by Gilles d'Aymery
"It hath ben sene and felt full ofte
The harde time after the softe."
—John Gower, 1390
(Swans - February 23, 2009) GLOOM AND DOOM: A friend from the San Francisco Bay Area called me the other day to share his concerns about the US economy and, particularly, the state of affairs in California -- and his own situation. He was worried. The value of his house has dropped by 30 percent, his 401(k) by 50 percent. The tech company where he works has laid off employees. He's kept his meager savings at Bank of America, which by standard accounting is nothing more than a Zombie bank. He said that even Silicon Valley was in recession and the economy of the state in a tailspin with 10 percent unemployment. The soaring budget deficit forced the legislature to implement drastic spending cuts ($15 billion), tax hikes ($12.8 billion), and more borrowing ($11.4 billion) when the state is pretty much insolvent. Then cities have started to ration water because of the drought and Steven Chu, the new US energy secretary, said on February 3 that with global warming, "we're looking at a scenario where there's no more agriculture in California," that the farms and vineyards could disappear by the end of the century. "I don't actually see how they can keep their cities going," Chu added. "I don't think the American public has gripped in its gut what could happen," he said. That's darn scary. Even the Pacific Ocean salmons -- known as king or Chinook salmons -- are disappearing as we speak. Only 66,000 adult salmons returned to the Sacramento River to spawn. There were 13 times as many when Bush got into office. "Man," my friend said, "this is rather ominous. Are you as gloomy as I am? Are we in the midst of total meltdown, an Arctic moment? Are we doomed? How long is it going to last?" he asked plaintively.
FRIEND, I AM gloomy by nature, especially toward the end of winter when my psyche is more depressed than usual, but there must be hope somewhere, for when you ask how long it's going to last you are intimating that we are not doomed -- though there are plenty of doomsters out there who look at the prospects with giddiness and excitement, preaching a return to the land and a simpler life with donkeys as a mode of transportation. More about them later, but let's try to eschew the eschatology of the End Times.
IT IS INDEED GLOOMY out there, a perfect storm that is worsening. In my opinion, we haven't approached the eye of that storm yet and the full force of the shock has yet to materialize. And forget about California for a moment, or the USA for that matter. This has become a worldwide crisis with a velocity never seen before. Even pinstripe gray suits are in awe. During a conference at Columbia University on February 20, Paul Volcker, an economic adviser to President Obama and former Fed chairman, said, "I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world." According to him, industrial production is declining all over the world even faster than in the U.S. His pessimism was echoed by financier George Soros, who contended that the financial system was all but kaput and the crisis worse than the Great Depression. He said that the financial system "was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom," and he compared the situation to the collapse of the former Soviet Union.
LAST SUMMER, when the hurricane-like crisis gathered speed, especially after the Lehman bankruptcy in September, the Europeans thought and asserted that they were in a better situation to ride the wave of the storm. Recent events have shattered their confidence. Iceland liabilities are more than 300 percent of GDP. The economies of Latvia, Estonia, and Lithuania are "clinically dead." The Eastern European countries (remember Donald Rumsfeld's "New Europe"?), which are members of the EU but do not belong to the Euro Zone, are threatening to bring down Western Europe ("Old Europe"). They have borrowed over $1 trillion Euros from Western banks, but are getting ever closer to defaulting on their debts as their economies have drastically contracted and the value of their national currencies plummeted, and they must service their debts in Euros (or in Swiss francs in the case of Poland). Banks in Austria, Belgium, Greece, Italy, Sweden, and a host of other countries are so much exposed that they too are close to becoming Zombie banks. As an example, Austrian banks are exposed in the order of 230 billion Euros, or 70 percent of the country's GDP. The national debt of Italy amounts to over 100 percent of GDP. That of Greece is close to 100 percent. The UK is now jokingly referred to in European chancelleries as "Iceland on the Thames" -- and it's not a joke! The Celtic Tiger -- Ireland -- is not just on its knees, it's down to the waistline mired in the big financial and economic mud that increasingly looks like quicksand. "Old" France and Germany are wobbling along with what looks like an inescapable downtrend, their economies rapidly contracting. Spain and Portugal are getting ever closer to the cliff with their own credit and real estate bubbles. Even worse, 74 percent of the $4.9 trillion loans made to "emerging" markets is owned by Europeans. And, as I mentioned in my Blips #79, "corporate debt in the Euro zone, measured at $11 trillion, is equal to about 95 percent of its economy, compared to US corporate debt (about 50 percent of US GDP, or $7 trillion)." Unemployment is soaring, calls for protectionism are rising, and social unrest is ballooning.
