focuses on care of the home front—the original Greek meaning of the word, economics. Domesticity was something I had always avoided because of my ambition to pursue a professional career and urban lifestyle. However, as the era of cheap energy gradually becomes a thing of the past—regardless of the promises of the alternative energy proponents—it is obvious to me that growing food will become an imperative to survival and not just an experiment in sustainability or the opportunity to eat fresh, good-tasting, local produce.
As new endeavors go, gardening has filled me with excitement, curiosity and a new sense of optimism that I can impact my own future, assert my independence from food megacorporations and get closer to Nature.
My Personal Credit Crisis
Ref - http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html
Something important to note at the end of the article: the guy hasn't paid his mortgage (from Chase) in over eight months and he's still waiting for them to call to "drop the axe" as he says. Many people in the economic doom-o-sphere have suspected that there are huge swaths of the population that, like the author of the Times piece, are essentially living "rent free" at this point. The banks, naturally, don't want to admit this for two reasons: first, it could spook their investors. Second, if people got word that at least a few of their neighbors are living in their homes 6, 9, or even 12 months without paying, they would probably just say "f--k it" and stop paying as well. It will be interesting to track the aggregate reaction to this part of the article as it's what you might call a "highly actionable" piece of financial intel.
NY Times: Credit Card Debt a Timebomb Ready to Blow Through Economy
Ref - http://www.nytimes.com/2009/05/18/opinion/18kim.html?_r=1
Americans’ credit card debt now tops $960 billion. And with the economy in a downswing, it’s hard to see how the debt can ever be paid back.
The Exiled Online: Inside New York City's Real Estate Propaganda Machine
Ref - http://exiledonline.com/the-making-of-k-town-inside-new-yorks-real-estate-hype-machine/
Across the US, similar salesmanship - masquerading as journalism - can be found in money-hemorrhaging publications, kept on life-support by brokers’ ad revenue. Reading the LA Times most e-mailed article this week, it’s difficult to imagine the infusion of real-estate cash not holding editorial sway. "[P]ent-up demand in traditionally stable or chic areas have kept prices up — not as high as the market’s peak, but not nearly as low as they feared," the broker-sourced piece gushes, bending over backwards to assure readers that - contrary to popular belief - the sky hasn’t fallen . . .
National Geographic Report on the Global Food Crisis: "The End of Plenty"
Ref - http://ngm.nationalgeographic.com/2009/06/cheap-food/bourne-text
It is the simplest, the most natural of acts, akin to breathing and walking upright. We sit down at the dinner table, pick up a fork, and take a juicy bite, oblivious to the double helping of global ramifications on our plate. Our beef comes from Iowa, fed by Nebraska corn. Our grapes come from Chile, our bananas from Honduras, our olive oil from Sicily, our apple juice — not from Washington State but all the way from China. Modern society has relieved us of the burden of growing, harvesting, even preparing our daily bread, in exchange for the burden of paying for it. Only when prices rise do we notice. And the consequences of our inattention are profound
Bad Collateral
May 18, 2009
James Howard Kunstler
http://www.kunstler.com
The wishes of the "green shoots and mustard seed" crowd really hinge on whether the various organs of the suburban economy can be jump-started back to life -- the production home-builders, the granite countertop outfitters, the mall and strip-mall gang, the national chain discount retailers, all the people who make Happy Motoring possible from the factory to the showroom, and, of course, the banks who shovel money into these enterprises.
All these organs of our now-former economy are gravely impaired, and a realistic appraisal of them would have to conclude that they've entered the zone of congestive failure. The choice we face really comes down to this: do we put our dwindling resources and "hopes" into resuscitating those dying systems, or do we move forward to the next chapter of American life, cut our losses, and make new arrangements more consistent with the realities on offer from the universe? To take it a step further, can we remain one nation, a common culture, without such a conscious re-purposing of our collective spirit?
The bizarre spectacle being played out right now by President Obama and his team only adds layers of mystery and mystification to this big question. On the one hand, you have Mr. Obama giving a graceful, thoughtful speech on a very difficult issue (abortion) at a very tough venue (the country's leading Catholic university), and presenting an excellent case for common ground. It was a bold deed, unshirking, even brave considering what have come to be the standard modes of pander or evasion in presidential politics. I suspect that Mr. Obama did it as much to demonstrate his willingness to face tough questions in general as to address abortion per se.
All this is to say why it is so dispiriting to see Mr. Obama's White House mount a campaign to sustain the unsustainable in the economic realm. Everything they've done for four months involving money management and enterprise policy -- from backstopping hopeless banks, to gaming the bankruptcies of the big car companies, to the bungled efforts to prop up artificially-high house prices -- amounts to a gigantic exercise in futility. Worse, it gives off odors of dishonesty or stupidity, since the ominous tendings of our system are so starkly self-evident.
Not least of the problems entailed in all this are the scary political consequences. It's one thing for a business such as a bank to fail; its another thing for the public to lose confidence in banking, or their own currency, or the credibility of all the people who work in banking, or the authority of those charged to regulate these activities, or the courts and their officers who are supposed to adjudicate misconduct in them. When faith in all these things starts to go, all bets are off for even larger social constructs like democracy, justice, and the destiny of a federal republic.
The Obama White House has very quickly painted itself into a corner on these things. The so-called bank "stress test" couldn't have backfired more completely. Rather than bolster confidence in our money system and the people who run it, it only made the system appear more obviously corrupt. It made the Treasury Department (and the White House by extension) look idiotic for concocting it. Worse, the game of allowing the banks to audit themselves, and cook their books under newly jiggered accounting rules, only made them look less sound and trustworthy, and their executives more venal and mendacious. The stress test scam also virtually guaranteed that the banks will not get another dime out of congress -- even while it is common knowledge that they will desperately need quadrillions more dimes in the months ahead.
