In the bowl, hand on the chain
A reader of this blog, Nicolas
Nilsen sent me an interesting video where, a couple of years before it
happened, stockbroker-agent-provocateur, Peter Schiff,
in Roubini mode, correctly predicted the disaster we are entering into
now. The video appears to be a montage of Schiff predicting and other
"prestigious" analysts literally laughing in his face.
Let's look a the video:
Wow.
Bang on.... and the best parts are all these jerks laughing at him.
Now Schiff's analysis is that, and I quote his Wikipedia article:
Let's have another look at the figures we saw the other day:
Where I disagree totally with Schiff and the whole Austrian School is that government is "the problem" or with my admired Paul Krugman that half-assed Keynesian money printing is going to fix it all. We are looking at a situation with all the ingredients necessary for fascism, even if it is dressed up in trappings of democratic government.
In many parts of the world people are going to have another hard look at socialism, but I can't imagine (yet) what it would take for Americans to get there. What progressives are going to have to organize themselves to do in the coming years is to prevent the United States from sliding into a major war.
Let's look a the video:
Wow.
Bang on.... and the best parts are all these jerks laughing at him.
Now Schiff's analysis is that, and I quote his Wikipedia article:
The US consumer thinks he's doing the world a favor by consuming what the rest of the world produces (Schiff) is quick to point out that this relationship will come to an end, in his view, much sooner than people imagine, and with negative consequences for the US. Schiff has been quoted as saying: "Consumption is its own reward for Production" -- meaning that without production, the US cannot indefinitely sustain its ongoing consumption. Schiff, and other adherents of Austrian economics, promote savings and production as "the engine of economic growth -- not consumption".Now up to here I agree totally with Schiff. I would add that in my opinion the United States at this point is a Ponzi scheme of cosmic proportions. Here is how Schiff would fix it:
Schiff has said on numerous occasions that the current economic crisis is not the problem; it is the solution. According to him, the transition from borrowing and spending to saving and producing cannot be accomplished without a severe recession, given the current imbalances of the US economy. But according to him, that transition needs to happen. He also thinks the government is doing no one a favor by trying to "ease the pain" with stimulus packages, bailouts and such. Schiff believes these actions will only make the situation worse and possibly result in hyperinflation if the government continues to "replace legitimate savings with a printing press."It is when Schiff gets to the remedies that, while I agree that they are logical, I can't believe they will ever work, simply because people like the Americans, precisely because they have been raised, encouraged, nay brainwashed to consume endlessly on credit, are not going to tolerate the puritanical pain implicit in Schiff's solutions. As I have written recently, I also fear that hyperinflation is a real danger and for the same reason I doubt Schiff's remedies will work: the politicians will not be able to stop their printing money to try to keep consumption afloat.
Let's have another look at the figures we saw the other day:
The bailout has cost more than all of these big budget government expenditures - combined:Obviously there is no relation in value here, the bailout is being paid for with funny money. When I look at those figures I am afraid that the dollar is already worthless and I am just waiting to see how long it will be until the world finds this out and will no longer accept them in payment for goods that Americans no longer produce themselves (almost everything).
• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion
TOTAL: $3.92 trillion
Where I disagree totally with Schiff and the whole Austrian School is that government is "the problem" or with my admired Paul Krugman that half-assed Keynesian money printing is going to fix it all. We are looking at a situation with all the ingredients necessary for fascism, even if it is dressed up in trappings of democratic government.
In many parts of the world people are going to have another hard look at socialism, but I can't imagine (yet) what it would take for Americans to get there. What progressives are going to have to organize themselves to do in the coming years is to prevent the United States from sliding into a major war.
When I look at the pain in store for Americans even my "inner Lenin" shrivels up and if I could kiss the economy and make it well I would. However... What I think or wish is not going to change anything.
Like a mule in a hailstorm we are just going to have to stand here and take it.
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While I appreciate the new subject matter (however brief) and I get once again we here in The US of A are doomed. I guess the point I am missing is how socialism saves us. I mean if we are doomed we are doomed be it capitalist or socialist.
December 2, 2008 4:45 PM | Reply | Permalink
The recipe remains unchanged:
- State cynical premise (must be variation of: A. Obama is a fraud, B. US is hell-bound)
- Bury reader in heaping helping of related quotes and links
- Attempt snappy summation
- Repeat daily
Wince. Burp. Yawn!
