Hermit's Weblog
everything your mother never taught you about how the world really works.

Thu, 20 Mar 2008

Why is Bush smiling?

This is a question being asked a lot these days, because there is the President dancing and smiling and joking, while the economic news grows worse everyday, the war lingers on and just about every measure of the real state of American life is on a down turn (unless you are rich). So, why is he smiling?

The answer is really simple, so simple in fact that its obvious. However, it is also dangerous and scary, so dangerous and scary that no one really wants to utter the truth. Well, on this blog that's what we're about: the truth.

THE PRESIDENT IS ON DRUGS!!!

There, I've said it. Happy now?

[08:57] | [] | # | G

Sun, 02 Mar 2008

Winter Woes, Global Warming?

Here in New Hampshire we have gone over the 2nd deepest recorded snow level ever and with two months of potential snow left (it can snow in April), we just might set a new record (we have over 100 inches so far and the people with snow plows are running out of places to put it, because up here it tends not to melt. If it fell in November, its likely still be on the ground in April.

Some people are suggesting that this cold long snowy winter runs contrary to the possibility of global warming. If its getting warmer because of human activity, why then is this Winter worse?

Well, the problem here isn't with the weather, but with the thinking. For example, people with an agenda and an already given point of view will takes whatever facts are at hand and make them fit their theory - that is their thinking is reasoning to a foregone conclusion. Most people don't think carefully about this problem anyway. Politicians like to have opinions, and anyone can find a scientist to support their ideology (as long as we keep in mind an ideology is a fixed system of ideas that looks to find facts consistent with it, much the same way people can find in the Bible just about anything to support totally different points of view.

Here's some help. Climate is a consequence of a very complex system of interrelated natural phenomena, including what human beings do that might effect it. If we just study the generally observable laws of complex systems themselves, we find that they have a tendency to a steady state, but on occasion will change to a new steady state. When they do undergo such a change, the whole system often oscillates wildly for a time, before the new steady state emerges.

What this means is that climate change isn't going to happen in a nice linear fashion, getting steadily warmer every year, but rather it appears as if human activity has so stressed the whole system that it has reached the point where it has to make an adjustment to compensate for the effect of our activity. Making this balancing adjustment, means all kinds of parts of the whole have to find a new harmonic relationship with each other, and so we get the wild oscillations. Weather gets more and more weird because the out of balance condition doesn't go immediately to a new steady state - there are too many individual adjustments that have to be made as part of the process.

So a cold winter that seems to press the extremes is just a part of the necessary wild oscillations the whole system has to go through on its way to a new steady state. All the recent weather phenomena really only tell us is that the interim period of wild oscillations is at hand, but it doesn't tell us where the new steady state is going to end up. The same is true about the excessive warming. Its just another wild oscillation. We could just as much be approaching a new (hopefully small) ice age, as we could have melting polar ice raising sea levels and drowning all kinds of cities at the coasts.

It ought to be clear, however, that human activity is affecting the system, and that we need to be far wiser about that then we presently are. If history tells us anything, however, it tells us that civilizations don't bother to be wise, for too many of those in power (making macro-decisions) only care about their more immediate short term goals. What this means is that ordinary people who want to survive or be a part of a community that wants to survive whatever the new steady state is, had better start thinking about that survival, and not expect an institution to take care of us. That's the lesson of Katrina - we are on our own, and its time to wake up and do what is necessary as individuals and small groups.

Trying to push Washington into action is really a waste of effort. Might was well try to move the Grand Canyon and the Colorado River to Atlanta for the water. In fact, and tragically, we can't save everyone, because a lot of ordinary people are just as short sighted as people in power. Actually, if one looks around carefully, you can already see a lot of people taking care of business on this level. Civilization is sinking into chaos folks, time to make the right kind of plans to ride it out.

[14:58] | [] | # | G

Sat, 01 Mar 2008

The Housing Crisis: symptoms of a crime.

In this blog I have been delaying saying anything much about the housing crisis (I also moved across the USA from Northern California to the New England, so my life was quite disrupted for many weeks). The truth is, of course, that every time we read in the press or hear on the news these words: the housing crisis, we are being told a lie. What we have instead is criminal activity at the highest levels of the finance industry. That's right folks, crimes were committed, and the so-called housing bubble is a consequence of these crimes.

