Back to Worrying about Worse-Case Scenarios – Tom Petruno, LA Times
Jul 182010
If you’ve been paying attention this past decade, it won’t surprise you to learn that the country’s policy elites are in the midst of a destructive, well-nigh unhinged discussion about the future of the nation. But even by the degraded standards of the Washington establishment, the growing panic over government debt is shocking.
Deficits of Mass Destruction
The Iraq War was never really about weapons of mass destruction, and the fight against the deficit is not actually about fiscal responsibility. It’s a shell game for gutting the welfare state and redistributing wealth upward.
Jul 172010
Imagine a world where prices of all sorts of goods and services just keep moving down.
Your weekly grocery bill shrinks. Your hairstylist gladly accepts 15% less, just to get the business. At long last, movie theaters even stop gouging you on popcorn.
Good times? Sure — until your employer cuts your salary or fires you to cope with the need to reduce prices. Suddenly, the economy is in the grip of a vicious spiral, as falling consumption forces prices lower, driving unemployment up, which in turn drives consumption and prices down further.
That’s the deflation scenario that has, yet again, become one of the hottest topics on Wall Street.
Fear of a broad-based, sustained decline in prices — the textbook definition of deflation — was rampant at the height of the credit crisis in late 2008.
That concern faded last year as the economy and financial markets recovered. By early this year many big investors were warning of the opposite risk: They saw the continued ballooning of government budget deficits, and central banks’ easy-money policies, as setting the scene for an eventual surge in inflation.
Now, we’ve come full circle: With the U.S. economy clearly slowing, deflation worries have revived.
“The U.S. economy is at the doorstep of deflation,” Nomura Securities economist Zach Pandl warned clients in a lengthy report this month.
A number of Federal Reserve officials have echoed that concern in recent weeks, although in the usual Fed manner — i.e., without using an alarmist tone.
For the moment, however, the story still is one of disinflation rather than deflation. Prices overall are rising, but the year-over-year rate of increase has fallen sharply since August 2008.
The government’s consumer price index for June, reported Friday, showed that core inflation — prices for everything except food and energy — was up 0.9% from a year earlier, the slowest pace in 44 years.
Still, the core CPI rose 0.2% in June from May, the biggest monthly increase since October. Prices of used cars, clothing and medical care rose at a faster rate last month than the previous month.
No wonder the average consumer will wonder what this deflation chatter is about. People aren’t seeing it in most of what they buy.
But with the year-over-year core CPI skating closer to zero, the risk is that a slowing economy could tip the scales to deflation.
Optimism about the recovery suffered another blow Friday, when the Reuters/University of Michigan national consumer confidence index for July fell more than expected, to the lowest level since August.
It matters more what people actually do with their money than what they say about their confidence or lack of it. But plummeting confidence preceded the financial crisis and economic crash of late 2008. And the government’s report this week of disappointing June retail sales added to concerns that consumers’ willingness or ability to spend is waning.
Revitalizing consumption has been the great challenge all along in the wake of the devastating recession, of course. A large chunk of the global economy’s capacity to produce goods and services has been idled since 2007. That means many businesses’ pricing power already is severely limited. If demand falls again, serious price-cutting may be the only option companies would have to try to maintain sales.
“A renewed downturn in the economy at the current low level of resource utilization opens up the possibility that disinflation will turn into outright deflation,” said Steven Ricchiuto, an economist at Mizuho Securities USA in New York.
So what? If you have a job, plenty of cash and relatively little debt, deflation would be paradise. Many of your favorite things would cost less. What could be better?
If you’re heavily in debt, however, deflation would make that load even more onerous.
What’s more, the deflation scenario terrifies companies, governments and central bankers because it raises the possibility of a downward economic spiral that can’t easily be reversed.
If consumers adopt a deflationary mind-set, and figure that prices will only get cheaper if they wait to buy, they’ll probably be right. But the end result could be a recession even worse than the one we just climbed out of, if demand sinks and companies react in part by slashing their payrolls again.
That is why deflation and depression often are mentioned in the same breath in economic discussions. From July 1929 to March 1933, as the Great Depression deepened, U.S. consumer prices plummeted 27%.
If we look to financial markets today for guidance on deflation risks, the messages aren’t encouraging. U.S. stock prices have tumbled since April, when worries about the economy began to intensify. Rally attempts have just given way to more selling, as on Friday, when the Dow industrials slumped 261 points, or 2.5%, to 10,097.
