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A More Bearish View: Legitimacy Dwindles



December 23, 2008 – Comments (11)

I have been Bearish more then a year. The unwind has been faster and harder then I expected. The power grab and wealth re-distribution by the government rivals anything from the most corrupt bannana Republics. I think it was a bad mistake for the government to get involved to this level and I think I will create "blow back".

Kunstler talks about possible "blowback" here:

Legitimacy Dwindles

Zounds! Public sentiment toward the accelerating economic fiasco has shifted, seemingly overnight, from a mood of nauseated amazement to one of panicked grievance as the United States moves closer to an apparent comprehensive collapse -- and so ill-timed, wouldn't you know it, to coincide with the annual rigors of Santa Claus. The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake. It's like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve. And out in the heartland, of course, there is the spectacle of Illinois governor Rod Blagojevich trying to desperately dodge a racketeering rap behind an implausible hairdo.
     What seems to spook people now is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system. Not even the the legions of Obama are immune as his reliance on Wall Street capos Robert Rubin, Tim Geithner, and Larry Summers seem tainted by the same reckless thinking that brought on the fiasco. His pick last week for chief of the SEC, Mary Shapiro, is already being dissed as a shill for the Big Bank status quo. In a few days we'll discover what kind of bonuses are being ladled out by the remaining Wall Street banks with TARP money and a new chorus of howls will ring out.
     This is very dangerous territory. In dollar terms, the numbers being applied to the various problems are so colossal -- trillions! -- that the death of our currency seems assured. And in defiance of congress's express intentions, none of the TARP "money" has been applied to its targeted purpose of buying up "toxic" (i.e. fraudulent) securities hidden in the vaults of banks, pension funds, and municipal portfolios.
     George W, Bush's personal bailout of General Motors and Chrysler is designed solely to postpone their bankruptcy and mass job layoffs until after the holidays. Otherwise, the $17.4 billion will probably be used by the companies to underwrite the extensive legal work required for the moment they must declare bankruptcy -- when Mr. Obama is in the White House. Meanwhile, the President-elect has ramped up his job-creation target overnight from two to three million, and some observers are catching a whiff of Soviet-style economic engineering ("...we pretend to work and they pretend to pay us....").
     The years since Jimmy Carter have produced an astoundingly flaccid public, sunk in various addictions and distractions, but this is about to change. The darkling mood of political protest and violent activism that saturated my own young adult years is scudding up again on the horizon. Mr. Obama's pick for attorney general, the mild-looking Eric Holder, may be the key figure in the early months of the new government. If he doesn't commence some aggressive investigations and prosecutions -- beginning with Henry Paulson for insider trading when he was in charge of Goldman Sachs and shorting his own company's mortgage-backed securities -- then the whole Obama enterprise could fall under suspicion of illegitimacy. The bums who ran the US banking sector into a ditch have to account for their turpitudes. They can't be allowed to hide under a TARP.
      Unfortunately, the legal system, and probably the legislative system, will be so buried in procedural bullsh-t from the unwind of countless enterprises and institutions, and the sorting out of the remnants, that it remains to be seen whether this generation of people-in-charge can even embark on a fresh start of anything connected to real everyday life in America. All this is starting to alarm the tattered residue of the middle classes, and from here it's a very short path to them being really pissed off.
     When legitimacy erodes, anything goes. Nothing is respected including rules and personalities. The center doesn't hold and the new vacuum there is a tumultuous place. The same crisis of authority and legitimacy is spreading from nation to nation now. Soon, China will contend with a discontented army of the unemployed. Greece has been in an uproar for two weeks. Belgium's government just collapsed. Trade barriers are going up. Exports are falling away. The world's energy markets are not immune to these disorders. I would expect problems with the currently seamless supply lines that bring America two-thirds of the oil we use. Even a mild disruption of oil supplies could attach an anvil to the ankle of an economy already falling off a cliff.
     Right now, the overwhelming sentiment is to get this country back to where we were, say, ten years ago, when everything was humming nicely: Clinton nostalgia. We're definitely not gong back there, though. It's an idle wish. And any set of policies designed to lead in that direction will prove very disappointing. Our destination is a land of much smaller-scaled local economies. We could retain our federal ties if the federal government can scale back appropriately from the bloated, feckless enterprise it has become. Otherwise, it might only get in the way and make matters worse, and the public in one region or another of North America might reach a decision that they are better off without it. That would be what's called a revolution.
My new novel of the post-oil future, World Made By Hand, is available at all booksellers. 