December 2, 2008 5:47 PM | Reply | Permalink
Saw somebody on another thread referring to Mr. S as 'Captain A-Hat', relentlessy pursuing Moby Obama. Yar! And don't forget the other behemoth that must fall to the harpoon - The Red, White and Blue Whale!
December 3, 2008 3:34 PM | Reply | Permalink
The question is how long you stay "doomed" and how bad it gets before it gets better and how you define "better"... stuff like that.
December 3, 2008 1:45 AM | Reply | Permalink
The big question in my opinion is how long "you" stay doomed but "who" it is that stays doomed. With socialism of the kind seen among our european allies, the little people do not stay doomed disproportionately relative to the rich. In America, without socialism, the little people stay doomed forever. Thus, I say we need to start talking socialism which, incidentally, is also the best medicine to ward off fascism because socialism keeps the light of hope burning brightly for those who are not rich and powerful so they do not feel compelled to turn to fascism or authoritarianism.
December 3, 2008 2:39 AM | Reply | Permalink
Sorry for the typo, I meant to write "not how long "you" stay doomed"
December 3, 2008 2:40 AM | Reply | Permalink
Foxy,
My take is pretty classic left. The USA is the cutting edge, the vanguard of capitalism, if that system finally "enters into contradiction" that is to say, is torn apart by the conflicts between its different elements, then it will happen first and most clearly in the USA. The inflation versus deflation polemic is that sort of contradiction... Destroy the value of the money in order to save the possible consumption of foreign goods which must be paid for with the money we are making worthless in order for people to get some to spend it on those goods. When you get into that sort of idiotic shit it is called entering into contradiction, I believe.
December 3, 2008 2:21 AM | Reply | Permalink
Schiff bears reposting:
http://www.talkingpointsmemo.com/talk/blogs/donal_fagan/2008/11/cassandra.php
As a Forbes article noted:
http://www.forbes.com/afxnewslimited/feeds/afx/2008/12/01/afx5758491.html
Spain has an unemployment rate over 12%, and they expect it to get worse. What do you see from your vantage point?
December 2, 2008 5:35 PM | Reply | Permalink
I would say that the major difference between Spain and the USA in this crisis are mostly cultural. Spaniards have big, extended, cousins by the dozens, families that are very absorbing and supportive and also most Spaniards cultivate a large number of friends that they have known since childhood. This means that their social and emotional resources for facing a crisis are different then those of most Americans. Also they have a better social net with free health care etc.
December 3, 2008 1:43 AM | Reply | Permalink
Also a difference between Spain and USA in crisis is Spanish fatalism, which they combat with hedonism... "eat, drink and be merry, for tomorrow we die" ism.
The only thing that is really serious for them is the "bald lady"... death. As the poet Antonio Machado said, "the sound of a shovel full of earth hitting the top of a coffin is perfect in its seriousness." Spaniards live while they can, how they can.
December 3, 2008 2:40 AM | Reply | Permalink
That sounds so much like Orlov's description of the Soviet collapse. Some got drunk and died, some thrived in the black market, some just disappeared, many just survived with the help of their social network.
December 3, 2008 8:08 AM | Reply | Permalink
I note that Krugman is not only published in journals, and the NYT, he is a Nobel winner. I'll listen to him first.
I wonder where your fear of hyperinflation comes from. I see no evidence of the inputs that would yield it. We are far from the tax/GDP ratios we had under even Eisenhower. The Fed worries first about inflation, since it threatens all old money, mainly including the government's.
We have under-utilized industrial and labor capacity. Keynes will work.
December 2, 2008 5:42 PM | Reply | Permalink
Astyk is worried about deflation:
http://sharonastyk.com/2008/11/30/why-im-not-worried-about-inflationat-least-for-a-good-while-yet/
December 2, 2008 6:20 PM | Reply | Permalink
I am too, Donal. We are looking at some serious deflationary signals right now. And they are of the type that don't have easy cures. The BDI spot is now down in the 600's. This is equivalent to the DOW dropping down to 1100 or so. The steel mills in Asia are beginning to close down furnaces, ships are idling at harbor or going for scrap. I don't think inflation is in the cards....
