Institutional Collapse

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Who lived in a pineapple under the sea?

SpongeBob! SquarePants!

Who died in an oil spill because of BP?

SpongeBob! SquarePants!

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http://www.guardian.co.uk/world/2010/may/30/india-heatwave-deaths *I see the climate-crisis massacres are recommencing

*Maybe atmospheric scientists made up all those dead Indians for money, and invented the oil spill, too

http://www.wmo.int/pages/mediacentre/press_releases/pr_869_en.html *Good thing a cold snap on K Street equals a cooler world

9-11, Enron, Iraq, Katrina, mortgage crisis, bailout, euro crisis, climate crisis, oil spill — we’re led by liars and sleepwalkers

Every major event that hits us is a fake, a fraud, a provocation, a panic or an organized denial — never anything we foresaw or averted

We’re way past the point of rationally managing events and into a business and politics of “lemming retention”

*And I’m not even angry — I’m saving my temper for the endless, ugly, Soviet-style ordeal of watching the Gulf Coast drown in tar

- tweets from @bruces (Bruce Sterling)

I’m not in the ‘it’s our (collective) fault’ camp. Yes, it’s impossible to argue that our oil addiction is not at the root of the Gulf disaster. But we, as a civilization, do a lot of things that involve risk – develop drugs, fly aircraft, drill and refine oil – and we have institutions/mechanisms in place that are supposed to mitigate these risks and ensure that there are good plans for when things go pear-shaped. The proximate cause of the Gulf spill (wrapping safety issues, inspection issues, lack or inadequacy of disaster planning into one package) is regulatory capture. Interior’s Minerals Management Service was not doing their job, to put it mildly. To paraphrase, power elites have always been with us, but it seems that in the past 15 years or so the world has gotten tougher to manage, while the (American, at least) power elite, aka Villagers, has become populated by nepotistically placed incompetents. If we’re going to make it through the crisis bottleneck that looms, we need to do better. My suggestions:

  • Go local. Though it’s like trying to change the course of a supertanker by hitting it with a feather, it needs to be done. Garden. Gather. Walk. Find your local farmer’s markets.
  • Learn whats up. One of the most dangerous trends of the past couple of decades has been the complete collapse/capture of the traditional media who are now fluffing power like there’s no tomorrow (with any luck, for many of them there won’t be – see Newsweek). There are people committing acts of journalism – mostly on the web. Seek ‘em out. Look for who can back assertions up with facts.
  • This one may get me in trouble – vote. The government (local, state, federal) is _our_ tool. Although corporations are people (a court decision I’ll never understand), they can’t vote. If your Senator represents Big Oil or Wall Street or the RIAA/MPAA more effectively than s/he represents your interests primary her (if D) or vote him out (if R). Sorry conservatives – if you are firm in your beliefs and honest about what’s going on , it’s third party (and NOT teatardism) for you. Although both parties are well integrated into the oligarchy, one (R) is a bought and paid for subsidiary of corporate power.

I’d love to see full cleanup costs extracted from, and Clean Water Act fines levied against, BP. If that means BP’s US assets are auctioned off and the company ceases to do business in this country, all the better. It would be a salutary lesson for many large entities.

Stupid? Or liars?

I’m afraid I’m starting believe that 1st world institutions – as a whole – are not capable of responding to the oncoming train that is global warming.

It seems mind-numbing, but Sen. Jeff Bingaman (D-N.M.) said snowfall in D.C. has had an effect on policymakers’ attitudes. “It makes it more challenging for folks not taking time to review the scientific arguments,” said Bingaman, chairman of the Energy and Natural Resources Committee.

As the threat of the crisis grows more intense, Congress cannot act. The environmental consequences are likely to be severe and unforgiving. *

Protip for our largely old, white, male, not very bright solons: Weather does not equal climate and the plural of anecdote is not data.

