Fat Cats Belly Up to the Bailout Bar Again

Now it’s American Insurance Group, worlds largest insurance company, back at the Bailout Bar to knock down a few more for the road. Altogether, $150 billion will be ‘invested’ in another craven, irresponsible, corporate welfare cheat.

Just for a little perspective, $23 billion would end hunger in the world. We’re always too poor to lay out the bucks to rescue dispensable little people from hunger, the ultimate deprivation, but always have the wherewithal to help mendacious corporations in their hour of need.

I don’t know about anybody else out there but if I were going to shell out $150 billion dollars of my hard earned dough, I’d want to have a say in how that money was used. As of now there are, in effect, no hard-wired restrictions on how the bailout money is being spent. Some recipient banks are using their freebies to purchase other banks, others are buying treasury bills when the bailout money was supposed to go for loaning. A full 10% of the money will wind up going for the same immense bonuses to top execs as before they lined up for the government dole.

Now General Motors is taking its turn showing up at congress with its begging bowl. If any corporation were allowed to fail it should be GM. Car manufacturing in America should continue but GM should be left to an ignominious death. Not saying Ford and Chrysler are that much better, but GM especially deserves the axe for the burial of its electric car, the EV1. I won’t repeat the whole sordid story; suffice to say that GM went through great lengths to get the few electric cars it did produce – by California government mandate – off the road, including refusing money from leaseholders who, at the end of the leases, begged GM to let them buy them.

Along with the other car companies, the labor unions and members of congress from auto producing states, they lobbied hard to prevent increased mileage standards. As a result, vehicles kept getting bigger and more destructive of the earth in the process. They ignored more efficient hybrid technologies for as long as they could, while concentrating on designing new gas-guzzling behemoths. They blew off trying to build better quality, longer lasting cars so they could concentrate on bigger profits and ever more insane compensation levels for top management.

Why is it a Japanese car will still be going strong at 200,000 miles while an American car is ready for the scrap heap at 150,000? Is it because American CEO’s are paid so much more than their Japanese counterparts? Japanese CEO’s earn about 11 times the average pay of their workers while American CEO’s earn upwards of 400 times.

Without a change in corporate culture and governance, the bailout babies will revert to the same stupid, greedy focus on immediate profits that caused them to falter in the first place. At the present time, corporations are forbidden to take the needs of society into account. They are literally prohibited from being good corporate citizens if that action impacts on shareholder value.

Take the case of Ben and Jerry’s. The two entrepreneurs wanted to earn a profit and manufacture a quality product as most firms would, but they also felt strongly about creating a healthy workplace for their employees and a cooperative atmosphere with their suppliers: one happy family. As a private company this was no problem, Ben and Jerry could run it as they saw fit.

But then grow or die reared its ugly head. You know, the idea, which totally defies logic, that a company that isn’t growing must be dying. What is so hard to comprehend about a company earning the same healthy profit year after year? But B and J got caught up in the growth mantra and decided becoming a public company would allow them to expand their products and good ideas to a wider sphere.

Big mistake. Once you have stockholders their well-being is the only consideration you are allowed: it’s not written into law, you’ll just get sued if you don’t put them first. Once B and J was public a multinational pounced with an offer to buy the company that could not be refused on any altruistic grounds else the certainty of that aforementioned suit.

The lamest of all presidential ducks has now taken to defending capitalism itself, pleading with the world not to try to regulate too much. Somehow the regurgitant coming out of his mouth is sounding a little hollow. If unbridled capitalism is so great, why not follow its own precepts and let poorly run companies die?

The big three automakers should be allowed to go bankrupt.

The hard assets could then be purchased by the government for creating new companies with the common good written into their charters. Once back on their feet, shares could be sold to the public but the government should keep a controlling interest. Capitalist purists will tell you that the government can’t effectively run a giant corporation, but what could possibly be worse than what current management has done?

It is sickening and disheartening seeing trillions of dollars spent feeding the wealthy and superwealthy while there is so much dire need in the world; it is truly painful to watch. Worse yet is knowing that money will not meet its objectives. The world economy is going down regardless; all that those trillions will do is let the fat cats breathe a little easier in the knowledge that their exorbitant compensation packages are intact.

Ultimately, it makes no sense whatever to provide that largesse to the very same people following the same economic beliefs that caused the problem in the first place.

Bush Nightmare Almost Over

Though his misunderestimated legacy will live on to haunt the American polity for a painfully long time and we’ll no longer find grim humor in his stupendous ineptitude and mendacity, his Reign of Error is thankfully nearly over.