Who knows what the point of this ludicrous exercise was? Observers in all corners of the media saw through it, and the public has only been made more cynical, and is now so furious over related stunts like AIG using taxpayer money to pay back swaps bets to Goldman Sachs that there is a whiff of revolution in the American air for the first time, really, since 1861. A lot of reasonable people see a good chance that our society will sink into disorder if these trends continue, and these fears could beat a path into radical politics, even the frightful prospect of coup d'etat -- not something that I advocate, by the way.
The president is playing with fire on all this. The old economy is not going to recover, and so far he has not used his rhetorical talents to articulate what the next economy is likely to be about. It is reasonable to wonder whether he even really has a clear sense of it -- and, based on the fatuous utterances of his economic mandarins like Larry Summers and Austan Goolsby, this team is really behind the curve.
There are plenty of things you can state about the economy past and future with some confidence right now:
-- Cheap energy is over and our wishes for alt.energy are currently inconsistent with reality, meaning we have to live differently.
-- We have to downscale and re-localize our major economic activities: food production, commerce and manufacturing, banking, schooling, etc.
-- We can't hope to have a stable money system unless we allow a workout of unpayable debt to proceed.
-- Even if we can do this, universal easy credit is a thing of the past. From now on, we have to save for the things we want and run our businesses and households on accounts receivable.
-- Major demographic shifts are inevitable as it becomes necessary to let go of suburbia and reactivate our derelict towns and smaller cities (and allow our giant metroplexes to contract).
-- We have to face the truth that our major social contracts cannot be met, namely the continuation of social security as we know it and probably all pension arrangements. We'll probably have to change household arrangements to make up for these losses.
-- Health care will have to go through a revolution more comprehensive than just changing how we pay for it. Like everything else, it will have to downscale, re-localize, and become more rigorous.
We're not going to rescue the banks. The collateral for their loans is no good and it will only lose more value. All those tract houses on the cul-de-sacs of America and scattered on the out-parcels of our tragically subdivided farming landscape will only lose value, one way or another, in the years ahead. Right now they're simply losing inflated cash value -- and that has been bad enough to sink the banks. In the months and years ahead, they'll lose their sheer usefulness as the distances once mitigated by cheap gasoline loom larger again, and the jobs vanish and incomes with them, and the supermarket shelves cease to groan with eighty-seven different varieties of flavored coffee creamers, and one-by-one the national chain stores shutter, and the theme parks, and the Nascar ovals, and the malls, and the colossal superfluous cretin-cargo of consumer nonsense that we've been daydreaming in gets blown away in a hurricane of change that we were not ready to believe in.
>Agree. These are very scary times. The financial abuse that occurred in this country for so many years cannot be resolved in a year or two. It will probably take a decade. But even then, we will have the prospect of Peak Oil.
sumi
401(k)s Hit by Withdrawal Freezes
Ref - http://online.wsj.com/article/SB124148012581385199.html
Some investors have lost hope of recovering their money. Judith Sterner, a 69-year-old part-time nurse, had more than $12,000 in the fund when she tried to transfer that balance to a money market last fall. But her transfer was denied, and her stake has since declined to less than $10,000. "This $12,000 represents a year of my retirement money that I don't have," said Ms. Sterner, of Morton Grove, Ill.
JHK isn't the only one. Money and Markets is predicting a swift and substancial drop in equity values for a numerous reasons right around the corner.
The Bottom for Credit Thanks to Peak Oil
May 8th, 2009
By James Howard Kunstler
http://whiskeyandgunpowder.com/the-bottom-for-credit-thanks-to-peak-oil/
Euphoria managed to out-run swine flu last week as the epidemic-du-jour, with “consumer” confidence jumping and the big bank stocks nudging up. The H1N1 virus fizzled for now, at least in terms of kill ratio, though we’re warned it might boomerang in the fall with a vengeance. No one was surprised to see Chrysler roll over like a possum on a county highway, but the memory of their muscle cars will linger on like a California surfing song. Here in the northeast, where Sundays are not spent at the NASCAR oval, the spring foliage reached the tenderly explosive stage and it was hard to feel bad about anything.
For now, the “bottom” is in — that is, the bottom of this society’s ability to process reality. It may continue for a month of so, even after the “stress test” for banks is finally let out of the massage parlor with a “happy ending.” But events are underway that are beyond the command of personalities. We’re done “doing business” in all the ways that we’ve been used to, but we just can’t get with the new program. Let’s count the ways:
1) The revolving credit economy is over. It’s over because we can’t increase energy inputs to the system, which is one way of saying “peak oil.” Of course hardly anybody believes this right now because the price of oil crashed nine months ago, along with global manufacturing and trade. But nothing has changed on the peak oil scene — except perhaps that ever more new oil projects have been cancelled for lack of financing, which will boomerang on us (even if swine flu doesn’t) in the form of much lower future oil production. In any case, the credit fiesta is over, and the “consumer” economy with it, because industrial growth as we have known it is over. It’s over globally, too, though all regions of the world will not experience its demise the same way at the same rate.
The Asian nations may swap things around a while longer but China is basically screwed. They have less oil left than we have (which is saying, not much at all) and they won’t corner the rest of the global oil market without starting World War Three. Meanwhile, they’re running out of water and food. Good luck becoming the next global hegemon. Oh, and Japan imports 90 percent of its energy; India over 80 percent. Fuggeddabowdit.
Credit will not vanish everywhere overnight — even in the USA — because it is not distributed equally everywhere. But it will vanish in layers, and here in the USA a very broad layer of the lower and middle classes are now losing their access to it in one way or another — personally, in small business — and they will never get it back. Anyone who intends to thrive in the years just ahead had better plan on doing it on the basis of accounts receivable — and what they receive might not even necessarily come in the form of US dollars. It may come in the form of gold or silver or in the promise of reciprocal services rendered.