The way things are playing out in Washington doesn’t make me hopeful – here’s John Cole’s accurate analysis of how things work – different topic, but the same dynamic applies (big quote, but read the whole thing. NOW.).

But here is the thing- we can’t do anything about it. I’m sure the House could pass a bill containing a small stipend for Americorps volunteers- in fact, I bet it would get a good bit of support. It might even be very popular with the entire country, as well as being good policy! Likewise, I bet almost all the Democrats and even some Republicans in the Senate would be in favor of passing that bill.

Except the bill would never pass, and I’m surprised James does not recognize that he is operating in a fantasy world. Once the bill hit the Senate, the fun would begin. Even though in the past there were probably numbers of Republicans who supported Americorps, the large majority of them would just flat out say no.

Wanting to negotiate in good faith, having never learned a lesson ever, the Democrats like Baucus and Conrad would slow down the debate to give the Republicans time to participate. Susan Collins and Olympia Snowe would work for a couple weeks with Senate leadership, get a couple things they want in the bill, then sigh and utter their public regrets that they just can not support the bill. Chuck Todd, the Politico, and other dullards in the beltway media would run a few pieces wondering why Obama hasn’t reached out more to moderates. While this is happening, the wurlitzer’s media blitz starts.
First off, we all know who loves Americorp- the Clenis. From there, it is all downhill. Breitbart would seize upon the bill, and claim that the anonymous stipend is just President Obama seeking to pay off his campaign volunteers- just like the KHMER ROUGE, POL POT, STALIN, AND DUVALIER! They would find some innocuous aspect of Americorps and turn it into something that is no doubt worse than Hitler.

The subservient GOP drones in the blogs would pick up everything Breitbart has said. Instapundit and Reason magazine would wake from their glibertarian slumber to denounce this “vast, wasteful expansion of government.” The Fonzi of Freedom, Nick Gillespie, would make fifty idiotic web videos decrying the bill, in between appearances on Fox News and penning stupid op-eds with Matt Welch in the NY Post. Pete Suderman and Megan McCardle would exchange links to each other, giving us all an eye into the steamy world of glibertarian pillow talk. Welch would do his own part, pointing out that the French have something very similar to Americorps, and he really enjoyed their services while he and his wife were in France, but now that they are here in America and rake in enough money that they don’t need those services, he will loudly and in the most smug manner possible oppose Americorps. Also, he is still pissed that his car was not accepted for Cash for Clunkers.

Malkin would start printing the addresses of Americorps volunteers, and would have her internet sleuths post a facebook picture of an Americorps worker drunk four years ago while in college. By this time, the noise machine is in full swing, and Rush, Glenn Beck, Hannity, the Heritage Foundation, the rest of the Koch funded “think tanks,” Fox News, the NY Post and the Washington Examiner, the NR, and the Weekly Standard and the other wingnut welfare publications would all embark on another disinformation campaign. *

Chris Hedges says something I think is true: it’s getting to be time to turn our backs on globalized capitalism – eschew WallyMart, expand the garden, raise a pig, redouble efforts to buy local – and transition to a simultaneously backyard (most physical feeds) and world-spanning (network infoculture) mode. Direct opposition can’t be the main approach; power/media/system ju-jitsu is called for.

All resistance must recognize that the body politic and global capitalism are dead. We should stop wasting energy trying to reform or appeal to it. This does not mean the end of resistance, but it does mean very different forms of resistance. It means turning our energies toward building sustainable communities to weather the coming crisis, since we will be unable to survive and resist without a cooperative effort. These communities, if they retreat into a pure survivalist mode without linking themselves to the concentric circles of the wider community, the state and the planet, will become as morally and spiritually bankrupt as the corporate forces arrayed against us. All infrastructures we build, like the monasteries in the Middle Ages, should seek to keep alive the intellectual and artistic traditions that make a civil society, humanism and the common good possible. Access to parcels of agricultural land will be paramount. We will have to grasp, as the medieval monks did, that we cannot alter the larger culture around us, at least in the short term, but we may be able to retain the moral codes and culture for generations beyond ours. *

