Buongiorno specie al mio preferito!

In ’89 the Berlin Wall fell, supposedly at least placing some doubt as to the wisdom of centrally planned/command economy running. Yet within 2 years, the intellectual juggernaut “It’s THE Economy, Stupid” was(and still is) sweeping our nation. My point is, isn’t it really “the economies,” and doesn’t our political trend of thinking of ‘them’ as an ‘it’ lead us away from understanding, not towards? I know that painting our economies as ‘The’ Economy serves a political purpose, but does it serve the tribe’s purposes? The political purpose is, if entities seek ever more centralized power(for better or worse)over the tribe, then they have a conceptually easier task of convincing us all that they are capable of controlling an ‘it’ rather than a ‘them.’ “ Are they an it?” is a fundamental question. Our nation has decided ‘yes’, for the worse I believe.

Consider all the counter examples. Consider the Sears Tower, in Chicago. ‘It’ is not really ‘a’ tower, it is a side by side stacked bundle of towers, more like a ‘cable’ than a ‘rod’. ‘It’ is strong precisely because it is not one thing. “ United we stand, divided we fall?” Sure thing, but it is not “United It Stands, Divided It falls.”

We talk about ‘the weather’, but not ‘the weather of the entire USA’ ,else, what is ‘the’ temperature of the USA right now? Let’s let the folks in Alaska and Florida duke that one out. Ditto ‘economies’. Ask someone who is today selling either ‘guns’ or ‘wallsafes’ about ‘the state’ of ‘the economy.’

The real villain of the current Perfect Storm has been AllOurEggsInOneBasket. Not just monopolies – we are reasonably vigilant about monopolies(except all those that are today ‘too big to let fail…”) – but rather, monopolies with guns. We are totally blind to them. SEC Exempt FNMA/GSEs were just used/abused to overcome more stricter state banking/lending regulations, to impose a OneSizeFitsAll singlular experiment on the entire nation. Instead of 50 experiments in parallel, our imbalanced federalism attempted to impose a single point of failure experiment on the entire nation. If FNMA had been just as large, but been ten independently run and managed experiments, or better still, 50 state experiments, then the crash and burn failure of any one of them would barely have made it past P8 of the local paper. Instead, they managed to touch nearly every mortgage and as well, nearly every portfolio in the nation, when their Perfect Storm singular experiment went awry.

How did it go awry? It was a Perfect Storm confluence of greed all around and well meaning public policy, but the former required the latter to have the impact it did. Think about it—who was going to say ‘no’ to all the tear-off credit, while the bubble was still inflating? Not FNMA – it was their stated policy to maximize home ownership across the broadest economic spectrum, which is a fancy way of saying, hand out tear-off credit to poor folks and get around the 20% down and other conventional banking conventions. Not CountryWide. Heck, along with FNMA, they were doing “God’s Work” when they were raking in all those millions. And certainly not the folks getting the tear-off credit. So, who was left to say ‘no?’ We really don’t have a ‘Czar of the Economy’, not even Greenspan. Plenty of folks were waving the red flag – while the bubble was inflating. However, if any one of them had been effectively able to ‘say no’, then they would have been redline painted as a meanie for keeping poor folks out of the party – while the bubble was inflating. But think of what ‘we’ – as a Perfect Storm confluence of greed all around and good intentions – did. We deliberately shepherded that segment of our population least able to bear the title “last investors into the bubble” into precisely that role. Some, motivated by ‘good intentions’, and some, motivated by greed(to keep the bubble inflating, by broadening out the market.) But locked, arm in arm, in a massive singlepointoffailure social experiment, and now we are deep into the ‘they did it!’ part of the festivities.

The villain was ‘monopolists with guns.’ Single Point of failure. One Size Fits All. All our eggs in one basket. Rampant out of control ‘imbalanced federalism.’ In this instance, the imbalanced federalists were not content with the proper role of the federal government, which is, enforcing fair housing and lending practices, and prosecuting actual instances of violations, to ‘regulate the marketplaces.’ By their own admission, that was ‘too difficult’ to enforce on an actual instance basis, so they switched instead to a scheme based on targeting broad (OneSizeFitsAll instances) demographic outcome numbers, period, and set as an overriding banking ‘standard’ simply the total number of loans issued to folks in a given income bracket(!), conventional banking practices be damned. The use/abuse of FNMA to override more stricter state banking regulations was seen as ‘critically important’ in achieving those goals. Ironically, the federalists are now claiming ‘not enough regulation,’ and are proposing as a solution to our national house fire that we call in the arsonists who started the fire.