December 22, 2008 in Commentary on Current Events | Permalink | Comments (75)

11 Comments – Post Your Own

#1) On December 23, 2008 at 8:28 AM, Bankwatcher1 (25.55) wrote:

Caught this last night. Old, but relevant. Just substitute United for "GM". Wealth redistribution? Take a good look at the 401K results.

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#2) On December 23, 2008 at 9:19 AM, DaretothREdux (53.06) wrote:

A roaring round of applause for that post! I am ready to take them on right now...if only they didn't have bigger guns then me....

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#3) On December 23, 2008 at 9:59 AM, carcassgrinder (34.33) wrote:

This whole article is right on point.  Does anyone have any knowledge of any large scale Federal protests being planned?  And does anyone know if there is a legal case for not paying Federal taxes because they are being used illegally?

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#4) On December 23, 2008 at 10:20 AM, outoffocus (23.22) wrote:

The protest should have started years ago, you know, when the current administration had the wool over your eyes? Yea then...

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#5) On December 23, 2008 at 11:01 AM, carcassgrinder (34.33) wrote: now we should just sit back and watch it all unfold on TV...right?

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#6) On December 23, 2008 at 11:21 AM, outoffocus (23.22) wrote:

Actually carcass, I thought my comment implied the opposite.  The problem is all this keeps happening because we are doing the same thing now as we have been doing, sitting on our rears and watching it unfold. I would LOVE to see a mass protest of the gross mismanagement of our tax dollars.  But you have to understand this type of corruption starts small and grows to unmanageable proportions. Everytime the American people got a whiff of something funny going on in Washington, the powers that be came down we a new blanket of wool (or TARP) to collectively pull over our eyes.  Before it was "9/11" (and no I am not downplaying the severity of the event, I'm just disgusted on how it was used to distract us after the event), now its "Too Big to Fail".  Theres not telling what excuses they are going to use next, but I believe that more excuses will be used to grossly mismanage out taxmoney.  I'm just hoping these excuses will lose their credibility and it becomes clear to the people that they are nothing but distractions.

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#7) On December 23, 2008 at 11:24 AM, TDRH (97.04) wrote:

Thanks for sharing this, excellent points.  My favorite:

"Mr. Obama's pick for attorney general, the mild-looking Eric Holder, may be the key figure in the early months of the new government."

As people suffer they are going to want some accountability for those responsible.  If the attorney general is agressive and throws a few exectutives to the wolves it may give the presidency some credibility.   The status quo cronyism is not going away, but a few select individuals will need to be sacrificed and I am not talking at the Martha Stewart - Mark Cuban level, they had better go after some at the top. 

The 500K retreats as AIG is getting bailed out, Golman's 1% tax bracket, and the bonuses for failure need to be illuminated, quantified and the individuals responsible need to be publicly humiliated and their credibility destroyed.   A public figure who leads this populist charge will have a bright political future if he/she can keep his/her nose clean.


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#8) On December 23, 2008 at 12:08 PM, carcassgrinder (34.33) wrote:

outoffocus....I'm sorry.....I interperated your first comment as "We already missed the boat".  I agree with you in full in response to your second comment.  And I assure you that I understand fully how this corruption starts...then manifests itself.

The question remains....what next? 

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#9) On December 23, 2008 at 1:24 PM, guiron (39.99) wrote:

Otherwise, it might only get in the way and make matters worse, and the public in one region or another of North America might reach a decision that they are better off without it. That would be what's called a revolution.

Yeah, you know, that tends to be very violent and messy. There's also no guarantee we'll end up the way you think we should. In fact, there's a good chance we'd end up with a form of dictatorship. So be careful what you wish for. 

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#10) On December 24, 2008 at 10:01 AM, abitare (30.30) wrote:



I should correct I meant to say

. I think it was a bad mistake for the government to get involved to this level and I think it will create "blow back".

I am not creating any blow back...


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#11) On December 25, 2008 at 1:55 PM, ollinBfreely (< 20) wrote:

great post as always abitare!

all this talk of revolution and protest -  and in a stock trading website no less!  makes me think this is a popular topic in many other forums as well.

 this coincides nicely with the strong govt. interest in "crowd control" types of systems for the past decade (at least) - 

I thought they might be for disputed elections -  but mass protests could really bring these suckers into widespread use domestically...  

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