Gold, considered the classic inflation hedge, has fallen 5.5% since reaching an all-time high in mid-June.
And the one asset likely to be coveted in a deflationary period — Treasury bonds, with their guaranteed interest — has seen ravenous demand for the last three months. The 10-year T-note yield has fallen below 3% in recent weeks for the first time since April 2009.
Skating Dangerously Close to Deflation – Tom Petruno, Los Angeles Times
AMERICA’S GDP is growing, employment is finally expanding and the stockmarket is buoyant. Yet one thing has not changed: the Federal Reserve’s monetary pedal remains firmly pressed to the floor. For more than a year it has kept its short-term interest-rate target near zero while pledging to keep it there for an “extended period”. It has also bought $1.7 trillion of long-term bonds, primarily mortgage-backed securities (MBS), to keep long-term interest rates down.
That is unsettling some inside the Fed, fuelling speculation it will soon signal an exit from that ultra-easy monetary policy, perhaps even by altering its “extended period” commitment when its next two-day policy meeting wraps up on April 28th.
The most vocal dissident is Thomas Hoenig, president of the Federal Reserve Bank of Kansas City and the Fed’s longest-serving policymaker, who has twice formally objected to the Fed’s “extended period” language. That commitment plus zero rates, he explained on April 7th, lead “banks and investors to search for yield… take on additional risk [and] increase leverage”. He argued the Fed should soon raise rates to 1% to “end the borrowing subsidy”.
The next day Narayana Kocherlakota, president of the Minneapolis Fed, voiced a different concern: that the excess bank reserves created by the Fed’s MBS purchases create the potential for high inflation. He advocated selling $15 billion-25 billion of MBS a month, which would clear the Fed’s inventory in five years instead of the 30 it would take for the bonds to mature.
The rest of the Fed and its chairman, Ben Bernanke, have listened politely but are not ready to drop or even water down the “extended period” language, much less raise rates. Dropping the commitment would be tantamount to a tightening of monetary policy as bond yields rise in anticipation of short-term rate hikes. Mr Bernanke has already said the Fed would eventually sell some MBS, but not now. By pushing up long-term rates that too would be a tightening of monetary policy.
Bank credit is contracting and getting more expensive. Excess bank reserves will not lead to inflation so long as the Fed can still raise interest rates, which it can. Indeed, the Fed has an embarrassment of ways to tamp down inflationary pressure when the time comes, from raising interest rates on excess reserves to selling bonds to telling banks to tighten lending standards. It has far fewer tools at its disposal for battling deflation, not a remote risk.
Still, as long as the recovery proceeds, the debate cannot be put off forever. The Fed will spend a lot of its policy meeting talking about how to talk about its exit. The Bank of Canada has helpfully provided a tutorial. On April 20th it dropped its own commitment to keeping its short-term rate at 0.25% until the second half of this year, citing stronger growth and firmer inflation than expected. “The need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus,” it said. Bond yields and the Canadian dollar rose in response.
The Fed also sees its “extended period” commitment as conditional. It does not mean six months, as many seem to think, but only as long as unemployment remains high and inflation (both actual and expected) stays low. If those things change, so will interest rates.
Washington Possessed
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Apr 242010
My Nov. 10, 2008 column warned that big government was walking away as the knockout winner over the private sector in the financial crisis. But it’s going much further than I’d feared. The federal government has accelerated its takeover of the economy, adding a mega-trillion-dollar health care entitlement, despite the damage to health care and the national debt this will cause. Washington is frenetically cutting unfunded checks. Capital is being channeled away from small businesses toward big government. Looming on the horizon is the bailout of state and local governments, which will concentrate more and more of the nation’s debt onto the diminishing base of federal taxpayers.
Washington’s excess spending is now running $1.5 trillion annually, and both the Treasury and the Federal Reserve are relying heavily on short-term credits for funding. The marketable national debt has ballooned to more than $8 trillion, but wait … the Obama Administration has budgeted an increase to $20 trillion over the next few years, bringing it to more than 90% of GDP. Even that huge sum–$100,000 for every working-age American–doesn’t include the rapidly escalating debts of Fannie Mae ( FNM – news – people ) and Freddie Mac ( FRE – news – people ) or the government’s unfunded liabilities for Social Security and Medicare. And to keep the debt estimate down the budgeteers are making wishful assumptions that millions of high-paying jobs will reappear and health care reform will pay for itself.