This has enormous implications for two of the items in which our credit-dispensing operations are most deeply vested: houses and cars. Unfortunately, these are exactly the things that economic life has been based on for decades in our nation, which leads to the next categories:
2) The suburban living arrangement is over, along with all its accessories and furnishings. Taken as “all of a piece,” the suburban expansion was one sixty-year-long orgasm of hypertrophy. We did it because we could. We won a world war and threw a party. We had lots of cheap land and cheap oil. It made lots of people lots of money and all its usufructs have become embedded in our national identity to the dangerous degree that the loss of them will provoke a kind of national psychotic breakdown. In fact, it already has. The completely unrealistic expectation that we can resume this way of life is proof of it.
The immediate problem is that we can’t build anymore of it. The next problem will be the failure of the stuff that already exists. The first stage of that is now palpable in the mortgage foreclosure fiasco and, just beginning now, the tanking of malls, strip centers, office parks and other commercial property investments. The latter will accelerate and become visible very quickly as retail tenants bug out and weeds start growing where the Chryslers and Pontiacs once parked. The next stage, which involves large demographic shifts in how we inhabit the landscape, has not quite gotten underway.
3) The Happy Motoring fiesta is over. You’d think that with Chrysler crawling into the bankruptcy court, and GM just weeks away from the same terminal ceremony, the news media would begin to suspect that the foundation of everyday life in this country was cracking. Instead, all we hear is blather about “market share” shifting to Toyota. News flash: not only will we make fewer automobiles in the USA, but Americans will buy far fewer cars made anywhere. We’ll keep the current fleet moving a while longer, but when it’s too beat to repair, we won’t be changing it out for a new fleet — despite all the fantasies about hybrids, plug-and-drive electrics, and so on. The masses will be too broke to buy these things. What’s more, they will be very resentful of the shrinking economic “elite” who can afford them. And, anyway, our roads and highways are destined to fall apart very quickly because there is no way we can sustain the necessary rate of normal maintenance. Meanwhile, we remain completely un-serious about public transit — even about fixing the vestiges that still exist. The airline industry, of course, will be toast inside of five years.
4) Our food production system is approaching crisis. There’s no way we can continue the petro-agriculture system of farming and the Cheez Doodle and Pepsi Cola diet that it services. The public is absolutely zombified in the face of this problem — perhaps a result of the diet itself. President Obama and Ag Secretary Vilsack have not given a hint that they understand the gravity of the situation. It is probably one of those unfortunate events of history that can only impress a society in the form of a crisis. It also happens to be one of the few problems we face that public policy could affect sharply and broadly — if we underwrote the reactivation of smaller, local farm operations instead of shoveling money to giant “agribusiness” (or Citibank, or Goldman Sachs, or AIG…). I maintain that this may be the year that the crisis gets our attention, because capital is suddenly harder to get than fossil-fuel-based fertilizer.
All these epochal discontinuities present themselves, for the moment, as a season of muted “hope” and general apathy. The days are suddenly mild. We’ve resumed old and happy habits of grilling meat outdoors and motoring to those remaining places that were not blanketed with franchised food huts and discount malls. We have a new, charming president with an appealing family. Newly-minted dollars are flowing to the “shovel-ready.” The new bad news is less bad than the old bad news (or seems to be). And the year just past has been such a bummer that our hard-wired human nature tells us that good things must be just around the corner.
Personally, I think a lot of good things await us, but not the ones we’re expecting — not a return to buying slurpees on credit cards. It will be very salutary to leave behind the junk empire we’ve accumulated and move into an epoch of quality and purpose. For the moment, though, our hopes reside elsewhere.
Regards,
James Howard Kunstler
May 8, 2009
James Howard Kunstler:
James Howard Kunstler is perhaps best known for The Long Emergency, which predicted the financial meltdown and the implications of the peak oil problem. The Geography of Nowhere , about the fiasco of suburbia, is a campus cult classic among the architecture and urban planning students. It was followed by a sequel, Home From Nowhere and The City in Mind: Notes on the Urban Condition . Mr. Kunstler has also authored 10 novels including World Made By Hand, a story set in America’s post-oil future. His articles have appeared in The New York Times, The Washington Post, Rolling Stone and The Atlantic Monthly.
Decoupling From Reality
James Howard Kunstler
May 11, 2009
http://www.kunstler.com/index.html
Back in the golden age of American Flyfishing -- say around 1913 -- when technical innovation in a prissy and recondite sport was joined by a new leisure class emanating from the white glove canyons of Wall Street, some new-minted guru of angling came up with method for whipping up action on a trout stream when no fish would rise to the fly. It was really lame. The idea was to artificially create the illusion of a mayfly hatch -- that moment when the larva of, for instance, Ephemerella subvaria, the Hendrickson mayfly, swims to the surface, molts, and dries its newly unfurled adult wings in the brisk spring air. This is famously the moment that drives trout crazy, and when it occurs en masse, with zillions of mayflies "hatching" off the water, a trout feeding-frenzy can ensue. The idea with the artificial hatch was to pitch a fake Hendrickson fly made of feathers and fur in so many furious, rapid casts that the dumb trout lurking below would get suckered into a feeding frenzy -- and, shortly, into the buttered frying pan, with a nice "tuxedo" of cornmeal and bacon.
In the annals of flyfishing, this gambit has been all but discredited, except among the mentally sub-normal who sometimes venture over from the lumpen realm of crank-and-plug fishing in search of improved social standing. But the tactic naturally transferred into the precincts of finance, where it reappeared in such disparate practices as Ponzi schemes and Keynesian "pump-priming." Now it is being employed at a scale never seen before, on an economy that is the equivalent of a great dead river poisoned by the toxic effluents of the same society that inhabits its banks (no pun intended). The dark secret of this river is that the fish who once ran there are all dead.
Much has been made in recent weeks of "animal spirits" and the "psychology of markets" in the hopes that mere attitudes might overcome the laws of thermodynamics. Math wizardry has now yielded to self-esteem building, an understandable sequence of events, since trafficking in the mutant spawn of Wall Street algorithms has ended up completely demoralizing the United States of America. Sadly, this is a little like subjecting a man who has just watched his house burn down to twelve segments of Oprah shows about the triumphal secrets of weight loss.