The securitization of mortgages into marketable bags of chopped salad could also not have occurred without the monopolists with guns. The ‘backwash credit’ window – (our endemic trade imbalance trying to flow back into the US as credit/investment all these decades) – has been the not so secret buoyant force in our previously gravity defying economies. Desperate to find risk taking/beast building capitalists yet breathing in the US in which to invest, instead they found ever more carcass carving capitalists. My Ivy League brethren sprint to Wall Street from where to launch a career staring at the scoreboard and betting on the game using OPM, with no skin in the game. From there, they go to K-Street to glom onto the guns of government and keep the CronyFest on the Potomac flowing smoothly. A connected at the hip Wall Street/K-Street Klan of Cronies makes sure of one thing, and that is, that the Masters of the Universe CronyFest is fully funded, and that thing, that so far soft fascism, is what used/abused the guns of government to foist those chopped bags of mortgage salad onto the free for all previously going on at the backwash credit window. Though, Perfect Storm, it turns out some of those bags of chopped salad have an indeterminate amount of defaulting/deflating bubble E.Coli in them, and so the backwash credit window slowed down considerably and those backwash credit dollars flowed elsewhere, into commodities, oil. China literally just sat on a ton of US dollars, because of a dearth of real investment opportunities in our climate. When the backwash credit window tightened, that left our own domestic investment banks sitting on massive inventories of chopped salad bags for which there was suddenly no longer any market any where. As banks stared across the table at each other, knowing full well that each other were holding E.Coli tainted bags of chopped mortgage salad, interbank credit froze as well. And, into that mess have rushed the monopolists with guns, recognizing full well that the crisis at hand is the future of monopolists with guns, running ‘the’ Economy for them and their crony connected special interest friends.

Meanwhile, a nation of 300,000,000 mostly bewildered folks simply hope that the mob really hasn’t taken over the country.

JFK’s entire federal budget was about $100B. In order to try and save some singular thing called ‘THE ECONOMY’, our current tribal CronyFest Masters of the Universe just handed over $300B to a single entity, AIG. A dollar is not a dollar(precisely because of the CronyFest), but that is still almost 10% of the current federal budget handed over to a single entity. What happened to FDR ‘saving capitalism’ – by implementing ‘mixed economies?’ Isn’t the very first thing in the ‘mixed economies’ List of Things To Do “Be wary of monopolies too big to let fail?”

We can’t call what has been going on capitalism. And what little capitalism remains in this nation is of the carcass carving variety, not the beast building variety. I don’t even think we can call it socialism. Some try to dress it up and call it ‘corporatism’, but it is most closely fascism, and even if it is so far a soft, mostly polite fascism, it is still a cozy melding of the guns of government with powerful special interests/mobs. We’ve unfettered our state, and just like in Germany in the 20s, under financial stress, we are screaming to unfetter it even more, even as the state itself and its massively single point of failure experiments cause the very economic stress driving this latest madness of crowds. We are witnessing … collective widespread insanity.

The chairman of FedExp “FredEx” – recently pointed something out in the WSJ. He employs a ton of people. FedExp is the #2 consumer of energy in the world, behind the US Military. They buy a ton of airplanes, like 777s from Boeing. Trucks, equipment, etc. Recently, he went to Boeing to buy 777s, and would have bought even more, except for what are ‘reasonable’ leverage rules of thumb; the folks on Wall Street get nervous when a brick and mortar beast building capitalist tries to borrow more than 15% of asset value. That is a ‘sound’ limit on credit. And yet, if “FredEx” was in the financial industry – if FredExp was involved in pushing value-proxies around, period -- he could routinely leverage out to 5000% of asset value.

???

Apparently, it’s good to write the leverage rules. But, who do they serve, and towards what ends? We can’t all be staring at the scoreboard and betting on the game. Somebody in our economies has to be willing to take risk and put their own skin into the game of building the future, aka, beast building capitalism. A massive once beast can tolerate some amount of carcass carving. A massive once beast can tolerate some amount of parasitism. A massive once beast can tolerate some amount of Anything Goes. But not an infinite amount, and only some, right up until the moment that the bones are beginning to show. And then what?

Well, in our case, we start to make noises about ‘redistribution of wealth,’ and we lurch left. We must believe, or there must be a theory floating around, that risk takers just can’t help themselves. And yet, when the Masters of Running the Economy Universe throw a trillion or two of tear-off credit borrowed OPM/debt at a problem caused by tear-off credit debt and then “The Economy” still circles the drain, they surely can’t blame themselves/Economy Running. No, they have to blame ‘the banks.’ The banks, they say, aren’t lending. It’s the banks fault. And I say, nonsense.

It turns out that loans, like education, are primarily taken, not given. They are both at most well offered. I had no trouble re-upping my largely unused business LOC last month, and interest rates are really low. I get hit daily with incantations begging me to borrow money. 500,000 at 0.5% for 36 months? Unreal, and yet yikes. And yet, I’m saying, “Not in this environment.” And lots of folks are saying “Not in this environment.” I don’t normally use a lot of credit, but I am certainly not incentified in this environment to take on any future business risk based on borrowing or credit. Not until this nation backs away from its imbalanced federalism, and devolves all of that out of control centralized power running amok on Wall Street and K-Street.

All of the above is noise, because as we speak, the nation is sprinting towards increasingly imbalanced federalism and even globalism. It’s not at all clear to me that is the right direction, based on how we got to this point, or even, based on an even cursory look at examples from the Universe of ‘strong’ systems of systems.

Restore balanced federalism -- which should be redundant. Devolve concentrated, single point of failure, monopolistic power. Especially, monopolists with guns. It's how we got here.

reguarda,
Frediano