(See here for another good Hedges post – this on the bankruptcy of traditional media: “The symbiotic relationship between the press and the power elite worked for nearly a century. It worked as long as our power elite, no matter how ruthless or insensitive, was competent. But once our power elite became incompetent and morally bankrupt, the press, along with the power elite, lost its final vestige of credibility. The press became, as seen in the Iraq war and the aftermath of the financial upheavals, a class of courtiers. The press, which has always written and spoken from presuppositions and principles that reflect the elite consensus, now peddles a consensus that is flagrantly artificial.”)

On a slightly brighter note, I’m reading Bruce Sterling’s The Caryatids. Reviews on Amazon are, to put it mildly, mixed; at approximately 1/3 of the way in, I’m enjoying it, perhaps because I find any post-onset-of-climate-crisis future where we’ve managed to retain some cultural continuity comforting. Based on the mixed reaction, you may want to use your local library or, if you follow @bruces, he twote a link to a pirate copy. Lest you think Caryatids is all sweetness and light, both major characters we’ve been introduced to so far have lost most of their families to violence in the starvation, food riots, disease and chaos as the climate crisis ramped up..

Collapse links

Something to cheer us all up on a Saturday morning. First up, Dmitri Orlov’s Social Collapse Best Practices (a talk to the Long Now Foundation – audio and video ava).

If you still have a job, or if you still have some savings, what do you do with all the money? The obvious answer is, build up inventory. The money will be worthless, but a box of bronze nails will still be a box of bronze nails. Buy and stockpile useful stuff, especially stuff that can be used to create various kinds of alternative systems for growing food, providing shelter, and providing transportation. If you don’t own a patch of dirt free and clear where you can stockpile stuff, then you can rent a storage container, pay it a few years forward, and just sit on it until reality kicks in again and there is something useful for you to do with it. Some of you may be frightened by the future I just described, and rightly so. There is nothing any of us can do to change the path we are on: it is a huge system with tremendous inertia, and trying to change its path is like trying to change the path of a hurricane. What we can do is prepare ourselves, and each other, mostly by changing our expectations, our preferences, and scaling down our needs.

Something that I don’t see discussed enough is what a severe downturn (or depression or collapse, as we run up the intensity scale) means for social order. The last big bust didn’t exactly bring out the best in a lot of people – I don’t think it’s reasonable to expect folks to just accept being dealt a bad hand in a crooked game (mmm – long pork!). I don’t read Salon much any more, but this article – We’re on the brink of disaster – caught my eye.

Take China. So far, the authorities have managed to control individual “mass incidents,” preventing them from coalescing into something larger. But in a country with a more than 2,000-year history of vast millenarian uprisings, the risk of such escalation has to be on the minds of every Chinese leader.

On Feb. 2, a top Chinese party official, Chen Xiwen, announced that, in the last few months of 2008 alone, a staggering 20 million migrant workers, who left rural areas for the country’s booming cities in recent years, had lost their jobs. Worse yet, they had little prospect of regaining them in 2009. If many of these workers return to the countryside, they may find nothing there either, not even land to work.

Under such circumstances, and with further millions likely to be shut out of coastal factories in the coming year, the prospect of mass unrest is high. No wonder the government announced a $585 billion stimulus plan aimed at generating rural employment and, at the same time, called on security forces to exercise discipline and restraint when dealing with protesters. Many analysts now believe that, as exports continue to dry up, rising unemployment could lead to nationwide strikes and protests that might overwhelm ordinary police capabilities and require full-scale intervention by the military (as occurred in Beijing during the Tiananmen Square demonstrations of 1989).

And then there’s climate change. This New Scientist article talks about the implications of a 4°C rise in global average temperature.

