We live in Limbo Land. Everything in the news is the same, day after day, so we wonder: have we hit the bottom? Are things really that bad? Things are still the same in Pakistan. And Iraq. And Gaza. Europe still fears summer riots. The US government is still giving money to GM. Unemployment continues to climb. And mortgage defaults keep increasing:
But the world hasn’t ended yet. The four horsemen haven’t shown up to the party. In fact, no one has heard hide nor hair of them for as long as most people remember. Rumor has it they never existed. Malls are still open with their flat, tinkling music. Restaurants are still steaming. Gridlock is ever-present. What’s the deal? If a person didn’t read the news, they could easily not know anything has changed in the last year. Does this mean we’re able to absorb so much more instability than we ever expected? Was Cheney right when he said “deficits don’t matter?”
No, I think people like John Michael Greer have it right when they talk about “The Long Descent.” It’s not going to be abrupt, and civilization won’t disappear overnight. But things will decline steadily, and things won’t return to the way they were before. We’re so used to instant gratification, we don’t even like to wait for our apocalypses. It’s been six months and I haven’t had a single blackout — Armageddon is boring!
I’ll admit, I would like things to happen sooner rather than later, mostly so we don’t end up pushing off our problems to our children’s generation. I would rather face the consequences head-on. Pushing them off in order to compound them later is what we’ve been doing for decades. But there is plenty of time for disaster. In the meantime, there are still a lot of things even the most paranoid person hasn’t done yet to prepare. This summer should be a particularly nice season for gardening. Time to kill the useless lawn? This cycle will last a long while, so we might as well enjoy the beginning of it as well as the end.
Today’s article of doom: if you live in Contra Costa County, sleep soundly knowing due to budget cuts, burglaries, assaults, and thefts will no longer be prosecuted.
Just to put things in perspective, let’s look at the latest figures of money spent “fighting the credit crisis.” Bloomberg puts the figure at $12.8 trillion. Oddly enough, it seems the most concentrated rage of the public has been over AIG bonuses; something Congress even passed a bill on in order to confiscate. Now, while I am just as outraged as anyone that these employees of failed banks are getting millions in bonuses straight from the taxpayer, let’s remember these are only millions. As in one thousandth of a billion, which is itself one thousandth of a trillion. Here is the total money spent on the bailout. Since it’s so massive, each unit represents one billion. In other words, $1.00 on here means one billion (or one thousand million for the numerically illiterate). All the AIG bonuses everyone screamed over was about $170 million, so here it would be represented as $0.17:
— Amounts (Billions)—
Total $12,798.14 $4,169.71
Federal Reserve Total $7,765.64 $1,678.71
Primary Credit Discount $110.74 $61.31
Secondary Credit $0.19 $1.00
Primary dealer and others $147.00 $20.18
ABCP Liquidity $152.11 $6.85
AIG Credit $60.00 $43.19
Net Portfolio CP Funding $1,800.00 $241.31
Maiden Lane (Bear Stearns) $29.50 $28.82
Maiden Lane II (AIG) $22.50 $18.54
Maiden Lane III (AIG) $30.00 $24.04
Term Securities Lending $250.00 $88.55
Term Auction Facility $900.00 $468.59
Securities lending overnight $10.00 $4.41
Term Asset-Backed Loan Facility $900.00 $4.71
Currency Swaps/Other Assets $606.00 $377.87
MMIFF $540.00 $0.00
GSE Debt Purchases $600.00 $50.39
GSE Mortgage-Backed Securities $1,000.00 $236.16
Citigroup Bailout Fed Portion $220.40 $0.00
Bank of America Bailout $87.20 $0.00
Commitment to Buy Treasuries $300.00 $7.50
FDIC Total $2,038.50 $357.50
Public-Private Investment* $500.00 0.00
FDIC Liquidity Guarantees $1,400.00 $316.50
GE $126.00 $41.00
Citigroup Bailout FDIC $10.00 $0.00
Bank of America Bailout FDIC $2.50 $0.00
Treasury Total $2,694.00 $1,833.50
TARP $700.00 $599.50
Tax Break for Banks $29.00 $29.00
Stimulus Package (Bush) $168.00 $168.00
Stimulus II (Obama) $787.00 $787.00
Treasury Exchange Stabilization $50.00 $50.00
Student Loan Purchases $60.00 $0.00
Support for Fannie/Freddie $400.00 $200.00
Line of Credit for FDIC* $500.00 $0.00
HUD Total $300.00 $300.00
Hope for Homeowners FHA $300.00 $300.00
So, about one dollar out of every seventy-five thousand dollars or so went to AIG bonuses. And yet that lone dollar is the only one that’s generated sufficient rage. What about the rest?
The truth is we are such a competitive (and some might say spiteful) group of people, that we’re fighting over the pennies while truckloads of cash are being stolen. It’s the same reason people are upset about bailing out GM. Again, I’m not a fan of bailing out anyone; least of all a company who arrogantly refused to develop fuel-efficient vehicles until the last moment, but the total money given to GM so far is about 18 billion, and another 6 billion for GMAC. So, 24 billion. That’s less than 0.1% of the total bailout money. And mortgage owners who took on too much debt — similar situation. We have 300 billion set aside for that, or 2.3% of the total money spent. Huh? If this whole problem is based upon bad mortgages, why have we only spent 2.3% of the bailout money on the problem?
These three issues are the hot button issues for the public. People hate seeing their neighbor down the street (i.e. peers) getting a good deal on taxpayer money. But when bankers, CEOs, and Wall Street get a good deal multiplied by a factor of a million or so, well, no harm no foul. Those people are invisible to us so it’s not real money, right? I mean… you know… “we gotta do something.” And, “our economy depends on these banks.” And, uh, “credit is the lifeblood of our economy”… right? But my neighbor’s job or house or car or food is subsidized. What a jerk. We’re so easy to bamboozle.
Speaking of subsization and bamboozling, did you know that every time you use the USPS to mail something, you’re subsidizing companies that send you junk mail?
Today’s article of doom: banks will sell their” toxic” (read worthless) assets at the price they determine in a “partnership” deal where the government assumes 93% of the risk.