Washington Possessed: It’s Worse Than I Feared – David Malpass, Forbes
The real economy is still deflating. Just look at the jobs situation. Far from slowing or stabilizing, 2009 was the worst year yet for job losses – ’07…’08 …and ’09…each year has produced greater losses. Even James Grant, who predicted a “barn burning recovery” now admits that his forecast has gone up in flames. He was “either early or wrong,” he says.
And just look at the real estate market. “Home prices are softening again,” says David Rosenberg. As for commercial real estate, here’s Kenneth Laub, who’s been in the business for 50 years, as reported by Bloomberg:
“He says the current downturn will overshadow all of the others…
“‘It won’t be a typical part of a cycle where we’re down for two or three years and things recover,’ says Laub, 70, whose New York firm, Kenneth D. Laub & Co., says it has handled more than $40 billion of real estate transactions since its inception in 1969. ‘It will be longer than we’ve gone through before.’
“As in past slumps, the weak US economy is curbing demand for commercial space, increasing vacancies and causing rents and property values to fall. The key difference today is the explosion in debt financing and related derivatives that fueled a run-up in commercial real estate prices in the 2000s, Laub says. That’s left property owners struggling to make mortgage payments. The overhang of debt will delay any recovery, he says.
“‘It’s not a supply-demand thing; it’s an overleveraged condition,’ Laub says.
“Laub expects a wave of restructurings by troubled commercial borrowers as hundreds of billions of dollars of loans come due annually during the next few years. Commercial real estate may still be recovering a decade from now, he says. ‘What you’re going to see is a tremendously long workout period unprecedented in commercial real estate in this country,’ Laub says. ‘That’s where we’re going, and it’s just beginning.’”
Sic transit America?
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Jan 162010
 |
| Flagging: a US sailor stands on the flight deck of the aircraft carrier USS George Washington |
If a week is a long time in politics, a decade is starting to look like an age in geopolitics. Comparing the America that began the 21st century with the America of today is to witness a country that has in some ways quite radically altered its view of itself and its relationship to the world.
In short, the metallic rust of decline has crept into the American soul. “You could argue that the first decade of the 21st century was the last decade of the American century,” says David Rothkopf, a former Clinton administration official and student of US foreign policy. “We are now entering the multipolar century.”
Self-doubt tarnishes Brand America
Jan 092010
Bill Bonner writes at The Daily Reckoning:
The stock market has not been corrected. It could easily get cut in half in the next six months. (We’re leaving our ‘Crash Alert’ flying over the building with the gold balls…until stocks reach bargain prices.)
The bond market could crash any time. The US is borrowing more money than ever before – trillions more. With such a huge increase in supply, demand…and prices…it should crack, sooner or later. Higher bond yields would send the whole economy into a much deeper depression.
Even our gold holdings could lose 20%-30% of their value. And gold stocks? They could get killed in the next stock market downswing.
Despite a truly monumental (albeit imbecilic) effort to revive the economy…the latest figures show the weakest post-recession recovery ever. Jobs are missing. Consumer credit is shrinking. Inflation is going negative. There is no real recovery…it’s a mirage created by government spending.
Monetary policy is useless (banks won’t lend; consumers won’t borrow). And fiscal policy, while apparently more effective, destroys wealth; it doesn’t add to it.
The more the government increases spending, to offset the correction, the more the economy becomes addicted to it. It’s like trying to cure an alcoholic by introducing him to heroin. Take away the government spending – as Japan tried to do – and the economy collapses into a deeper depression. Not only that, but the budget deficit actually grows!
In other words, the feds spend money they don’t have trying to fight a correction. This creates huge budget deficits, but it makes it look like the economy is recovering. So they slack off. Then, they discover that their fiscal stimulus didn’t really create any genuine economic activity. Take away the fiscal stimulus and the economy collapses again…reducing tax receipts and widening the deficit. In effect, the cure became a disease of its own! Now they can’t cut government spending. The economy depends on it. Instead, they’re locked into a debt spiral…more and more deficits…higher and higher debt…down, down, down, until…
..until the whole thing finally crashes.
Japan faced this problem in the ’90s. It eased off its stimulus program…and the economy collapsed. Now, it’s become hooked on government spending. Where does it lead? We repeat this prescient note from The Telegraph, which we sent you yesterday:
“This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time…
“Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE [quantitative easing...aka 'printing money']. The country will flip from deflation to incipient hyperinflation…”
But we’re not worried. Somehow it will all work out. Americans are still trying to get even. They still believe that the stock market will recover – fully. They still think the Fed is in control…and that our economists know what they are doing. They are delusional, in other words.