Economic crimes, by their nature, produce economic wounds. The rape and beating of a human being, wounds and perhaps kills that human being. The rape and beating of an economy wounds and perhaps kills that economy. Such a crime - an economic crime - can have millions of victims, and as long as the press fails to recognize the crime involved, the people never really understand what has actually happened. For those who may not have been paying much attention, here is a bit of a summary of the nature of the crime.

As the Republicans, in the latter days of the 20th Century, more and more deregulated everything in sight, the higher levels of the world of finance became increasing free of any oversight at all. We have for some time now been experiencing the political terrorism that comes from an out of control religious fundamentalism; and, now we are going to experience the economic terrorism that comes from an out of control economic fundamentalism - the religious-like fantasy called: the free market.

Banks, stock markets, the Federal Reserve and now Hedge Funds have become a place where a kind of economic anarchy is fostered. Few or no rules restrain the natural appetites of human beings (for greed, for power etc.) in these venues, and it is in effect (in these near invisible realms of finance) a war zone. Companies eat other companies. Large investors create rumors that cause the markets to make predictable (and therefore highly profitable) panic moves. The Fed, for example, was asked (more than ten years ago now) by Congress to oversee these developments and decided instead to be as much hands off as possible.

To appreciate the truly outrageous character of this, we also have to realize that under present banking rules, when the Fed lends money, it is just creating play money - nothing economically real is being put into the stream of finance. So as the Fed pumped money into the economy (via easy credit - all those loans ordinary people were taking out to buy houses they couldn't actually afford), the whole thing was just so much hot air. Hedge fund managers, private finance banks, and stock market owners, saw here a great opportunity. Easy credit was something of which a clever person could take advantage. The way to do this was a kind of three shells and a pea game, using financial instruments (derivatives) that are as economically meaningless as the fake money put out by the Fed. As a result a giant ponzi scheme was put in place. A ponzi scheme is a fraud where promises are made to investors of incredible rates of return, that only works because the newest investors' money is used to pay the earlier ones their promised return. As long as there are new investors things go well, the scam artist takes his profit off the top, and the new guys (without knowing it) pay the first investors, who then run around exclaiming what a cool deal they just made (sucking in more new investors).

The particular derivative used was for the issuing mortgage company (the place financing the poor smuck who bought the house he couldn't afford) to sell bundles of these mortgages to the next level of financing above the originating lender. So these bundles of mortgages became a second (or derivative) financial instrument. In our insane economic anarchy (unregulated free market finance), such instruments then become something that is bought and sold in a market.

To make this even more confusing, bundles of mortgages where themselves bundled, and another level of the ponzi pyramid came into being. These too created a market. Okay, take a deep breath now, because we are going to plunge into the real swamp next.

Follow the money. The Fed eases credit, which is soaked up by the speculation in the housing markets. Housing prices go up (inflate, because that is what easing credit with fake money does - it causes inflation). The excess of liquidity created (too much cash), attracts predators at the bottom - the sub-prime lenders. Through lies and fast talk, these bottom feeding aluminum siding types suck in credulous home buyers, with no-down offers, no credit checks and no proof anywhere that the loans can be repaid. These mortgages are worthless going out the gate.

Up they go then into the derivative markets as bundles and bundles of bundles, where (because the feeding frenzy of the easy credit is inflating housing values) all this looks like a really good deal. The buyers and sellers of these derivative instruments don't really care about the underlying value, because they make their money in the markets for these instruments. As the inflation of housing increases, these all too fake instruments seem more and more edible to the higher flying predators in the finance and hedge fund industries.

The easy credit provided by the Fed is also made available to those financial banks which loan money to the buyers and sellers of these instruments, so another infusion of fake money enters the ponzi pyramid at the upper level. Now these dudes are really sharp, okay. I mean seriously sharp and clever. What happens next is actually amazing, and because no one is watching, it all goes awry right in the beginning. Hedge funds start playing heavily in these markets, for a lot of money is being made (skimmed off is a more accurate phrase). Hedge fund managers take a lot off the top before they pay off their investors (its a kind of mini-ponzi inside a larger ponzi). The big institutional lenders (such as Citibank and Morgan Stanley) actually get together (I think there were four of them altogether) and form a conspiracy. Collectively these guys agree to enter into the topmost level of the pyramid (the hedge funds) and invest huge portions of their own capital in an effort to corner the market there.

