21st Century Depression

In the latest developments in the looming 21st Century Depression, it seems that we were all saved! Hooray! Investors jumped up and down with joy, hugging each other and punching the sky. Then it turned out we were really doomed! Investors and bankers ran screaming for the nearest precipice, in order to hurl themselves en masse into the abyss. Ben Bernanke and his crew were lined up along the cliff top offering golden parachutes to retard the speed of their descent. Many American "Joe Six-packs" and "Hockey Mums" (I hesitate to call them "battlers"), lined up with baseball bats instead, and seemed keen to tie old washing machines filled with wet cement around their ankles, to speed the bankers' descent and make sure they stayed at the bottom of the abyss.

Politicians in America are in something of a quandary. Should they save America (and the world)? Or should they save their political arses? (or "asses" as our American cousins so often say). Many of them decided that saving their arse was more important than saving America. And they may have made the right decision. Because the sad truth is that 700 Billion Dollars just isn't enough! In fact it doesn't even come within coo-ee of being enough. No dear reader, 700 Billion dollars would barely cover the combined Wall Street and Washington annual expense accounts.

Not that I want to sound like a prophet of doom, but I have to say that stopping the Depression with a meager 700 Billion would be like a patient with a liver condition and a urinary tract infection attempting to piss into the teeth of an approaching cyclone. I'd have more chance of bailing out the Titanic with my tea cup, than the Fed would have of bailing out the American economy with a paltry 700 billion dollars. And might I remind you dear reader that the Titanic is already on the bottom of a very deep ocean and my cracked old tea mug is currently full of tea. Though not for much longer!

Currently, there are frantic negotiations underway to insure the passage of the 700 billion bailout. And the president is asking the media to please refrain from referring to it as a bailout!. No sooner had he uttered these words, then media outlets around the world adopted the term. It has now been universally accepted as the correct label for this last-ditch, desperate measure.

One of the little adjustments that was made to the bill, was providing limits on (taxpayer funded) payouts to CEOs. None of the media outlets that ran this item specified exactly what the limit was! Certainly anything greater than zero would be unacceptable!

No doubt when congress decides to "Save America" rather than their arses and the bailout has passed all the necessary legislative and political hurdles, investors and bankers will start to rejoice again. But their joy will be short lived.

<sarcasm> It's a pity that that nice Mr. Bush is going to leave office soon! No doubt he would be able to save America! He'd just exhort investors and consumers to go out and spend their way out of the crisis! Do it for America!, he'd cry. And if that clever Mr. Greenspan was still in charge of the Fed, he'd lower the interest-rate to less than zero, in order to facilitate the rescue. The Fed would actually pay people to take money off them. Not your regular folks mind you! Just those friendly bankers! And America would be saved!. </sarcasm>

I have included sarcasm tags around the last paragraph for readers who are part of the Conservapedia demographic (although it is hardly likely that they would be reading my Elephantine Blog). So for those sarcasm-challenged readers I will explain (slowly) that the Bush administration has, in fact, been catastrophic for the American economy, and have brought the US (and the world) to the brink of Depression ten years earlier than they would otherwise have done. And Greenspan is probably the worst chairman of the Fed ever.

Neverthless, the financial disaster is not really life-threatening. I expect that 98% of us will survive it. And the 2% that don't will mostly die of natural causes. We will have to face the not so difficult dilemma of choosing between the following (mutually exclusive) alternatives.

• Adjust the value of assets downwards by about 50%. Shutup and take our medicine ... or
  
  
• If the Fed keeps on printing more money we will adjust our currencies after the cost of a loaf of bread exceeds a thousand dollars.

It's really just a question of economics. And faced with such a choice, I know which option I would prefer. It's a no-brainer.

Overall there might even be a silver lining in those approaching clouds of Depression. Among them:

• We may have to find alternative ways to transfer money around the world. Perhaps we could talk to the Muslims about this? Although the collapse of the global economy will be very sad for the people who used to make fabulous profits buying and selling money. It will be at least as tragic for them as it was for philosophers several centuries ago, when they could no longer make a good living out of debating how many angels might dance on the point of a needle. No doubt they will find other employment.
  
  
• Many of us may have to find new forms of employment. This applies especially to my own profession, who have ridden the Financial gravy train for many decades. This will create opportunities in training and development of new technologies.
  
  
• There may even be some indirect health benefits. In Australia, we now have the dubious reputation of being the fattest nation on earth. All around the continent, Aussies sitting on their couches, with remote in one hand and a cold frosty in the other can cheer, One more thing we've beaten the Yanks at! With the onset of the Depression, however, we might even reduce our waistlines as well as our wealth and overall consumption.
  
  
• In the face of economic adversity we may even re-discover a sense of community that our grandparents shared. We may even re-discover the value of thrift, which was formerly considered a virtue. Although this may be a far too optimistic and rosy assessment of the human condition.

Alas, although I can face the Depression Elephant with resignation and equanimity, perhaps even a hint of schadenfreude, I cannot say the same thing about the Global Warming Elephant, which fills me with dread.

But more about that later.

References (Further Reading)

• Islamic Banking On The Rise. Strictly speaking Muslims are forbidden to charge interest. Sometimes it seems they can get up to some shenanigans of their own as this Background Briefing Report discusses. So how is the Islamic banking sector faring?
  
  
• The Masters Of The Universe Have Left New York, according to Tom Woolfe in this OP-ED in the New York Times. Were the rats deserting a sinking ship?