The Great Wish across America is to resume the life of comfort-and-convenience that seemed so nirvana-like just a few short years ago, when the very constellations of the heavens might have been renamed after heroic Atlanta realtors and Connecticut hedge fund warriors, and the boomer portfolios groaned with earnings, and millions of graying corporate salary mules dreamed of their approaching retirement to a satori of golf and Viagra, and the interior decorators grew so rich installing granite countertops that they could buy their own houses in the East Hampton, and every microcephalic parking valet in Las Vegas qualified for a bucket full of Ninja mortgages, and Lloyd Blankfein could dream of divorcing his wife to marry his cappuccino machine.
The choices now are stark and the kind of life on offer by the future is rather austere. The job of the current president, and the people who work with him, is to manage an epic contraction -- let's say, to land a very large, loaded defect-ridden airplane that has both run out of fuel and suffered grievous mechanical breakdown... and to bring down that vehicle in an unfamiliar country filled with angry savages. Sadly, the new president and his co-pilots just want to keep the plane up there, circling. The president's viziers are working round-the-clock to come up with some way, some toggle-switch, that might turn off the laws of gravity (which are not unrelated to the laws of thermodynamics). But all they seem to be able to come up with are mumbled prayers that are pale imitations of the algorithms once concocted by the Wall Street engineers who designed the aircraft they're riding in.
Well, that's enough conceits and metaphors for today.
We've digested the so-called "stress tests" for now with nary a burp and in a few weeks General Motors will step into the dark cave of bankruptcy. All the ancillary businesses linked to the US car-makers face contraction and annihilation. A couple of things occur to me which have not even entered the national debate on these matters: 1.) the US will still need to manufacture engines and chassis for military vehicles. Do we intend to send out to Mitsubishi for those things in the years ahead? 2.) the US will need rolling stock (i.e. choo-choo cars and engines) for a revived passenger railroad system. Do we intend to buy all that from the quaint peoples of other lands? (While the US workforce instead focuses on updated releases of Grand Theft Auto.)
At the moment, there is tremendous hoopla and jubilation over the start-up of so many "shovel-ready" highway projects around America -- as if what we need most are additional circumferential freeways to enhance the Happy Motoring lifestyle. How insane are we? Is this the only thing we know how to do?
I remain confident that the months ahead will introduce the American public and our leaders to a range of horrors that will begin to penetrate our addled collective imagination. We're far from done with the crisis of banking and money and the related fiasco in mortgages -- which translates into the very real situation of many people become homeless. It remains to be seen what may happen on the food production scene, but the current severe shortage of capital and the intense droughts shaping up around the world will resolve into a much clearer picture by mid-summer. The price of oil has resumed marching up and has now re-entered a range ($50-plus) that spun the airline industry into bankruptcy last time around. Enough carnage has already occurred on the jobs scene that the next act among many chronically jobless may tilt toward desperation, anger, and violence. The sporting goods shops around the nation are already rationing ammunition.
It's not just the stock markets that have decoupled from reality as we enjoy the fragrant vapors of spring -- it's the entire conscious consensus of everybody holding the levers of power and opinion. To put it as simply as possible, we're still sleepwalking into the future.
CNN Money: Schools, Agencies See Big Increase in Homeless Families
Ref - http://www.cnn.com/2009/POLITICS/05/02/homeless.families/
For years, homelessness has been depicted as that of an individual man or woman living on the street and begging for money. But with the perfect storm of the foreclosure crisis and the faltering economy, more and more families are becoming homeless. According to a recent count by the Metropolitan Washington Council of Governments, the number of homeless families in the Washington region alone has jumped 15 percent since last year.
Associated Press: California May Need to Borrow $20 Billion Next Year
Ref - http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/05/07/state/n101250D05.DTL
Gov. Arnold Schwarzenegger's finance officials had estimated the state would have to borrow $13 billion for California to get through the 2009-10 fiscal year. . . Dickerson urged Schwarzenegger and the Legislature to resume work on the budget since passing a spending plan in February. The budget analyst in March said the recession created another $8 billion hole just weeks after the end of a bruising fight to close a $42 billion gap through June 2010.
Associated Press: General Motors Moving Closer to Bankruptcy Filing
Ref - http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/08/BU0417GLMV.DTL&type=business
The company lost $6 billion in the first three months of the year. The results were bad enough to bring a warning from Chief Financial Officer Ray Young, who acknowledged the difficulty of climbing out of a steep decline even if the company cuts costs. "Once you start losing revenue, you get yourself into a vicious circle in which you cannot recover," he told reporters on a conference call.
Der Spiegel: Freighters Being Scrapped En Masse Through South Asia
Ref - http://www.spiegel.de/international/business/0,1518,623250,00.html
The global economic and trade crisis is so severe that a growing number of ships, some larger than the Titanic, are being pulled from their routes and sent to scrap yards to be sold for parts. Freight and charter rates have fallen and regularly scheduled passenger lines are being cancelled. Those container ships that are still sailing can barely cover their costs. Over-capacity created in recent boom times has accelerated the trend toward scrapping ships.
Mike Whitney: Bank Stress Tests Just A "Giant Public Relations" Ploy
Ref - http://www.counterpunch.org/whitney05082009.html
The stress tests are a public relations ploy designed to build confidence in the banking system and to fend off demands that insolvent banks be taken into conservatorship by the government. The market will decide whether Geithner's tests are credible or not; the jury is still out. Initial results indicate significantly smaller losses than estimates by the IMF and the vast number of economists. So, who is right; Geithner or the IMF? If Geithner is right--and the banks are in such great shape -- then why is the taxpayer being asked to provide up to $2 trillion through the Term Asset-backed Securities Loan Facility (TALF) and the Public Private Investment Partnership (PPIP) to purchase the banks garbage assets?