Our man Obama has triumphed. The popular vote was closer than I expected but the electoral vote was so lopsided no amount of Repug voter suppression or thievery could’ve changed the outcome.

And history was made with America electing its first multi-racial president. I phrased it that way since in fact, he’s not really black anymore than he’s white. Being any part black is considered a taint, which goes to show how far there still is to go regarding race. If you contrast American blacks with Africans, it’s clear that the vast majority of African-Americans have a good deal of white, or other races, mixed in.

As someone who picketed Woolworth’s in 1960 because of its segregated southern lunch counters, to see a person of color in the White House is breathtaking. Maybe it should now be painted a nice shade of tan and called the Off White House.

Interestingly, in Thailand, which is about 15% Chinese, people of mixed heritage refer to themselves as Chinese as a matter of preference.

At any rate, our man of the moment will have his work cut out for him. His biggest challenge will be to keep people from losing their faith when things don’t magically turn around overnight. FDR brought hope to America, not to mention make-work jobs and food on the table, but the economy remained in the doldrums for years.

A president with heart can keep people going through extremely difficult times, hopefully transformational times, but will not be able to resurrect the endless growth paradigm. No amount of fiscal stimulus, whether in tax cuts, infrastructure investment or corporate welfare, is going to bring back the old free wheeling economy. (By the time it might be theoretically possible again, four or five years down the line, the world will be entering resource scarcity mode.)

Nor should it. Starting back in the 1950’s and ‘60’s when mechanization of industry – then called automation – was allowing businesses to increase production with fewer workers, there was talk of people working less and having more time for family, community, life. That did not sit well with the business community since it meant workers would also have less income and reduced ability to consume.

Instead of a more social world where people worked less and had more time for leisure, working hours lengthened to the point where Americans recently were working 200 more hours per year than back in the ‘70’s. This movement came partly as a result of trickle down economic policy. As mentioned recently, putting a lot of money in the hands of the wealthy results in the bidding up of prices for many necessities, especially housing. As costs rise, average Joe’s are forced to work more to get by. In the midst of all the recent booms, large numbers of people were forced to work more than one job just to survive and most families had to have multiple wage earners.

Of course, it wasn’t just survival; we also entered consumption mode, later to intensify into hyper-consumption. Much of the extra work went for four dollar lattes, 60 inch TV’s and the many other accouterments of the ‘good life’. If you didn’t have the ready cash for all those good things, you could always borrow it on your credit card (at very high interest rates). With the people at the top having so much surplus money to ‘invest’, they made it easy for people to get into debt.

Rather than engaging in frantic and futile efforts to resuscitate the old economy - and engendering huge amounts of new debt in the process - we need to create a new economy. We will need to spend heavily to insure that necessities are provided for - homes to live in, food to eat - but well-being needs to replace consumption as the primary goal. To that end, the work week needs to be shortened to spread scarce jobs, as well as provide the leisure time that Americans have been so sorely lacking. Europeans, in contrast, are guaranteed four weeks paid vacation per year with many countries mandating more.

That change would be impossible without universal health care that is provided outside the current employer-based system. The current system encourages the opposite - fewer employees working increased hours. With the government taking health care costs out of the equation, people and jobs would both be more flexible. Americans could go on about working to live rather than living to work.

Of course, I’m being unbelievably, unrealistically utopian. Have you ever heard a Dem, let alone a Repug, speak of building a stable, sustainable, light-on-the-earth economy? Of shrinking the economic sphere so people could work less and enjoy life more? Unthinkable. Yet, it’s the only way that makes sense.

One of the greatest times of my life came when I had the least money. I did the authentic hippie commune thing back in the early ‘70’s. At one point I calculated that 35 of us were living on about $600 per month, in total. We had no electricity or flush toilets, very limited piped water, all cooking and heating was from wood we had gathered. We bought 50 lb. sacks of rice, kerosene by the barrel for our lamps: We lived simply.

Yet it was also one of the healthiest, happiest, easiest and most enriching times of my life. We never went hungry, though often didn’t have all the variety we would’ve wanted. Meanwhile, our diet was probably a lot healthier than one we would’ve preferred: you know, brown rice and veggies most of the time.

We had no electricity for stereos or TV’s so we had to make our own music. We conversed, meditated, communed with nature to fill our time. I was apprehensive about living without modern conveniences before going to live there. The realization of how unimportant those things are was almost instantaneous upon arrival.