If we use land, energy, food and water efficiently, our population has a chance of surviving – provided we have the time and willingness to adapt. “I’m optimistic that we can reduce catastrophic loss of life and reduce the most severe impacts,” says Peter Falloon, a climate impacts specialist at the Hadley Centre. “I think there’s enough knowledge now, and if it’s used sensibly we could adapt to the climate change that we’re already committed to for the next 30 or 40 years.”

This really would be survival, though, in a world that few would choose to live. Large chunks of Earth’s biodiversity would vanish because species won’t be able to adapt quickly enough to higher temperatures, lack of water, loss of ecosystems, or because starving humans had eaten them.

Things are not disconnected – it’s all interrelated. Assuming we haven’t already passed some climatological positive feedback tipping point, the current economic meltdown may moderate our output of greenhouse gasses. On the upheaval front – China, India, and Pakistan share borders and possess nukes. Pakistan is the loosest of cannons, but China has a long history of civil fun ‘n games (I believe it’s called ‘losing the mandate of heaven’). A Pakistan/India nuclear exchange would kill a lot of people and put a lot of dust in the air – what kind of feedback effects would a south Asia nuclear nightmare cause? If climate change continues, the Indian monsoon becomes unreliable and there’s instability to the north – what then?

I don’t know if it’s an American thing, or whether this goes on worldwide, but some folks rub their hands in eager anticipation of an impending apocalypse. Just so I’m clear – if you think a post-collapse landscape looks like a Frank Frazetta painting with you in a starring role – grow up. If statistics and experience are any guide, it looks like you (and me) face down in filthy stagnant water or curled up in a cold, damp corner with a high fever and bloody diarrhea.

Have a nice day!

Update – two other posts on the specifics:

A great article on Iceland – the whole financial mess writ small – Wall Street on the Tundra.

In reply to the Santellis of the world – the foreclosure mess in Cleveland. Yes, some people were incredibly irresponsible (see Irvine Housing Blog), but even in those cases it takes two to tango. Some lending practices, though, were just short of theft/fraud.

In other instances, mortgage brokers would cruise neighborhoods, looking for houses with old windows or a leaning porch, something that needed fixing. They would then offer to arrange financing to pay for repairs. Many of those deals were too good to be true, and interest rates ballooned after a short period of low payments. Suddenly burdened with debt, people began to lose homes they had owned free and clear.

As early as 2000, a handful of public officials led by the county treasurer, Jim Rokakis, went to the Federal Reserve Bank of Cleveland and pleaded with it to take some action. In 2002, the city passed an ordinance meant to discourage predatory lending by, among other things, requiring prospective borrowers to get premortgage counseling. In response, the banking industry threatened to stop making loans in the city and then lobbied state legislators to prohibit cities in Ohio from imposing local antipredatory lending laws.

The first thing we do, let's…

…and the bankers and the talking heads. Via TPM comes this truly appalling clip of Nouriel Roubini and Nassim Taleb on CNBC. Roubini and Taleb are talking about a systemic crisis and the needle that they think we need to thread to get through it; in contrast the network talking hairstyles want stock tips. I suppose it’s progress that the traditional media are talking to folks that actually got it right, rather than their usual practice of canonizing those who dug the hole we find ourselves in (obviously – given the title of the post – I’d prefer cannonizing them). I’m beginning to believe that a piece of the institutional failure we’re seeing can be attributed to our ruling elite’s love of going meta – don’t pay attention to the content of the argument, instead, warn your guests about the dangers of being a rock star and marvel that Bill Gates would actually wait in a line to hear your guests speak. The rage in the hinterlands may be breaking through the Villager’s (DFH-speak for the elites) carefully constructed bubble; Diane Rehm – usually the Villager-est of softball, conventional wisdom interviewers – was amazed at the platitudes spewed by her banking industry guests yesterday (check out that guest lineup though – now those are some wild and radical gets *sarcasm*).