Economist: America's Mountain of Debt Means Recovery will be Painful
(Welcome back . . .)
Ref - http://www.economist.com/finance/displaystory.cfm?story_id=13611284
. . . do not mistake the bottom for a vigorous rebound. Consumption may be growing again, but there is every chance it will remain depressed in coming years because of weak income growth, depleted wealth and tightened credit.
Peak-Oil Prophet James Howard Kunstler on Food, Fuel and Why He Became a Vegan
By Kerry Trueman, AlterNet.
Posted May 7, 2009.
http://www.alternet.org/environment/139877/peak-oil_prophet_james_howard_kunstler_on_food,_fuel_and_why_he_became_a_vegan_/
Washington Post: Rural Towns Collapsing as Employment Evaporates
Ref - http://www.washingtonpost.com/wp-dyn/content/article/2009/05/03/AR2009050302066.html
He traveled 60 miles each way, every day, for the job that paid $17 an hour. The job helped him buy this plot of land, his first, so he never complained about the pre-dawn drive there or the bumper-to-bumper drive back home. But that job is gone now. It evaporated in the sputtering Northern Virginia economy. So Morgan, along with many others in Luray and surrounding Page County -- where unemployment recently was as high as 17.7 percent -- spend their days picking through the scant job listings, tending to daytime chores or hunting for day laborer work.
Bloomberg: Rich Americans Defaulting Just Like Subprime Vicitms
Ref - http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aXIKT1zzD4.g
Bloomberg: Almost One-Quarter of U.S. Homeowners Under Water
Ref - http://www.bloomberg.com/apps/news?pid=newsarchive&sid=alObJoQNAz.E
Stan Humphries, Zillow’s vice president of data and analytics, said in an interview . . . “You are going to continue to see home prices fall for the rest of this year and some portion of next year.” The recession cut home values by $2.4 trillion last year, First American CoreLogic said in a March 4 report. More than 8.3 million U.S. mortgage holders owed more than their properties were worth and an additional 2.2 million borrowers will be underwater if prices decline another 5 percent, the Santa Ana, California-based seller of mortgage and economic data, said in the report.
Bloomberg: U.S. Companies Reduce Payrolls by Another 491,000
Ref - http://www.bloomberg.com/apps/news?pid=20601103&sid=asnDB772FbzE&refer=us
The Federal Reserve projects the U.S. will probably continue to lose jobs even after the economy emerges from the recession, economists said. “We are likely to see further sizable job losses and increased unemployment in coming months,” Fed Chairman Ben S. Bernanke told congress yesterday. “The unemployment rate could remain high for a time, even after economic growth resumes.”
The Atlantic Monthly: Why This Crisis is a Depression, Not a Recession
Ref - http://correspondents.theatlantic.com/richard_posner/2009/05/the_developing_economic_situation_and_the_obama_administrations_response_february_2-may_1_2009.php
The most ominous depression phenomenon--significant deflation--cannot be ruled out.
NY Times: Nation's Debt Time Bomb Clock is Ticking Faster Than Ever
Ref - http://www.nytimes.com/2009/05/04/business/economy/04debt.html?_r=3&ref=business
. . . the Treasury Borrowing Advisory Committee, a group of industry officials that advises the Treasury on its financing needs, warned about the consequences of higher deficits at a time when tax revenues were “collapsing” by 14 percent in the first half of the fiscal year. “Given the outlook for the economy, the cost of restoring a smoothly functioning financial system and the pending entitlement obligations to retiring baby boomers,” a report from the committee said, “the fiscal outlook is one of rapidly increasing debt in the years ahead.”
Asia Times: Creditworthiness of Entire American Economy Now at Risk
Ref - http://www.atimes.com/atimes/Global_Economy/KE05Dj01.html
. . . while it often appears otherwise, finance provides no free lunch. The mispricing of credit and misperceptions of risk in the marketplace have deleterious effects, although their true impact may remain unexposed for years. Indeed, the more immediate (and always seductive) consequences of loosened financial conditions tend to be reduced risk premiums, higher asset prices, and a boost to economic "output". Conventional analysis of monetary policymaking still focuses on "inflation" and "deflation" risks. I would strongly argue that our contemporary world has already validated the analysis that acute financial and economic fragility are major costs associated with market pricing distortions.
Macleans: California the Bleeding Edge of the U.S. Economic Collapse
Ref - http://www2.macleans.ca/2009/04/15/on-the-front-lines-of-america%E2%80%99s-meltdown/?ref=patrick.net
unemployment in Merced (pop. 80,000) hit 19.9 per cent, double the national average and well above California’s already high rate of 10.5 per cent (only Michigan has been harder hit). During the housing boom, half of all new jobs in California were tied to real estate, and Merced was no different. With the housing collapse, thousands of construction jobs have dried up. The region relies heavily on agriculture, but a three-year drought has crippled the sector . . . Quebecor World, the Montreal-based printing company that sought bankruptcy protection last year, operates a plant here that has laid off staff. Ellie Wooten, the 75-year-old mayor of Merced, recently warned it might close altogether. “Merced was a sleepy little town that nobody had ever heard of,” says Whalley, a Canadian from London, Ont., who moved to Merced at the peak of the boom to work at the university. “Now everybody knows it as the centre of the bust.”
San Francisco Chronicle: Carmakers' Woes Hitting State Budgets Hard
Ref - http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/30/BUNA17CGD0.DTL
. . . these plans could hurt because auto dealers are big local employers and sales taxes on cars are vital to cities.