Public Trust has Economic Consequences
A Growing List Of One Term Presidents, A State of Distress, Analysis & Commentary, Consumption Ran the Old Economy, Coup d'etat in America, Deflation-Inflation-Stagflation, Integrity and Responsibility, IT'S ALL ABOUT POWER AND MONEY, News & Analysis, Obama's Hypocrisy, Our phony middle class
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Oct 172009
Public trust has economic consequences, by Howard Davies, Commentary, Project Syndicate: Public trust in financial institutions, and in the authorities that are supposed to regulate them, was an early casualty of the financial crisis. That is hardly surprising, as previously revered firms revealed that they did not fully understand the very instruments they dealt in or the risks they assumed. … But … if this loss of trust persists, it could be costly for us all.
As Ralph Waldo Emerson remarked, “Our distrust is very expensive.” The Nobel laureate Kenneth Arrow made the point in economic terms almost 40 years ago: “It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence.”
Indeed, much economic research has demonstrated a powerful relationship between the level of trust in a community and its aggregate economic performance. Without mutual trust, economic activity is severely constrained. …
So if it is true that trust in financial institutions – and in the governments that oversee them – has been damaged by the crisis, we should care a lot, and we should be devising responses which seek to rebuild that trust. …
In the United States,… a … systematic, independent survey promoted by economists at the University of Chicago Booth School of Business … did show a sharp fall in trust in late 2008 and early 2009, following the collapse of Lehman Brothers.
That fall in confidence affected banks, the stock market, and the government and its regulators. Furthermore, the survey showed that … if your trust in the market and in the way it is regulated fell sharply, you were less likely to deposit money in banks or invest in stocks.
So falling trust had real economic consequences. Fortunately, the latest survey, published in July this year, shows that trust in banks and bankers has begun to recover, and quite sharply. This has been positive for the stock market.
There is also a little more confidence in the government’s response and in financial regulation than there was at the end of last year. The latter point, which no doubt reflects the Obama administration’s attempts to reform the dysfunctional system it inherited, is particularly important, as the sharpest declines in investment intentions were among those who had lost confidence in the government’s ability to regulate.
It would seem that rebuilding confidence in the Federal Reserve and the Securities and Exchange Commission is economically more important than rebuilding trust in Citibank or AIG. Continuing disputes in Congress about the precise details of reform could, therefore, have an economic cost if a perception that the system will not be overhauled gains ground. …
Researchers at the European University Institute in Florence and UCLA recently demonstrated that there is a relationship between trust and individuals’ income. …
The data show, intriguingly, that … if you diverge markedly from society’s average level of trust, you are likely to lose out, either because you are so distrustful of others that you miss out on opportunities for investment and mutually beneficial exchange, or because you are so trusting that you leave yourself open to being cheated and abused. …
Maybe we should trust each other more – but not too much.
Prof. Jim Hamilton at Econbrowser (thanks Mark Thoma for the link) addresses one of the Fed’s standard methods of draining liquidity from the banking system: reverse repurchase agreements. Basically, the Fed will transfer some of its assets to the banking system via short-term loans taken out with its Primary Dealers, presumably offering standard (Treasuries) and less standard (MBS or agency bonds) assets as collateral.
Reverse repurchase agreements simply slosh around the assets (MBS, agencies, and Treasuries) between the Fed and the Primary Dealers, rather than removing the assets from the Fed’s balance sheet permanently. Eventually, though, the Fed must sell the securities outright onto the open market – we are far, far from that!
This is all hot air for now. How can the Fed soak up the expansionary liquidity, let alone unwind $1 trillion in assets, when the banking system is still shedding pounds?
The Fed is considering another route, too: conducting the same repurchase agreements with the money-market mutual fund industry in tandem. An excerpt from the FT:
The Federal Reserve is looking to team up with the money-market mutual fund industry as part of its strategy to ensure that its unconventional policies to stimulate the economy do not produce a bout of post-crisis inflation.
The central bank envisages eventually draining liquidity from the financial system by engaging in trades called “reverse repos” with the deep-pocketed money-market funds. In these, the Fed would pledge mortgage-backed securities and Treasuries acquired during the crisis as collateral for short-term loans from the funds.
The obvious counterparties for reverse repo deals are the Wall Street primary dealers. However, the Fed thinks they would only have balance sheet capacity to refinance about $100bn of assets. By contrast, the money-market funds have $2,500bn in assets, which means they could plausibly refinance as much as $500bn in Fed assets. Officials think there would be appetite on the part of the funds, which are under pressure from regulators and investors to stick to low-risk liquid investments.