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Rather than stock tips, what might actually be useful are some thoughts on the future of unemployment. Somebody twittered this link – whoever it was – thanks.

Start with the numbers: worldwide, the UN estimates as many as 51 million people could become unemployed this year. Here in Britain, if the analysts are right, one million people who currently have jobs won’t do in twelve months’ time. What happens next for those people will shape the kind of society we live in, over the next decade and beyond.

I want to think about some of the ways this situation could play out. In particular, I’m interested in whether the things we’ve learned from social media over the last few years can play a role in lessening the hardship of this recession and shaping the world which comes out the other side. *

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Finally, a blog that’s going on the blogroll real soon now – Boone, Johnson and Kwak’s Baseline Scenario.

The Baseline Scenario is dedicated to explaining some of the key issues in the global economy and developing concrete policy proposals. Since it was launched in September 2008, articles on this blog have been cited by The Wall Street Journal (Real Time Economics), The Economist (Free Exchange), The Financial Times, NPR (Planet Money), and many other sites around the Internet. The authors of the blog have also published articles in The Washington Post and in the online editions of The Wall Street Journal, The Financial Times, The Guardian, Forbes, Bloomberg, and Reuters. The blog was the subject of an interview with Simon Johnson in The Wall Street Journal. Content from The Baseline Scenario is currently republished by Seeking Alpha, Talking Points Memo Cafe, and RGE Monitor. *

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You’ll know I’m really pessimistic when I start posting recipes for long pork.

The future – here, but not widely distributed

Three quick forward-looking links.

Crooked Timber is doing a Charlie Stross book event.

A New Year, a new Crooked Timber book event. But instead of one book, we’re covering a dozen or so, all written by Charlie Stross, exploring different forms of the SF genre from postcyberpunk to alternate history and beyond. For this we need an all star cast, and, in addition to several CT regulars (Henry, both Johns and Maria), we have contributions from Paul Krugman, Brad DeLong and Ken MacLeod. Between us, we’ve managed to cover nearly everything. Glaring exceptions include the Laundry series, which every fan of Len Deighton and HP Lovecraft should read, and Glasshouse. I’ve added an open thread at the end of the seminar, for those who want to discuss what we missed.

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Geoff Manaugh is getting close on the BLDGBLOG book.  Close enough, in fact, that he’s posted some Wordle word clouds – looks like it’s going to be an interesting read.

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At City of Sound, The Personal Well-Tempered Environment.

SUMMARY

  • A real-time dashboard for buildings, neighbourhoods, and the city, focused on conveying the energy flow in and out of spaces, centred around the behaviour of individuals and groups within buildings.
  • A form of ‘BIM 2.0′ that gives users of buildings both the real-time and longitudinal information they need to change their behaviour and thus use buildings, and energy, more effectively. An ongoing post-occupancy evaluation for the building, the neighbourhood and the city.
  • A software service layer for connecting things together within and across buildings.
  • As information increasingly becomes thought of a material within building, it makes sense to consider it holistically as part of the built fabric, as glass, steel, ETFE etc.

Three completely unrelated links

First – an excellent post – Hunting and Fishing Like Adults – over at Patrick’s place. Coincidentally, I recently watched the No Reservations ep where Frances Mallman talks about patience – an underrated virtue in today’s world.

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Second – S. Clay Wilson bashed his head (badly), got pneumonia and spent a bunch of time in ICU in November (via BB). He’s out now and there are some benefit concerts coming up for those on the west coast. If you don’t know his work already, Wilson is one of the greats of underground comix – his stuff is not for everyone – the amount of sex and violence is way high, but he’s a favorite of mine.

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Third – this map:

has been getting a lot of notice on the web (here, here and here). I find myself firmly in the pointing and laughing camp – New Hampshire and South Carolina? That’s beyond “he’s smoking something” and well into industrial strength CIA hallucinogen testing protocols. Georgia goes to Mexico? *shakes head*

Shop Smart! Shop S-Mart!