Bloomberg: Recession Will Redefine Full Employment as Jobs Vanish
Ref - http://www.bloomberg.com/apps/news?pid=20601102&sid=aOhkusQ9LifQ&refer=uk
almost a quarter of the unemployed have been out of work for 27 weeks or longer, the highest proportion since 1983. Permanent layoffs -- for workers who don’t expect to ever regain the same job -- hit a record 51.5 percent in March. Mass layoffs, those that affect 50 or more people, rose to a record 2,933, comprising almost 300,000 lost positions. “We’re shedding jobs in industries in a significant way, and we’re not going to see those same industries be the source of job creation,” Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York, said in an April 21 interview. “We’re going to be living in a world in which we’re going to be feeling that the normal on the unemployment rate is above 6 percent.”
AFP: Few in D.C. Realize China Has Cancelled America's Credit Card
Ref - http://www.google.com/hostednews/afp/article/ALeqM5i4estRSYeFBIII9kezxnP4jgoGZQ
Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors. "There will come a time where the lack of Chinese participation may have a significant impact," Kirk said. "We should track that, because up until last month they were the number one provider of currency to the United States and now they're gone."
Kunstler: "America has hit the bottom of its ability to process reality"
Ref - http://www.lifeaftertheoilcrash.net/Archives2009/KunstlerMay04.html
. . . even after the "stress test" for banks is finally let out of the massage parlor with a "happy ending", events are underway that are beyond the command of personalities. We're done "doing business" in all the ways that we've been used to, but we just can't get with the new program. And, China is basically screwed. They have less oil left than we have (which is saying, not much at all) and they won't corner the rest of the global oil market without starting World War Three. Meanwhile, they're running out of water and food. Good luck becoming the next global hegemon. Oh, and Japan imports 90 percent of its energy; India over 80 percent. Fuggeddabowdit.
Washington Post: It's Time for a Reality Check for Economic Optimists
Ref - http://www.washingtonpost.com/wp-dyn/content/article/2009/04/28/AR2009042803457.html
The reason for the seeming disconnect has to do with the various benchmarks by which the economy can be measured. There's the level at which it is functioning -- how many people have jobs and how much the nation produces. There's the direction it is going -- whether those numbers are growing or shrinking. And there is the speed with which it is changing. The improvement that Obama and economists inside and outside of government are talking about is, so far, limited to the third category.
NY Times: U.S. Economy in Second Straight Quarter of Steep Decline
Ref - http://www.nytimes.com/2009/04/30/business/economy/30econ.html?ref=business
The last six months were brutal. Output fell at a 6.1 percent annual rate in the January-through-March quarter after falling at a rate of 6.3 percent in last year’s fourth quarter, according to the Commerce Department. If that pace were to continue, nearly $1 trillion would be wiped out this year from the nation’s economic output of $14.2 trillion last year.
Yahoo News: Jobless Rate Rises in All U.S. Metro Areas In March
Ref - http://finance.yahoo.com/news/Jobless-rates-rise-in-all-US-apf-15068914.html?sec=topStories&pos=6&asset=&ccode&ref=patrick.net
The Labor Department reported Wednesday all 372 metropolitan areas tracked saw jobless rates move higher last month from a year earlier. The Indiana region has been hammered by layoffs in the recreational vehicle industry. RV makers Monaco Coach Corp. Keystone RV Co. and Pilgrim International have sliced hundreds of jobs.
NY Times: Chrysler in First Major Automaker Bankruptcy Since 1933
Ref - http://www.nytimes.com/2009/05/01/business/01primer.html?_r=1&ref=business
Chrysler is reorganizing under Chapter 11 of the United States Bankruptcy Code. The law allows companies to shed assets, restructure debt, cancel contracts and close operations that normally would have to continue running. Once they secure financing to emerge from bankruptcy, these companies are reconstituted as new legal entities. Should Chrysler fail to successfully reorganize, it might turn to a Chapter 7 bankruptcy, which would mean a liquidation.
Ca.Gov: California Declares an Unemployment State of Emergency
Ref - http://gov.ca.gov/proclamation/12041/?ref=patrick.net
. . . WHEREAS on April 17, 2009, the State Employment Development Department (EDD) reported that the unemployment rate in California increased to 11.2 percent in March, that nonfarm payroll jobs declined by 62,100, that the year-over-change (from March 2008 to March 2009) showed a decrease of 637,400 jobs, and that the number of people unemployed in California was 2,080,000, up over 119,000 for the month, and up by 913,000 compared with March of 2008; and
WHEREAS in that same report, EDD indicated that there were 79,979 new claims for unemployment insurance in March 2009, compared with 76,303 in February 2009, and 48,282 in February 2008; and
WHEREAS EDD and the California Unemployment Insurance Appeals Board (CUIAB) have made significant efforts to expand its operations in response to the exponential increase in demand for their services, but more resources are needed to effectively serve the needs of Californians struggling in this economic downturn; and the services are of such an urgent nature that the delay incumbent in their implementation under state civil service and contracting rules would frustrate the very purpose of unemployment compensation under state law, and the federal stimulus payments under federal law; and
WHEREAS the circumstances of the economic downturn, and the circumstances of the resulting unemployment in California, by reason of their magnitude, are beyond the control of the services, personnel, equipment and facilities of any single county, city and county, or city and require the combined forces of a mutual aid region or regions to combat; and
WHEREAS under the provisions of section 8558(b) of the California Government Code, I find that conditions of extreme peril to the safety of persons and property exist in California caused by the current and continuing economic downturn and resulting unemployment in California.
NOW, THEREFORE, I, ARNOLD SCHWARZENEGGER, Governor of the State of California, in accordance with the authority vested in me by the California Constitution and the California Emergency Services Act, and in particular California Government Code sections 8625 and 8571, HEREBY PROCLAIM A STATE OF EMERGENCY to exist in California.
