[Marxism] What is it?
lnp3 at panix.com
Wed Jul 28 12:06:55 MDT 2010
What Is It?
By James Howard Kunstler
on July 26, 2010 9:26 AM
The New York Times ran a story of curious import this morning:
"Mel Gibson Loses Support Abroad." Well, gosh, that's
disappointing. And just when we needed him, too. Concern over
this pressing matter probably reflects the general mood of the
nation these dog days of summer - and these soggy days, indeed,
are like living in a dog's mouth - so no wonder the USA has lost
its mind, as evidenced by the fact that so many people who ought
to know better, in the immortal words of Jim Cramer, don't know
Case in point: I visited the Slate Political Gabfest podcast
yesterday. These otherwise excellent, entertaining, highly
educated folk (David Plotz, Emily Bazelon, and Daniel Gross, in
for vacationing John Dickerson) were discussing the ramifications
of the economic situation on the upcoming elections. They were
quite clear about not being able to articulate the nature of this
economic situation, "...this recession, or whatever you want to
call it..." in Ms. Bazelon's words. What's the point of sending
these people to Ivy League colleges if they can't make sense of
Let's call this whatever-you-want-to-call-it a compressive
deflationary contraction, because that's exactly what it is, an
accelerating systemic collapse of activity due to over-investments
in hyper-complexity (thank you Joseph Tainter). A number of things
are going on in our society that can be described with precision.
We've generated too many future claims on wealth that does not
exist and has poor prospects of ever being generated. That's what
unpayable debt is. We have such a mighty mountain of it that the
Federal Reserve can "create" new digital dollars until the cows
come home (and learn how to play chamber music), but they will
never create enough new money to outpace the disappearance of
existing notional money in the form of welshed-on loans. Hence,
money will continue to disappear out of the economic system
indefinitely, citizens will grow poorer steadily, companies will
go out of business, and governments at all levels will not have
money to do what they have been organized to do.
This compressive deflationary collapse is not the kind of cyclical
"downturn" that we are familiar with during the
two-hundred-year-long adventure with industrial expansion - that
is, the kind of cyclical downturn caused by the usual exhalations
of markets attempting to adjust the flows of supply and demand.
This is a structural implosion of markets that have been
functionally destroyed by pervasive fraud and swindling in the
absence of real productive activity.
The loss of productive activity preceded the fraud and swindling
beginning in the 1960s when other nations recovered from the
traumas of the world wars and started to out-compete the USA in
the production of goods. Personally, I doubt this was the result
of any kind of conspiracy, but rather a comprehensible historical
narrative that worked to America's disadvantage. Tough noogies for
us. The fatal trouble began when we attempted to compensate for
this loss of value-creation by ramping up the financial sector to
a credit orgy so that every individual and every enterprise and
every government could enjoy ever-increasing levels of wealth in a
system that no longer really produced wealth.
This was accomplished in the financial sector by "innovating" new
tradable securities based on getting something for nothing. That
is what the aggregate mischief on Wall Street and its vassal
operations was all about. The essence of the fraud was the
"securitization" of debt, because the collateral was either
inadequate or altogether missing. That's how you get something for
nothing. The swindling came in when these worthless certificates
were pawned off on credulous "marks" such as pension funds and
other assorted investors.
Tragically, everybody in a position to object to these shenanigans
failed to issue any warnings or ring the alarm bells - and this
includes the entire matrix of adult authority in banking,
government (including the law), academia, and a hapless news
media. Everyone pretended that the orgy of mortgage-backed
securities, collateralized debt and loan obligations, structured
investment vehicles, credit default swaps, and other chimeras of
capital amounted to things of real value.
Certainly the editors and pundits in the media simply didn't
understand the rackets they undertook to report. You can bet that
the players on Wall Street made every effort to mystify the media
with arcane language, and they succeeded beyond their wildest
dreams. (Making multiple billions of dollars by trading worthless
certificates based on getting something for nothing must be the
ultimate definition of succeeding beyond one's wildest dreams.)
It's harder to account for the dimness of the news media. I doubt
they were in on the caper. More likely there is a correlation
between their low pay and their low capacity. But I wouldn't
discount the fog of assumptions and expectations about the way the
world is supposed to work that can disable even people of
I'm as certain as the day is long that the folks on Wall Street,
from the myrmidons in the trading pits to the demigods like John
Thain, with his thousand-dollar trash basket, knew that they were
trafficking in tainted paper. Many of them deserve to be locked up
in the federal penitentiary for years on end, and they probably
never will because president Barack Obama lacked the courage to
set the dogs of justice after them and now it is too late.
The most confused of any putative authorities are the academic
economists, lost in the wilderness of their models and equations
and their quaint expectations of the way things ought to go if you
can tweak numbers. These are the people who believe with the faith
of little children that if you can measure anything you can
control it. They will go down in history as the greatest
convocation of clowns ever assembled, surpassing all the collected
alchemists, priests, and vizeers employed in the 1500 years
following the fall of Rome.
It's harder to tell whether the elected officials and their
appointees in sensitive places like the Securities and Exchange
Commission and the FBI had a clue as to the scale of misconduct in
the financial sector, or if they were bought off plain and simple,
or just too stupid to understand what was going on all around
them. The term "regulatory capture" provides valuable insight. How
could Christopher Cox at the SEC fail to notice the stupendous
malfeasance in the mortgage-related securities rackets. Why isn't
he working for fifty cents a day in the laundry of Allenwood
Federal Correctional Facility? Why is the grifter of Countrywide
mortgage favors, Christopher Dodd, still free to guzzle the fabled
bean soup in the Senate lunch room? I could go on in this vein for
two hundred pages, but you get the drift.
The collective failure of authority, whether of intention or
oversight or mental deficiency boggles the mind. And it leaves us
where we are: in a compressive deflationary contraction, a.k.a.
the long emergency. This is not a cyclical recession. It's the
end of one thing and the beginning of another thing, another phase
of history in which people will have to learn to live differently
or perish. I'm convinced that just about very elected official who
can be swept out of office will be swept out of office - even if
their replacements turn out to be a very unsavory gang of sadists
and morons who will certainly make things worse.
But these dog days of summer nobody will be paying attention, even
as the markets themselves roll over and puke, as I rather imagine
they will between now and Halloween, if not next week.
P.S. I have not come to any conclusions about the fate of the
Macondo blow-out and the claims of Matthew Simmons, though I have
certainly got a lot of mail about it, some of it very intelligent.
The BP oil spill has vanished from the news headlines again as the
world waits for the final push at the relief wells. We do know
that we are entering the heart of the hurricane season and that
will make for some excitement.
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