- or -

Groovy!

A couple political observations – then, back to critter-blogging!

Apparently, some folks feel that the Republican party’s problem is that they didn’t run far enough to the right and/or hold fast enough to principals. Good luck with that:

Voting shifts – 2008 v. 2004

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My hunch is that there are a lot of people like me – pragmatists – who have figured out that if you want government to work, it’s probably best not to elect people who have moored themselves to the idea that the government doesn’t and can’t work. As a fan of functioning divided government (notice the important 1st qualifier), I’d love to see the return of grown-up Republicans – folks who are now disparaged as RINOs: the Bill Welds and Christie Whitmans of the party. Not sure that’s going to happen though – in the inevitable backstabbing attendant on a loss, Caribou Barbie is being promoted by some as the future of the party. Insofar as she represents a near-perfect amalgam of corruption and Christianism, I guess she does make sense if you think the problem is that Republicans are not past-8-years-of-Republicanism enough. As an aside, the name of one of the components of the circular firing squad – Operation Leper – is a nice counterpoint to the religious fervor of the woman they’re trying to protect. I’ll admit to not being the best CCD student ever, but I thought the carpenter guy was in favor of cleansing rather than creating lepers. I found this clip over at Hot Air – a nice visual representation of a post-November 2008 ‘lessons learned’ session:

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In the other direction, The Onion has this to say about post election let-down:

Got a message, number 419

Dear American:I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.Yours Faithfully Minister of Treasury Paulson *

Via BB

This isn’t intended for me, I don’t think.
It’s a missive from the edge of despair, I mean brink
of total desperation; the communication therein
says her hopes for survival are slim
and she’s writing to the Front, though we’ve yet to meet,
with a confidential matter ‘cause she’s heard I’m discreet.
And the urgency of her request for my aid
is matched by the depth of the trust she displayed.
“Don’t betray me like our oil minister did (staged a coup).
And I’m about to flee Nigeria soon
but I’ll never make it out,” she says, with twenty million
three hundred twenty thousand US dollars that are still in
her possession. She embezzled them, I guess.
Look, I don’t really know her so uh… that’s none of my business.
She’s the LADY MARYAM ABACHA, deposed.
These days, can’t even get her caps-lock key unfroze. *

Jim “Mr. Happy” Kunstler:

Last week’s ripe moment turned out to be the Thursday night Washington photo op when Treasury Secretary Paulson and Fed Chief Bernanke emerged from a huddle with House Speaker Nancy Pelosi and just about every other legislative eminentissimo in an attempt to reassure the nation that its financial system had not turned into something like unto a truckload of stinking dead carp. I don’t know about you, but I got two distinct vibes from the faces in that particular tableau: 1.) abject fear, and 2.) a total lack of conviction that they knew what they were doing.
The product of that huddle was a cockamamie scheme for the US treasury to absorb all the losses from a twenty-year binge in which Wall Street created and retailed the most complex set of swindles ever seen on this planet Earth. The background music to the tableau was the whoosh of a several trillion dollars exiting the US financial system never to be seen again.
The next day (Friday) many particulars of that scheme began to emerge — such as the complete lack of oversight and review mechanisms for Treasury’s new power to monetize private business failures and frauds — and the stock market soared in response. Other new features of the reformed capital landscape also resolved later that day, like a new experiment aimed at eliminating the short sale as a way of guaranteeing that henceforth market bets could only be placed on the upside of the table. It will be interesting to see how that reform works out in the days ahead.
Over the weekend, all these various playerz retreated into their gilded bunkers to negotiate the details, and by Sunday night, among other things, Goldman Sachs and Morgan Stanley — the two remaining investment giants left standing — announced that they would metamorphose into regular banks in order to qualify for additional truckloads of government loans in exchange for any leftover fraudulant securities still lurking in their vaults. Another new provision had the Treasury rescuing swindled foreign companies, too — in effect, saving the world, which seemed at least, how you say, pretty ambitious.