IT IS HEREBY ORDERED that all agencies of the state government utilize and employ state personnel, equipment and facilities for the performance of any and all activities consistent with the direction of the California Emergency Management Agency (CalEMA) and the State Emergency Plan
Kansas City Star: Even Bigger Wave of Foreclosures is on the Way
Ref - http://www.kansascity.com/business/story/1159532.html?ref=patrick.net
Lenders laid the groundwork for this second foreclosure wave in 2005 and 2006, Edmiston said. Those years saw a surge in mortgages on which borrowers were required to make relatively small monthly payments for the first five years. Those low house payments are poised to reset to much higher levels in 2010 and 2011 and push more owners out of their homes
Economist: Disaster is Looming in the Commerical Property Market
Ref - http://www.economist.com/finance/displayStory.cfm?story_id=13528258&source=patrick.net
It is likely to be a similar story with bank lending. Many banks are extending loan terms, hoping that the problem will go away. It will not. A growing overhang of debt will only make it harder for the market to recover. And the full effects of the bust are only just beginning to be felt. Losses on commercial property tend to lag behind rises in the unemployment rate by a year or so, largely because lease terms protect landlords from immediate falls in rental income. (An exception is the hotel industry, where leases are, in effect, renewed daily). The pain is now arriving. Office vacancies in America’s city centres increased to 12.5% in the first quarter, up from 9.9% a year earlier. Delinquencies are spiralling. Write-offs on bank-held commercial-property loans rose sevenfold in 2008.
UK Telegraph: U.S. Banks Face $70 Billion Shortage in New Capital
Ref - http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5220905/US-banks-face-70bn-shortage.html
Many of the largest banks in the US will have to raise new funds following the Federal Reserve's completion of stress tests, according to analysts.
UK Independent: Professor Warns of Risk of Global Wide Food Riots
Ref - http://www.independent.co.uk/news/science/professor-warns-of-global-food-riots-1675459.html
There is a real threat of food riots around the world unless research into increasing crop yields is stepped up, a leading UK scientist said today. Professor Douglas Kell, chief executive of the Biotechnology and Biological Sciences Research Council (BBSRC), is calling for an additional £100m a year to be spent on food research in the UK to help the world meet growing demand.
The Joker
James Howard Kunstler
April 27, 2009
http://www.kunstler.com/index.html
Things come out of the woodwork. All of a sudden it's a mutant H1N1 swine flu, with bird and human DNA accessories. We don't know where this is taking us. It could be a media blowover, like SARS, or it could be a big deal, shutting down travel and assemblies of humans. It would be a very big deal if it killed, proportionately, as much of the population as the 1918 flu event -- the worldwide toll then was roughly 30 -100-million out of a global population around 1.7 billion. Now the world population is over 6.5 billion. The only thing anyone can predict at the moment is that there will be a lot of very worried health officials and politicians out there in the days ahead.
This flu epidemic comes just as global economy itself lies comatose in the economic intensive care unit, with IV lines of dollars, euros, yen, and renminbis transfusing its hollowed-out carcass. It's an odd time for attention to be diverted from that awful spectacle. The cash transfusions have sent the Cable TV gang into raptures of "optimism" -- meaning they expect debt securitization to resume as before, along with Yuletide-level credit card shopping sprees in the malls, a mass splurging on new cars, and a renewed frenzy of house-building in the Florida buzzard flats. Those "green shoots" and sprouting "mustard seeds" they report seeing may themselves be a flu-like symptom. I don't know what the so-called Mexican swine flu will lead to, but the global economy as we've known it is a goner.
Even if the Mexican swine flu turns out to be something of a false alarm, it will require billions of dollars in unexpected new outlays for prevention operations here in the USA -- reinforcing the false idea that the nation has bottomless resources (the same idea that has been driving the bail-out fiesta). My guess is that the fear emanating from the story will be a potent generator of paranoia in the meantime, leading to widespread closures of things, canceling of events, restrictions on travel (official or otherwise), and a sell off in the financial markets. And that's if the flu turns out not to amount to anything.
If the flu is the real deal, it will surely drive a stake through the faintly-beating heart of that invalid global economy, and possibly even continental-scaled economies like the US, the Euro-zone, and China -- any place where things and people have to move long distances to keep life going. The US, obviously, suffers in this instance from its proximity to Mexico, and the fact that so much of our food comes from places that employ casual Mexican labor. A serious flu outbreak would be a short path to food shortages in the US, with our three-day supermarket inventories and just-in-time shipping methods. It would not be such a bad idea now to lay in supplies of beans, brown rice, cooking oil, onions, and toilet paper.
The big story at the end of last week was New York Attorney General Andrew Cuomo's pursuit of former Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke in the matter of Bank of America's gobbling of Merrill Lynch last fall. It is alleged that the dynamic duo importuned BOA chief Ken Lewis to avoid disclosing some important particulars to the BOA shareholders, as required by law. The outstanding stage-whisper coming from all this was the word "indictable" in reference to messers Paulson and Bernanke. It goes to show how swiftly events can move beyond "unthinkable" in extraordinary times. Now, former Merrill Lynch chief John Thain -- of thousand-dollar trash-basket infamy -- has come back out of the woodwork to backbite BOA's Ken Lewis over who-said-what in regard to a treasure chest of bonuses divvied up during the blur of TARP payouts last fall. Thain complains of being unemployed since then -- though one wonders why he doesn't just shut the fuck up, buy half of Nantucket with his untold millions of booty, and learn to play the oboe or something. This giant CEO cat fight was just getting interesting when the Mexican flu pulled the news-plug on it.
Of high interest to those confused and perplexed over President Obama's actions so far in the banking fiasco, I commend a great piece by fellow blogger-on-the-margins Charles Hugh Smith: Obama's Secret Plan. This analysis is low on the paranoia and high on the Machiavellian maneuvering insight. The basic idea is that Mr. Obama has gone along with all the TARPing and PPIPing because it was tactically the only way that he could give the Wall Street plutocrats enough rope to hang themselves -- and that this was the only reality-based strategy that could get public opinion in the mood for real change. It explains a lot, if it's true. Alternately, it would be very sad to learn that Mr. Obama really believes he can rev back up a securitized-debt-and-consumption fiesta by turning the Federal Reserve into an ATM.