December 3, 2008 12:00 AM | Reply | Permalink
Tom, I'm not as pessimistic as for example, James Kunstler. This is his take
As to hyperinflation and deflation. When things get out of balance you can move very quickly from extreme to extreme. If left to itself we will have deflation because deflation is another name for collapsing a balloon... however if we print money endlessly with nothing but debt behind it, as anyone who has taken economics 101 will tell you, the money loses all value and you need bags of it just to buy a sandwich. So I would say that Krugman is worried about the social effects of the disaster and Schiff isn't. I think that unfortunately both of them are probably right.December 3, 2008 1:59 AM | Reply | Permalink
Here is some more Kunstler on inflation:
That is really what we are talking about. Americans import nearly everything they consume and they are purchasing it with funny money. At some point people will not take American paper anymore.Where I would mix the unmixable: Schiff and socialism is to say that, yes, the American economy needs to reconverted from consumption to production, but no, sorry Peter, I don't trust "the market" to do it.
December 3, 2008 2:08 AM | Reply | Permalink
I think we need some actual numbers here. Kunstler is not an economist, so I have no idea how far to trust his estimate of how egregiously inflationary the Fed and Treasury policies are.
To what extent are the bailouts are being financed by money printing, and to what extent are they being financed by borrowing and deficit spending. Right now, the government is able to borrow money at at ridiculously low rates of interest.
December 3, 2008 8:03 AM | Reply | Permalink
"We are looking at a situation with all the ingredients necessary for fascism, even if it is dressed up in trappings of democratic government."
Mr. Seaton, don't you ever get tired of spouting hyperbolic nonsense like this every day? This sort of alarmist style betrays a lack of intellectual depth usually associated with teenagers or undergrads (or adults in a state of arrested adolescence).
Alternate title for your post:
At My Desk, Hand In My Pants
December 2, 2008 6:38 PM | Reply | Permalink
.
Uhhhhh . . .
Damn ... Them fascists are everywhere.
It must be the Benito Mussolini complex.
Second Alternate title?
Biting Fart Bubbles in the Tub
Quack!
~OMG~
December 3, 2008 1:16 AM | Reply | Permalink
On September 10, 2001 I made some comments that now look rather silly - that looked silly by eve of the next day - in how the sometimes misguided American people still provide a bulwark against abuses and mistakes of playing the uber-tyrant, said a bit differently at the time.
I'm not sure an economic crisis will create the same visceral instinctive reaction that the terrorist hit did, but I think we're pretty far down the road to call anyone's surmisings "hyperbole" unless they invoke alien space Gods or conservative compassion.
December 3, 2008 7:34 AM | Reply | Permalink
I appreciate and welcome this information David. It is not information that Americans generally like to take any note of. My own opinion is that whether we go through a period of deflation is of little consequence because there is no doubt in my mind that we will live to see an inflation so robust and galloping at such a pace that we could well become another Weimar republic. People scoff at such talk but they have also scoffed at those who pointed out the obvious with respect to the whole mortgage crisis and the wholesale theft that has been taking place in the so-called "finance" industry.
Our nation, both public and private sectors is so overstretched in terms of debt that anyone can see for all practical purposes the dollar is already unstable and soon will be virtually worthless. When the dollar is no longer the world currency and we can no longer buy anything, the situation in our country is going to be unlike anything any of us have ever seen. I do not believe our people are in any way prepared for what is about to happen and our governmental leaders are even less prepared to lead us through this very destabilizing period. The best hope of the American people is that the leadership of our european allies will be unified and mature and insist that we proceed responsibly.
December 3, 2008 2:48 AM | Reply | Permalink
Oleeb,
Here is some Jimmy Kunstler to add some spice to your perceptive commentary:
December 3, 2008 5:32 AM | Reply | Permalink
.
Just waddlin’ back in . . .
Mr. Kunstler also said the following at the very beginning of his post:
Taking his last sentence above, to me the shorter meaning is ...
"Crap indiscriminately globally and locally the people drink the effluent."
And that is the way it's been for some 60 years. I see all this from a different long view perspective after 40+ years of watching the total decline of competent legislation and representation in the name of "We the People..." rather than my party first, right or wrong.
~OGD~
December 5, 2008 12:30 AM | Reply | Permalink