We lived in a beautiful spot. It wasn’t special compared to a lot of places, but we did have forests, gardens, clean fresh air, a mountain view, a swimming hole with clear, clean mountain water for those hot summer days; really, all one could ask for.

We had work to do - but not jobs, except for occasional off site work like fire fighting and brush clearing - and lots of leisure time. It took very little actual work to keep the community going, no more than 10 or 15 hours per week per adult.

I’m not saying everyone should go primitive as we did. Only that living on a lot less doesn’t necessarily mean living less. Truly, no amount of money could’ve bought a healthier, more enlightened lifestyle.

Our goal needs to be well-being, not to get the economy back on track. Growth is not what we want unless it’s intellectual, social, spiritual. The more money spent trying to prime the old economy for a renewed growth cycle, the harder and longer the transition will be to the new way of life.

Political Climate Change

Conventional Wisdom will insist that launching universal health care in America is out of the question in light of the financial meltdown. On the contrary, this is not only a good time to do it but society will literally have no choice.

Fifteen percent of Americans currently lack health insurance, another 30% are underinsured - large numbers of people who’ve been declaring bankruptcy for medical reasons actually had insurance but were buried in co-pays. A friend who came down with breast cancer who had reasonably good insurance had to come up $18,000 in co-pays for her treatments.

When large numbers of people become unemployed they will also lose their medical coverage. Concurrently, many employers, taking drastic measures to try to cut costs and remain in business, will reduce or eliminate insurance.

The current system will begin to go on life support, leading to a total breakdown. Government rescue will be imperative; action will also be essential from the standpoint of needing to cut costs on a systemwide basis. In spite of the many uninsured and underinsured in the states, per capita medical costs are consistently higher than in Europe; nearly double that of the UK. The current system will simply become unaffordable.

Change will also come from falling property prices: after the dust settles from the financial crash, that will turn out to be blessing for the bottom half of society. Once people have eaten their losses, both imaginary – when a way overpriced property goes down to a rational level it feels like a loss to the individual involved but it’s really just a reality check - and real – people are loosing their homes - housing will become much more affordable. In the process of throwing money at the wealthy - the economic imperative of the last 30 years - prices of many things have gone up, but especially in housing. Many Americans have been struggling to pay the rent for years; falling prices will provide some respite.

It was recently said that housing is still 10 to 15% overpriced, but that was based on the heady levels of artificially inflated neo-con economic irrationality. Thought of in the context of very high unemployment and general economic hardship, prices have to go down a lot more than that.

The punditry talks about the inevitability of boom and bust cycles: They are not inevitable. Ups and downs can not be avoided, but booms and busts are only part of the picture because of warped economic paradigms. Were subprime mortgages inevitable? Only because public policy made them so. If prevailing economic wisdom dictates that a government must do all in its power to maintain growth then there will certainly be extreme ups and downs.

The more frantically a government tries to push the economy upward, the more likely a serious crash on the downside, even though it may take a while. And it’s not like there’s no financial or monetary consequence when vast sums of money are expended on (ultimately futile) rescue and stimulus plans.

On the other hand, if the goal is long term stability and sustainability in a context of minimum income disparity (and no superwealthy) where every citizen has work to do and a home to live in, then there’ll never be another crash. The problem revolves around manic desire for growth.

Take Japan and Europe, for instance: There is constant lament over the very low growth rates they’ve been experiencing for a long time. But look more closely and you see mature and aging societies with stable or sometimes even declining populations.

Those kinds of societies have no reason to grow. Older people need and consume less with the exception of medical care. There’s no need to build a lot of new residential, commercial or government buildings in a stable population, only upkeep and a small amount of replacement is necessary. Infrastructure is largely in place, only maintenance is needed.

There is absolutely no reason for them to grow unless that growth involves societal advancements like renewable energy and conservation, more efficient transport, better educational and cultural opportunities; things that actually improve life and the environment. America needs some growth to provide for increasing population - entirely the result of immigration - and possibly to correct for extreme disparity in wealth, but to borrow and spend, to consume for its own sake - like building giant houses in the exurbs and manufacturing monster SUV’s to access those far flung mcmansions - is totally unnecessary, destructive and stupid.

Most important of all, now is not the time to pull back on tackling climate change because we somehow now can’t afford to. The extremely modest goals the world has set for itself will already have no impact whatever on the problem. They are only a start on a change of consciousness that will hopefully evolve into real progress on the matter; a change in thinking that might actually someday save the planet. The work that needs to be done to tackle the problem of global warming is the only kind of growth that makes sense.