The Fed is solely attempting to assuage inflation angst at this time; it’s still very premature to talk about an exit of expansionary policies when credit markets still crimp the stimulus that the Fed so desperately wants to get into the open market (much of the base, roughly $855 billion on September 23, 2009 and up from $2 billion in August 2008, remains on balance with the Fed in the form of “excess reserves). Just look at the crunch in the consumer credit space (chart to left).
As Prof. Hamilton suggests, the mechanisms of the reverse repos should successfully sterilize the base before it starts to become inflationary (with either the Primary Dealers and/or the Mutual Funds industry). However, one of the programs through which the Fed utilized previously to sterilize its liquidity, and to which Prof. Hamilton refers, – the Supplementary Financing Program – is unlikely to be an avenue for removing liquidity.
In fact, it’s quite the opposite. The Treasury already announced its imminent plan to liquidate the bulk of its $200 billion account with the Fed. There’s another $200 billion in excess reserves with which the Fed must contend (see my previous post here).
It’s easy to get the liquidity into the financial system. But getting it out without collapsing the economy or allowing inflation pressures to build? Well, that’s a different story.
By the time of Trajan in 117 AD, the denarius was only about 85 percent silver, down from Augustus’s 95 percent. By the age of Marcus Aurelius, in 180, it was down to about 75 percent silver. In Septimius’s time it had dropped to 60 percent, and Caracalla evened it off at 50/50. read more…
Geithner recently told the Chinese: NO, don’t worry, watch what we do.
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Deborah Solomon and Jon Hilsenrath at the WSJ inform us that, in order to keep from hitting the $12.1 billion trillion debt ceiling, the Treasury Department is winding down a one-year-old program it created to borrow funds on behalf of the Fed:
Since last year, the Treasury has been selling special short-term securities and placing the proceeds in an account at the Fed. The program, known as the Supplementary Financing Program, reached about $560 billion late last year, but has since fallen to about $200 billion, where it has remained throughout 2009…
The decision could also be controversial, since the program was put in place to help blunt any inflationary impact from emergency actions taken by the Federal Reserve.
But the end of the Treasury program is unlikely to spur inflation, given the Fed’s ability to pay interest on reserves that banks keep on hand there. Both interest on reserves and the Treasury program are tools that can be used to blunt the inflationary impact of the Fed’s balance sheet expansion.
Is the Treasury Courting Inflation? – Zubin Jelveh, The New Republic
Sep 192009
When the market is overvalued, as it is now, rising interest rates can have a much more severe impact as the market quickly eliminates its’ overvaluation as it did in 1961 and 1987.
The current rally is being driven by the liquidity the Fed has flooded the system with over the past year. But in 2010, if the economy is rebounding, and particularly if growth is stronger than expected, the Fed will be under intense pressure to drain this liquidity. Some Fed spokesmen are already warnings that rates could rise rapidly over the next year.
Stock Markets When EPS Growth Turns Positive – Spencer, Angry Bear
Sep 132009
The Importance of ECB Wording on Inflation – Euro Thoughts Sep 7-11 2009 – UniCredit Group
Aurelio Maccario | Sep 9, 2009
Last Thursday my boss, Marco Annunziata, did not hesitate to define President Trichet a true statesman for his wise and transparent conduct of the ECB September press conference. In the last few weeks, with his intervention in Jackson Hole, the Sep 4 presser, and the op-ed in the Financial Times the following day, Mr. Trichet has been able to reassure markets that the ECB is aware that the economic and financial cycles remain fragile, that the weapons of mass salvation employed over the last year need to remain in place (e.g., the decision not to apply a spread on the upcoming 12-month fixed rate-full allotment operation), thus steering market rates’ expectations in the desired direction. The publication of bearish staff forecasts has contributed to finish the job. The ECB stance remains quite accommodative and any decision on rates and on the unwinding of unconventional measures is postponed to next year.
Let’s see if we can start by agreeing on some basic facts. First, the process of securitization was unquestionably enormously successful in the early part of this decade in attracting huge sums of capital from all around the world to fund loans to U.S. households and firms. Without securitization, it is inconceivable that we would have seen anything like the $4.3 trillion in new non-agency household mortgage loans issued between 2004 and 2006.