WITH THE SPECTACULAR drop in the prices of commodities, countries like Russia and Venezuela are reeling. With the price of oil down in the low $30s, the Bolivarian Revolution is stalled (mismanagement didn't help either). Africa, a continent that has been ravaged first by colonialism, then natural resource exploitation, export substitutions, and neoliberal globalization, is sinking faster than Latin America, her people faced with starvation on a grand scale. The extent of this drama has prompted Robert Zoellick, the president of the World Bank, to propose that the "rich" countries devote 0.7 percent of their stimulus packages, both economic and financial, to a fund dedicated to helping the most vulnerable countries -- a proposal that fell on deaf ears. The old adage, chacun pour soi et Dieu pour tous, appears more relevant than ever.
MY FRIEND IS CONCERNED with unemployment -- a legitimate concern undoubtedly. By the time you read this the U.S. will have passed the 4 million mark -- a very conservative and distorted statistic. But what of the 20 million jobs lost in China, the tens of millions in Africa, and other parts of the world? Europe is losing jobs at a faster pace than the United States. Japan, South Korea, and all the "Asian tigers" are hunkering down, as their economies are teetering. India's suicide rate is at an all-time high. A job -- with a living wage -- is becoming a luxury in most parts of the world. The spiral is accelerating, with no policymaker able to figure out how to apply the brakes.
SOCIAL UNREST, like a prairie fire fueled by heavy winds, is spreading all over the world from Russia to China. In Europe, they have toppled governments (Iceland, Lithuania, and counting). A new wave of riots is engulfing Greece. Two and half million people descended in the streets of French cities. Italy sits on top of a soon-to-erupt Vesuvius. Turkey is not immune. No country is immune, not even the U.S., which will eventually join the fray. Universities are in turmoil, from Helsinki to La Sorbonne (remember 1968?) in Paris. Governments, in spite of the crisis, or because of it, are increasing their policing budgets, unleashing these forces of state repression upon their own people. Scarcity brings fear and fear brings repression -- an old story.
WHICH BRINGS ME BACK to the Doomsters. Some welcome the chaos in the making in the name of the famed "socialist revolution," but others, often located in the U.S. -- people who have made a business (often profitable) of predicting doom and gloom -- lend a hand to the repressive times ahead. People like James Howard Kunstler, Jay Hanson of dieoff.org fame, Jan Lunberg of "Cultural Change," Dale Allen Pfeiffer of Surviving Peak Oil, conspiracy theorist Michael Ruppert of From the Wilderness, Matt Savinar of Life After the Oil Crash, are just a small sample of that notorious crowd.
ONE TO PARTICULARLY ENJOY is Dmitry Orlov, who for years predicted the collapse of the former Soviet Union and is now predicting the same outcome for the U.S. Orlov's recent speech given on February 13, 2009, at the Long Now Foundation -- a bunch of new/old-age do-gooders -- in which he claimed "that all the [support] systems and institutions that are keeping us alive [are crashing]." Says Orlov: "Forget 'growth,' forget 'jobs,' forget 'financial stability.' What should their [the policy makers] realistic new objectives be? Well, here they are: food, shelter, transportation, and security." Orlov goes on with a mind-numbing rant that includes getting a tiny chunk of land to grow food and an AK-47 for security. Notice that health care and education are not a part of his program... One should read the entire diatribe, "Social collapse best practices," to get a clear picture of today's face of reaction. Gloom and doom, it actually is -- and utterly socially irresponsible.
HARALD WELZER, a German psychosociologist (yes, that species does exist too) and researcher at the Kulturwissenschaftlichen Institute in Essen, Germany, posits that societies are unable to apprehend an unfolding crisis. Their members are stuck into their daily chores, the maintenance of governing institutions and the leaders that know best, the dependence on the media that channels the messages from the "leaders." Additionally, people believe that nothing really catastrophic can happen. The post office works; planes take off; shelves in stores are restocked; traffic on the roads remain unperturbed; gridlock is a daily experience; weekend car races and other sports are on schedule; Christmas decorations adorn the neighborhoods and local stores and businesses, whatever the experienced tougher times. Normality, that condition which we've known forever -- the good old times -- carries on. Willful ignorance trumps careful understanding and assessment of a dire situation. Life, in spite of some impediments, goes on as it always has, even if it is simultaneously crashing within total obliviousness. Only, in retrospect and hindsight, historians can decipher the letdowns of cognitive dissonance. (See "Crise: le choc est à venir," Le Monde, February 7, 2009.)
MY FRIENDLY ACQUAINTANCE asked another question that I have conveniently avoided: "What would you do if you were in a position to affect history?" Lucky me, I do not have a pinstripe suit in my wardrobe, and while I have offered solutions over time (read my Blips) and while they may all be a blend of stopgap policies, I have no clear idea how to fix that mess. I do not have a magic wand either. But if anyone does, please feel free to send me your suggestions. Whether as articles or Letters to the Editor, I'll make sure that your prescription to save the world is published.
NOW, IF YOU ALLOW ME, I'll go back to bed, the best place to cuddle my melancholia.
. . . . .
C'est la vie...
And so it goes...
La vie, friends, is a cheap commodity, but worth maintaining when one can. Supporting the life line won't hurt you much, but it'll make a heck of a difference for Swans.