In any case, the banking-and-investments sector has been on auto-pilot for a few weeks. Lesser banks are crashing around the country (Idaho, Florida, California last week), but the remaining Big Boyz are still lurching through the landscape like so many Frankenbanks, jazzed up on electric surges of digital cash. There are ever more hints of a peasant uprising against the castle of privilege, but no sign just yet of the flaming brands and shaking fists from the village below. This flu thing will put the schnitz on their distempers for a while.
For an excellent background briefing on flu matters, I direct you to a recent blog by Elaine Meinel Supkis.
http://emsnews.wordpress.com/2009/04/26/viral-flu-earths-oldest-trojan-horse-invaders/
Have a healthy week.
Asia Times: Bank Profits, Market Rallies Masking Considerable Turmoil
Ref - http://www.atimes.com/atimes/Global_Economy/KD24Dj02.html?ref=patrick.net
Sovereign wealth funds around the globe, having suffered huge losses on their investments in US banks, can be described by the adage "once bitten, twice shy". Many have decided to largely divest themselves of their holdings in US financial shares. Why? They no longer trust the banks to disclose their true financial position fully, accurately and honestly. The Barack Obama administration has thus painted itself into a potentially very grim corner with the stress tests. Almost no matter what is done on May 4, the risks of a new crisis of confidence in the US financial sector are significantly rising.
Wall Street Journal: Unemployed May Turn to Violent Forms of Protest
Ref - http://online.wsj.com/article/SB123871251471484469.html#mod=todays_us_nonsub_marketplace
"In the U.S., people accept getting fired on the spot, without complaining," says Michel Laboisseret, a CGT union delegate who took part in the Caterpillar protest. "We are more willing to pick a fight."
UK Guardian: China Realizes that the U.S. Dollar is Gravely Wounded
Ref - http://www.guardian.co.uk/commentisfree/2009/apr/20/global-power-shift-china
Clearly they recognize that the days of the dollar as the dominant global currency are numbered. This would also, incidentally, signal the end of New York as the global financial center . . . it is evident that the Chinese are seeking to progressively internationalize its role. The Chinese government recently concluded a number of currency swaps with major trading partners, including South Korea, Argentina and Indonesia, thereby widening the use of the renminbi outside its own borders. It is also in the process of taking steps to increase the yuan's role in Hong Kong. This is significant because of the latter's international position. In addition, the government has announced its intention of making Shanghai a global financial centre by 2020.
CNN Money: Microsoft Sales Fall for First Time, Profits Down by 32%
Ref - http://money.cnn.com/2009/04/23/technology/microsoft_earnings/index.htm
The company has had a difficult time combating slumping demand for its Windows operating system, as the economic slowdown has dragged PC sales down 7% to 9%, according to Microsoft's estimates. The recession has also prompted many consumers to opt for cheaper, scaled-down "netbooks" that perform only basic tasks like e-mail and accessing the Internet. They typically run open-source operating systems like Linux, rather than Windows.
Market Watch: Gold Back Up Over $900 on U.S. Jobless Claims Report
Ref - http://www.marketwatch.com/news/story/gold-rises-above-900-copper/story.aspx?guid={AE062FE7-915A-4EC3-BD01-964A44C47484}&siteid=yhoof
First-time claims for state unemployment benefits rose a seasonally adjusted 27,000 to 640,000 in the week ended April 18, the Labor Department reported Thursday. For the week ended April 11, the number of people collecting state unemployment benefits reached another new record of 6.14 million.
Economist: "It would be a mistake to assumme the worst is over"
Ref - http://www.economist.com/opinion/displayStory.cfm?story_id=13527685&source=hptextfeature
But, welcome as it is, optimism contains two traps, one obvious, the other more subtle. The obvious trap is that confidence proves misplaced—that the glimmers of hope are misinterpreted as the beginnings of a strong recovery when all they really show is that the rate of decline is slowing. The subtler trap, particularly for politicians, is that confidence and better news create ruinous complacency. Optimism is one thing, but hubris that the world economy is returning to normal could hinder recovery and block policies to protect against a further plunge into the depths.
Scientific American: Could Food Shortages Crash Modern Civilization?
Ref - http://www.sciam.com/article.cfm?id=civilization-food-shortages
Food scarcity and the resulting higher food prices are pushing poor countries into chaos. Such “failed states” can export disease, terrorism, illicit drugs, weapons and refugees. Water shortages, soil losses and rising temperatures from global warming are placing severe limits on food production. Without massive and rapid intervention to address these three environmental factors, the author argues, a series of government collapses could threaten the world order.
NY Times: An Effort to Save Flint, Mich by Demolishing Parts of town
Ref - http://www.freep.com/article/20090422/NEWS06/90421089/Seeing+less+of+Flint+would+be+better++city+fathers+say
Flint civic leaders are talking seriously about demolishing entire parts of town and condensing the city’s declining population into a smaller area, the New York Times reports. The movement gained steam last month when Acting Mayor Michael Brown spoke of “shutting down quadrants of the city,” the paper says. Flint now has a population of 110,000 spread over 34 square miles. For starters, the city could save about $100,000 a year by eliminating weekly garbage pickups on sparsely populated streets, said Dan Kildee, the Genesee County treasurer and chief spokesman for the movement to shrink Flint. “Decline in Flint is like gravity, a fact of life,” Kildee told the Times. “We need to control it instead of letting it control us.”
Bloomberg: Soaring Budget Deficits Will Mean Billions in Bond Sales
Ref - http://www.bloomberg.com/apps/news?pid=20601103&sid=anA.WOxto6qQ&refer=us
“Tax receipts are just collapsing,” said Chris Ahrens, head of interest-rate strategy at UBS Securities LLC in Stamford, Connecticut, one of 16 primary dealers required to bid at Treasury auctions. The need to sell more debt “is a big issue in the Treasury market and it is ongoing. The surging budget deficit is the primary cause.”
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