Second, surely we can agree today (though some may have still thought otherwise as recently as May of 2007) that this success was absolutely not
spurred in large part by innovations that reduced the costs for lenders of assessing and pricing risks. In particular, technological advances facilitated credit scoring by making it easier for lenders to collect and disseminate information on the creditworthiness of prospective borrowers. In addition, lenders developed new techniques for using this information to determine underwriting standards, set interest rates, and manage their risks.
http://www.econbrowser.com/archives/2009/07/looking_for_an_1.html
Jul 302009
“I think we will probably have to begin raising rates sometime in the not-too-distant future,” Federal Reserve Bank of Philadelphia President Charles Plosser told Dow Jones Newswires and the Wall Street Journal in an interview.
And listen to what Richard Bernstein, Merrill Lynch’s former chief investment strategist, is now saying, that America is still blowing bubbles with its heavy, excessive borrowing. The US government in a post-bubble environment simply is genetically incapable of waiting for economic growth to rebound to soak up excesses, and instead reflexively acts without thinking in the face of growing voter unease over job losses.
So the US has now embarked on Japan’s post-bubble strategy, which it did during the 1990s, that is, to support excess capacity by reflating the economy via gunning the mints, moves which stymie the post-bubble consolidation forces.
Easy money is like tequila, tasty, but dangerous, another inflation hawk, Dallas Fed official Richard Fisher, has warned
The Committee to Defraud the World
To say now that ‘No one knew’ or ‘I was mistaken’ or ‘I was just doing as I was told’ is another in a series of lies and deceptions that have supported one of the greatest frauds in the history of the world.
But this is not history. This episode of fraud is still playing itself out now. And to fail to understand the depth and breadth of this madness is to place oneself in peril, and in the power of those who are twisting the Western economic and political system even now to satisfy their lust for wealth and power. You are only successful if you can keep what you kill.
Glass-Steagall fell after a decade long campaign involving hundreds of millions in lobbyist money spread lavishly around the Congress, led by Sanford Weil of Citibank, supported by key banking and political figures in the Congress and at the Fed. It involved Senator Phil Gramm, who helped to put a stake in the heart of the financial regulatory process under the Reagan free markets banner, and who recently said the problem is that the middle class were a bunch of whiners. As did his wife Wendy, who as the chairperson of the CFTC had exempted Enron from regulatory oversight, and then left to take a position there on its board of directors.
Like the Mortgage Backed Securities scandal it involved surprisingly few principal players, like Alan Greenspan and Robert Rubin, who used their power and influence to silence and ostracize critics, and promote a climate of reckless disregard for the public trust under the meme of ‘efficient markets’ and deregulation. This might have been an innocent policy error if it did not involve premeditated theft on a massive scale, followed by cover ups, denials, and a control fraud that exists even today.
But it also involved literally thousands of collaborators and enablers, from mainstream media people, economists, analysts, and other thought leaders to politicians and regulators who saw that it was to their advantage to at least passively support this scheme which they knew very well was a fairy tale, a fraud, class warfare by a new name, but were able to hide their own guilty consciences behind self-serving rationalization and the shield of plausible deniability.
History, and hopefully the justice system, will sort this all out. It is difficult, even now, to get one’s mind around the enormity of it. This is its most powerful weapon. Who could be such monsters, so amoral, so destructively sociopathic? Future generations will regard it as an episode of madness, driven by a few people in a tight circle of self-reinforcing thought, people with remarkably similar cultural and educational backgrounds, driven by a consuming lust for power, that were able to dupe and delude an entire nation made vulnerable by propaganda, a co-opted press, and apathy.
In the meanwhile all the great mass of people can do is to watch, and wait, and seek to protect themselves from these ravening wolves grown increasingly desperate, as their arrogance comes to a tragic fall. They can vote out incumbents, but the parties choose the candidates, and too often they resemble competing crime families of special interests more than pillars of a representative government, saying one thing to get elected and doing another thing once in office.
This is the approach of trouble when hubris is at its height, and the few feel they have everything to gain and nothing to lose, if only they can gain more power, and necessarily become more ruthless. They are trapped in a cycle of fear and greed. The fear provokes the lies and the cover ups, but the greed promotes the extension of the fraud and the theft, requiring even more lies and cover ups. The operative word is ‘over reach,’ in a classic late stage Ponzi scheme. This will undoubtedly add to the confusion as the truth is assaulted by the big lie.
The last vestiges of polite society are often shed as the downfall reaches it final conclusion, at the end, when all is revealed, at last. And so there will be great danger.
Jesse’ s Cafe http://jessescrossroadscafe.blogspot.com/2010/07/committee-to-defraud-world.html