The world cannot continue to increase its population and consumption and still survive. Fixation on growth must change. It is a theoretical impossibility that is nonetheless embraced by nearly all Serious thinkers and Important people.

The worldwide economic crash provides the opportunity to settle into a new, sustainable, lightly-living lifestyle; however, I am not optimistic. No matter how badly the Establishment has fucked up the world, they will insist that their way is the only way to right it; obviously a ridiculously inane conclusion.

Many people over the world are going to suffer tremendously from this man-made disaster, we can only hope against hope it isn’t totally in vain.

It may even be possible that the poor, who have not existed in American political discourse since Reagan, will actually have their needs considered again. If that does happen it’ll only be because a lot of formerly middle class people find themselves heading towards the bottom.

Meanwhile we can try to suspend our disbelief that the feckless, spineless, close to worthless Democratic Party will somehow find the will to do at least some permanent good – like universal health care, regulation of the financial sector and building of sorely needed infrastructure. The Dems haven’t had a leader with the guts to stand for anything for a long time. Will Obama stand up to the plate, play that role, come through for America and the world?

Economic Meltdown Next

Alan Greenspan now says nobody could’ve predicted the scale of the current banking meltdown. Meanwhile, the Maestro, as he once was called, who guided the economy with a “magic touch” during his long tenure blithely ignored every indicator that trouble was brewing. He is correct, of course; nothing like this has happened since 1929, and moreover, probably wouldn’t have happened if the banking reforms put into place in response to that calamity hadn’t been eviscerated ten years ago under Clinton’s watch.

For certain, everybody who didn’t have a personal vested interest in being optimistic, was pointing out extreme imbalances and deficiencies in the economy that were likely to have serious, if not necessarily catastrophic, consequences. People involved in reporting on and opining about the business news invariably own stocks and are totally sold into the conventional wisdom so unconsciously project optimism in their reporting. You know: “All we need is a few trillion dollars to bail out the banks and they’ll start trusting each other and then they’ll start lending as before and people will be borrowing just as in the past and in a couple of quarters the world economy will be back on track.”

They also assure us that we can’t have another Great Depression because we ‘responded’ quickly with huge bailouts and because there are now programs in place to protect individuals from the extreme deprivations of the thirties. As to the latter: Thank God for small miracles; people will at least have something, small as it may be – I get $600 month in Social Security; how far will that get you in America? - to help negotiate the hard times.

The bailout may have led bankers to feel a lot better about themselves and the security of their exorbitant pay, but even if it was enough to get them loaning money again, not many will want to borrow.

Let’s face it, anybody with half a working brain cell who isn’t part of the wealthy elite, is hoarding their resources, saving for a rainy day, learning how to get by on less (if not yet, then soon). That being the case, industrial production will plummet, housing construction will grind to a halt, any business that depends on discretionary spending - restaurants, etc – will see their profit margins reduced to the bone, governments will be starved for revenue and be forced to cut back on services… you get the picture.

There’s no going back to bubble-like days of prosperity predicated on figmentary money created out of whole cloth or based on borrowing from the future. Recent precipitous falls on world stock markets show that investors are catching on that this is not a temporary detour on a strong upward economic path; a mere glitch in the endless growth paradigm.

This is going to hurt, as well it should. Americans, amongst all the world’s rich peoples, have been living beyond their means and the ability of the earth to provide for their insatiable appetites. It had to come to an end. For sure, it would’ve been a lot smarter and easier and more sensible to gradually transition to a more stable, sustainable lifestyle, but there’s nothing in the world, that is, no amount of reason or logic, that could’ve stopped this juggernaut from destroying itself in an orgy of excessiveness and exuberant irrationality.

Thankfully the entire neo-con, unfettered free market, trickle down economic regime is crashing and burning after a long and bruising binge… while also leaving a hangover that has created a monumental headache for the world.

Europe is closer to getting the message than the US. When the former bought stakes in tottering banks they took voting power, in some cases, voting control of the institutions. America purposely took no voting rights: I guess that would be too much like socialism to take control over institutions that you’ve just showered with Joe Sixpack’s money. Bush and the Democratic Congress wanted to preserve the ‘Free Market’.

The American economy is going to languish in the doldrums for a long time. I’m hoping against hope it’ll emerge in an entirely new and sustainable context. With oil prices hitting rock bottom this is our last chance to convert at a reasonable cost. Petroleum won’t stay cheap for long. World population is growing along with their aspirations. If China’s growth slows to half last year’s pace there’ll still be millions of new cars on their roads every year. Electricity demand in lowly Cambodia, currently supplied 90% by fossil fuel, is growing at 25% a year in spite of 80% of its people not even being connected yet.