And, lest I be accused of quoting exclusively from one side of the spectrum – and I’d remind folks that what with the current Republican administration having nationalized AIG, one may want to be careful about slinging ‘socialist’ as an insult – one from Daniel Larison at The American Conservative (AmConMag = paleocon in most taxonomies – it labors under the twin disadvantages of consistency and truthfulness):

During the months before the invasion of Iraq, I often heard or read the claim that we had to defer to the government, because they “knew more” than the rest of us, which meant that if they claimed a dire threat was on the horizon there really was a dire threat on the horizon.  As it turned out, they knew scarcely more than the average well-informed citizen, and much of what they thought they knew was wrong.  There was a broad, international consensus of supposed experts that did not doubt the severity of what turned out to be a non-existent threat, and this consensus held despite an acknowledged lack of reliable information.  Indeed, the consensus thrived on the impossibility of proving a negative.  Except for a relative handful of dissenters, who were either ignored or dismissed as cranks, the people in the relevant policy community acquiesced or kept quiet, and the average citizen looked at the near-unanimity of supposed experts acknowledging the severity of the threat and took it far more seriously than he would have ever done otherwise.  Instead of asking who benefited from building up the threat, people were cowed into taking the threat for granted and accepting more or less unquestioningly government proposals for addressing it.  To be part of the mainstream conversation, one had to admit first of all that the threat was real and serious, at which point the debate was really already over.

This strangely misplaced confidence in government expertise seems to have returned.  This time people seem to be inclined to defer to government claims because the situation really is quite serious and the problem at hand is fairly complex, which makes it much easier to confess a lack of expertise, yield to expert opinion and say, “Well, we have to trust the government–the alternative is unthinkable!”  If the last few years have shown anything, I would have thought they would have taught us to recognize this sort of browbeating as a means to shut down critical thought and skepticism.  The people who sold a war of choice as a war of necessity are now telling us that yet another emergency measure is absolutely necessary, which makes me think that it is distinctly possible that it is not.  The language of necessity in turn feeds the public’s fear that things must be so bad that they should not question the principle behind the emergency measure.  They can, as half-hearted critics of the invasion did, quibble about means and process, and at this point that is all we are seeing from most members of Congress, but they are not supposed to doubt the necessity of acting and acting now.

I’ve already written about taking a deep breath and counting to ten – what about the current situation requires us to act NOW NOW NOW NOW? Weren’t we being assured a week or two ago that everything was under control – by the very same people who are now predicting total world economic collapse? Were they lying then? Lying now? Incorrect then/now/both? Why do they need all the money up front?

falsus in unum, falsus in omnibus

On a somewhat lighter note, I fully support this suggestion made by Tanta over at CR:

What I really really like is the idea of subjecting CEOs to the same petty humiliation everyone else gets treated to. I suggest that for every separate asset these CEOs sell to the government, they be required to write a Hardship Letter over a 1010 warning (that’s a reference to the statute forbidding lying in order to get a loan) explaining why they acquired or originated this asset to begin with, what’s really wrong with it in detail, what they have learned from this experience, and what steps they are taking to make sure it never happens again. Furthermore, the Treasury Department will empanel a committee of the oldest, most traditional, and bitterest mortgage loan underwriters–preferably those downsized to make way for automated underwriting systems–to review these letters and opine on their acceptability.

And on a much, much lighter note, if you are not aware of all Internet traditions and thus don’t get the reference in the picture above, hie thee over to Failblog, instanter.

Now – I hope – back to dogs, bugs, birds, etc. On deck – ants! Zombie bears (and how do walruses relate?)!

The Bailout

Kleptocracy. Just say no (or prepare to walk away – I’m doing both).