Remember, buying and selling all these derivative instruments (bundles of bundles and hedge fund stocks as well as the really weird futures market instruments in these same so-called securities) allows the players to make lots and lots of money. Hedge fund managers were fast making millions and the big institutional lenders were making billions. How is this happening? Where is the wealth coming from?

Well it isn't real in the first place. The easy credit provided by the Fed at multiple levels in this ponzi pyramid inflates all the values (inflation on top of inflation). Yet, right at the beginning there is the mortgage, remember that? As the money is fed into the pyramid by the Fed (what a pun that is!?!), something is left behind: debt. Those who are borrowing the fake money at any level in the scheme are also obligated to pay something back to the lending institution. But the craziness got so out of hand, that as the bundles were bundled, no one bothered to make sure who actually owned the debt at the bottom. Some homeowners, who are the original victims of this criminal activity, are finding that in court they can challenge the foreclosure, because the institution seeking to foreclose can't actually prove it owns that particular and individual mortgage.

All of this is why what is falsely called the sub-prime lending or housing crisis is not actually causing all this trouble at the top of the pyramid. The big four thieves ended up holding hedge fund securities and other instruments that didn't have any value at all (the value was never there in the first place, but during the led up to this situation no one (well almost no one, we'll get to that next) gave a damn. All this money was being made personally by hedge fund managers, finance house managers, stock holders in these companies etc. As long as the Fed was making easy credit (inflated inflation), the fake wealth could go in the private bank accounts of the faceless players. They were happy.

To top it off, as the institutional corporations started having to write off all these valueless instruments from their balance sheets, the managers (even if let go) were walking off with golden parachutes (in the tens of millions of dollars). Of course, the value of the stocks of these companies declined, some rather rapidly. And here we get to the even higher levels of this criminal enterprise.

There are people who are actually smarter then those who believe they are more clever than the other guy. A few people actually understand that the Fed creates fake money, and what the consequences eventually will have to be of this infusing of vast amounts of fake money into all these markets, from the bottom of the pyramid to the top. When the bubble bursts (as burst it must because it is all just so much hot air), all sorts of stock companies are going to see the prices of their stocks fall, some quite far. This doesn't mean by the way that the company is valueless, but it does mean that for a time the company can be bought on the cheap.

This previously happened on the cusp of what we remember as the Great Depression. The truly smart ones watched the market speculators steadily inflate values out of control, and then when the false values fell, as they must, perhaps even below their true value, this is the time to buy. So we see this now, except instead of just involving the United States the situation has far wider dimensions. We live now in a global economy, and as these American financial institutions fail, whose managers risked their whole company in order to make short term individual financial gain during the time of the rising bubble, they are now for sale cheap. In come the international smart ones, from China and India, and the oil rich middle-east.

America is having a corporate fire sale!

Meanwhile life goes on at the bottom, such as it is. People lose their homes. People lose their jobs. Families come under increased stress. Local governments can't cope with the increase in need for social services. Nor can the private institutions, such as the Churches. Those who caused and profit from this criminal collapse of the American Economy bear none of the suffering. They aren't even called before the bar of justice. The press will continue to treat the original borrower as the one at fault, for (let us never forget) the corporations control the media.

Welcome to another giant step in the descent of the lives of ordinary Americans into conditions that will be not unlike those in the third world. Of course, if we don't sleep through this, we'll learn how through changing the underlying culture (and processes of education) how to ride out this crisis and become stronger. Those at the top can eat each other all they want, especially if those of us at the bottom begin to realize that we don't have to act like competitors in a jungle of survival of the fittest. With a change in the culture (in the stories we tell each other of what this all means), we can learn to cooperate and survive together. What is only an appearance of descent in terms of material circumstances can be change into a spiritual/moral ascent in terms of how we treat each other.

Let the corporations collapse. We can build tight communities instead. We don't need them remember, they need us. Without mindless drone workers and consumers, the consumption culture fails.

We don't need fake money from the Fed. We can have local currencies and barter systems instead. We don't need senseless media exploited culture (fake artists), we can have local musicians and singers instead.

We don't need state run schools training us to be drones, we can have real schools and real education all on our own. The mothers and the fathers and the teachers are the ground from which are grown any real culture or civilization. Let us revere them instead of fake celebrities, and fake sports figures and fake politicians and fake corporate leaders, and fake religious leaders. Do I need to say more? Are you getting the point? I sure hope so.

[12:26] | [] | # | G

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