There’ll need to be massive New Deal type public works programs and welfare – that dirty word - for the destitute and people simply experiencing hard times. There’ll need to be a sharing of available private-sector jobs else unemployment really will approach Depression era levels. There’ll need to be publicly financed mortgages for low income people. And there’ll need to be higher taxes on everyone but the poorest else public debt become an unsustainable burden and public works be impossible to finance. Let’s not forget that America experienced some of its most prosperous times during the fifties and sixties when income tax rates on the wealthy stood at 91%.

As most of you reading this I’m hopeful that Obama will rise to the occasion. That he will bring the country together in a way that takes the hardest edge off of hardscrabble times. In no manner will it be easy, but at least he won’t emulate Hoover saying giving food to hungry Americans will hurt their self-reliance.

For certain, dynamic and fascinating times are ahead.

Slavering at the Public Coffers

In the latest twist to the sordid saga of hat-in-hand bankers slavering at the public coffers, central banks in England, France and Germany, for starters, are now guaranteeing loans between banks. According to conventional economic wisdom - the very same ‘wisdom’ that got us into this mess, I might add – if banks can’t lend to each other, they won’t have the money to lend to Average Joe, or his corner candy store, so he and small business, will, in turn, suffer.

There’s good reason they won’t lend to each other; they’re deathly afraid of not getting paid back since they know how many of their compatriots are teetering at the brink of the chasm. If that’s the case, and we undoubtedly know it is, then the governments involved may be liable for immense losses. This also may encourage the banks - not noted for being prudent or responsible - to borrow recklessly, knowing Joe will foot the bill in case of default.

This all brings me back to the question: Then what the hell are they doing with my deposits? That isn’t money to lend? Well, best I can make of it, econ 101 style, is that to maximize profits money has to be constantly in use; no idle times are allowed. As a result, capital needs are calculated down to the minute, so they essentially need emergency loans the get through many a day. They may also have more business than they have capital for so borrow from other banks to maximize their portfolios.

So what if they can’t lend to each other. That will not have any impact on their solvency, only their profitability. They simply won’t have as much to lend and people will have to wait a bit or defer their borrowing. All of which brings this down to the second question: What’s the big deal if Joe has to save the money to buy that 60” digital TV? Or wait till he has a substantial down payment before he can buy a new car? Is that suffering? He’s already drowning in tidal waves of high interest, credit card debt. And it does, after all, cost a lot more when bought on credit.

As for small business, banks are not the only source of working capital. It would seem to me that anyone with a viable company ought to be able to get private short-term money to tide them over cash flow problems. If they have to cut back temporarily, well, nearly everybody will so no great hardship.

The endless growth machine is not going to be jump-started or even restarted and besides, it is long past time for a paradigm shift. The world is drowning in pollution from excessive consumption. It wouldn’t hurt a bit for Americans, for only one nation of many, to retrench and start saving for the things they want.

Ah but the frantic scrambling on the part of governments to bail the banks is also designed to “calm” and “provide stability” to the markets. Now that a majority of Americans, when Investment Retirement Accounts are included, own stocks, it becomes a government priority to prop up the stock markets.

But stock markets, however much we hope and pray and cross our fingers that they will always go up, are not supposed to be propped up. They are supposed to represent true value. In an overpriced market we should be applauding, and playing happy music when markets go down, not when they go up.

Latest word is the US treasury is going to take stakes in nine major US banks including the likes of Citibank and Bank of America. The list also includes Morgan Stanley, et al, latter day Mom and Pop banks which in their previous incarnation were investment banks designed exclusively to help the wealthy play with their money. Once they realized how bankrupt they were they begged the Fed to make them just like your average, corner, small town bank and thus be able to join the banker bread line when the public money started to flow.

It should be mentioned that banks were not allowed to cross state borders as late as the sixties. Moreover, banks in Manhattan were not even allowed in other parts of New York state. It was a mistake to let banks expand so exponentially and become so large. Local banks will survive this crisis in far better shape than their multinational counterparts. Maybe once those giant banks are nationalized they should be broken up into smaller units; in this case, able to serve the real needs of the economy rather than concentrate on lascivious speculation.