Sec. 2. Purchases of Mortgage-Related Assets.
(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Dean Baker:

The most obvious question: is how will paying market price for near worthless assets prevent the collapse of zombie institutions like Bear Stearns, Lehman Brothers and AIG? These institutions needed money. They won’t get it from selling mortgage backed securities, that are chock full of bad mortgages, at the market price. We already know this, because they already had the option to do so.

Ken Houghton:

Unless the Fed is planning to buy assets at above market value—that is, to directly subsidize those same bankers and firms with taxpayer dollars, with concomitantly to make those risky assets “less” risky in the market and still providing no route or incentive to return to the “good” equilibrium—the “bailout” as discussed with have no positive effect on the health of the firm(s).
So what Henry Paulson is proposing has to be a direct subsidy to have any effect.

Paul Krugman:

I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.
As I posted earlier today, it seems all too likely that a “fair price” for mortgage-related assets will still leave much of the financial sector in trouble. And there’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away?

Calculated Risk:

There are private investors willing to buy these troubled assets right now, but the banks do not want to sell at those prices. Why? Some banks believe the assets are worth more than the current bids (it all depends on future house prices, and different banks and investors have different projections). And many banks are unwilling to accept the current bids because the banks would then be insolvent. See Professor Krugman’s: Doubts about the rescue and Uneasy feelings. Also, even solvent banks would probably have to recapitalize (dilute shareholders) or reduce lending if they sold at current bid prices.

So how does the Treasury plan help? It isn’t clear yet. The first goal should be transparency of the troubled assets. What do the banks own, and what are the assets really worth? Transparency is surprisingly difficult: each RMBS and CDOs – even within the same asset class and origination year – can have significantly different values depending on the orginator and other factors. If the Treasury conducts a reverse dutch auction on a broad asset class, they will probably end up with certain New Century and Bear Stearns deals that are basically worthless.

To facilitate price discovery, it would probably be better to bid for individual mortgages from RMBS pools, but analyzing each mortgage would be a monumental task. We definitely do not want the Treasury to buy RMBS and CDOs at anywhere near the value on the bank’s books. Buying at those prices would help keep the banks lending, but it would also severely impact the taxpayers, it would be a transfer of wealth from the many to the few, and it would also encourage future excessive risk taking.

So determining price will be difficult. And what happens if a price can be determined? How does this help keep the banks lending?

Jim Henley:

What we have here is a soul test of several tendencies in American politics – progressivism, libertarianism, limited-government conservatism, principled defenders of managerial liberalism generally. This is as naked a case as we could imagine seeing of the state working to enrich the already wealthy at the expense of the many. The only theoretical defense of it would be a belief that the well-being of America’s wealthy as a class is necessary to the well-being of the country as a whole, and that this transcends any merit its members possess. That is, the business of America isn’t business, but businessmen. This is not an argument anyone is going to want to make in so many words.

If libertarians fail to oppose this bailout, they stand revealed as the hypocritical apologists for corporate power their detractors have always accused them of being. If Democratic leaders fail to oppose this bailout, they will prove to be the phonies and weaklings of stereotype. If managerialists go along with it, then every argument against the State as guardian of the general welfare will bear out. Right now a corrupt and spent corporate class is on the brink of getting a corrupt and spent governing class to perpetuate its privilege by almost dumbfoundingly transparent means. Anyone with a soul needs to oppose them.

The coveted Worf endorsement

Having traveled back in time to the era in which the Star Trek television set of series aired, which is a remarkably frequent occurrence given the impracticality of time travel, I, Lieutenant Worf, from television’s Star Trek-The Next Generation and Star Trek-Deep Space Nine, am now ready to declare who I support in the 2008 Presidential Campaign.

There is honor in peace, pigeon-headed flute man. There are humans, Klingons, and even Democrats who do not see this.

Wonderful stuff! Be sure to read the comments – some of the in-jokes sail right past me, but I found a bunch of laugh-worthy remarks.

Thanks, rstevens.