Once you go down the path of nationalizing banks you also own the bank’s bad debts. In this case, we could be talking about liabilities of catastrophic proportions. As mentioned previously, while the total housing market totals about 10 trillion dollars, the market in derivatives based on that market is 45 trillion dollars. Derivates have no direct connection to the real world they are based on, they are simply bets on what the real world will do. And housing is only a small part of the derivatives market.

Liabilities to the public could be nation bankrupting, as is happening in Iceland, whose banks brought in large amounts of money from around the world to bet on these toxic and inscrutable financial instruments.

There is one good that can come of public ownership of the banks: The public can dictate lending policy. If it deems low income housing important, it’ll get built. Today that money may well go to financing sweat shops in China.

The silver lining, however, will come at a very high price.

The Financial World is Going to Shit Before Our Very Eyes

And it’s all happening so fast. A spark ignited in the US has turned into a world-engulfing wildfire. I was surprised at the ferocity at which it attacked European banks, who I assumed were less insanely greedy while subject to greater public restraint, but it seems they either bought into America’s toxic assets directly or copied the same shenanigans. They’ve also been hit with declining property markets – 16 of the world’s developed nations still have overvalued real estate – resulting in far less equity than they had assumed and the need to hoard resources.

Rising property values create a lot of ready cash. Until the financial system recently began to unravel, largely from declining real estate values, Americans kept their economy humming by borrowing vast amounts of cash against their properties – many of which now have mortgages greater than their house’s value. It would seem totally legitimate to borrow against equity in order to make long-lasting improvements to the house, but a lot of people essentially took out 30 year mortgages for purchases like luxury vehicles that they expected to have a less than a decade lifespan. About five percent of all property changes hands each year so a lot of money is also created simply through a rising market.

Well now, that money spigot has completely dried up. And you can bet that even when the mortgage money does starts to flow again, borrowers will have to come up with hefty down payments; which is exactly as it should be. Obviously, it has ominous portents for the real economy, since Americans will have to live within their means and actually save to be able to consume. While some will say this retrenchment couldn’t come at a worse time, it’s never fun to pay off old debts or cut back on the “Good Life”.

One way or another recession, or the scary “d” word, depression is inevitable. The capitalists are manically, frantically rushing around trying to save their asses with public money, but while they may stave off paralysis or bankruptcy in the banking system, nothing is going to change the fundamentals: the old economy is screwed and finished.

The credit system is currently frozen, banks aren’t lending to each other because they don’t trust each other, they’re afraid they won’t be paid back. However, after six months maybe a year, the money will start to move again and a new economy created from the ashes of the old. Certainly, there’s no way it can ever be the same, at least not for generations.

Thankfully, the US Treasury is moving toward purchasing stakes in troubled banks, as the UK is planning to do, rather than carelessly throwing money at them. As long as they are in some way nationalized people will not fear for their deposits. That should keep most from going under which in the end would cost a lot more than keeping them alive.

Every day it seems a new rescue plan is announced which is supposed to restore confidence in the markets. Each one is touted as the magic bullet that will bring stability and the speedy return of growth and prosperity. Forget it: pure wishful thinking.

The one thing, above all, that needs to change is the endless growth mindset. The entire world economic system is in thrall to a theoretical impossibility. It is unadulterated fantasy which cannot possibly outlive reality. By any sustainable standard, people in the developed world, but especially Americans, have been consuming far too much. Now’s the perfect opportunity to give the planet a rest, to develop an economic philosophy capable of providing a comfortable, if much less profligate, lifestyle.

While I applaud this calamitous economic correction, I don’t in any way wish to downplay its significance for the lower rungs of society: this is going to hurt. But the poor have always suffered, so they will take it in their stride. They haven’t even had more than the barest representation in government for a long time: What politician would ever propose a War on Poverty today? Yet that will be their biggest challenge in the coming years. Increased unemployment benefits, food stamps, general welfare, make work programs: the new New Deal is inevitable.

Meanwhile, even according to a former community organizer, soon to be our next president, the middle class now goes all the way up to $250,000 per year – and need a tax cut in the midst of spectacular deficits. They won’t suffer in the same way but they sure will have their dreams and aspirations severely truncated, not to mention have difficulty supporting their mcmansions and long distance gas-guzzler commutes.

Falling energy prices will provide a little respite but not for long. Within a year or two, China, India and other developing world economies, which will continue to barrel ahead, albeit a bit more slowly, will replace the demand that’s currently dropping in the developed economies. It’s still a finite resource in an expanding world; a world in which growth-forever economics will remain the Gospel.

All in all, it’ll be fun to watch.