Re: Serial Bubbles?

[Leigh Meyers <the.buffalo.in.the.midst@xxxxxxxxx>]

"...But if it were merely a scheme for big banks to issue innovative
new securities for gigantic fees without actually getting any trains
running - well that would be in the nature of just another
old-fashioned swindle, as the bundling of mortgages into securitized
debt paper has proven to be."

Gasp!

A direct attack on the American way of doing 'business'!

Must be one of those frankenfurter (sic) school marxists or somthing...

Leigh



On Feb 8, 2008 7:48 AM, Charles Brown <charlesb@xxxxxxxxxxxxxxxxxxxxx> wrote:
> http://lists.econ.utah.edu/pipermail/a-list/2008-February/070176.html
>
> Clusterfuck Nation
>
> by Jim Kunstler
>
> Comment on current events by the author of
> The Long Emergency (Atlantic Monthly Press, 2005)
>
> www.kunstler.com (February 04 2008)
>
>
> Eric Janszen of iTuilip.com has made a splash in the mainstream media
> with his Harper's Magazine cover story on the "The Next Bubble". His
> thesis is that a new tidal wave of investment will shortly roll toward
> "infrastructure and alternative energy". By this Janszen means a
> revived
> nuclear power push, refurbishing highways, bridges, and tunnels,
> "high-speed rail", solar and wind power, and alternative liquid fuels.
> This coming boom, he says, would be driven by political fear about
> energy security.
>
> On the face of it, Janszen's proposition seems more promising and
> intelligent than the previous engineered boom in suburban houses. But
> it
> raises a lot of questions and flags.
>
> For one thing, the term "bubble" suggests something more like a
> financial Chinese fire drill than actual productive activity. It would
> be an excellent thing if Americans invested in a restored passenger
> rail
> system. But if it were merely a scheme for big banks to issue
> innovative
> new securities for gigantic fees without actually getting any trains
> running - well that would be in the nature of just another
> old-fashioned
> swindle, as the bundling of mortgages into securitized debt paper has
> proven to be.
>
> In other words, does Janszen make a distinction between a boom and a
> "bubble"? He seems to understand that the previous two bubbles in
> dot-coms and houses were essentially frauds that generated imaginary
> wealth, which sooner later evaporated off the balance sheets and out
> of
> the financial system. A boom, it seems to me, is not the same as a
> "bubble". While perhaps wasteful and messy, booms at least produce
> something of value beyond the fees paid to bankers for arranging the
> deployment of capital. A boom that resulted in citizens being able to
> take a train from Boston to Albany would produce a substantial public
> good. The creation by Goldman Sachs of a company on paper that never
> accomplished anything would be something else. This, of course, leads
> to
> a deeper question as to whether the USA is actually a serious society
> or
> just a nation of hopeless, greedy clowns? Are we even capable anymore
> of
> distinguishing between purposeful activity and the art of the grift?
>
> This leads to a further consideration of where the capital for "the
> next
> bubble" supposedly comes from. Janszen doesn't account for the
> essentially bankrupt condition of the USA. The capital that was
> deployed
> and squandered in the previous two bubbles is not there anymore to be
> washed, rinsed, and recycled. It's gone. It was winkled out of
> hundreds
> of pension funds, millions of individual investors, and, in terms of
> eventual obligations, the federal government. There is a black hole of
> unresolved debt where that "capital" used to be.
>
> Janszen's idea seems to be that the new investment comes from simple
> credit reflation. I don't see how this is possible while the current
> bubble in housing remains only fractionally "worked out". It has a
> long
> way to unwind yet, and a lot of damage to do. It will bring down
> banks,
> insurance companies, hedge funds, municipal governments, and leave a
> lot
> of individuals impoverished, literally out in the cold. As long as
> trillions in losses remain concealed or unresolved, the basic system
> for
> deploying capital will remain paralyzed.
>
> I wonder if fixing all the infrastructure for happy motoring is not an
> exercise in futility and another layer of tragic misinvestment. After
> all, it's based on the assumption that we will still be running huge
> numbers of cars and trucks decades ahead, and I'm not convinced that
> this will be possible under any circumstances. The psychology of
> previous investment will exert a powerful pull to throw money at our
> highways. It might be more realistic to think of this as a triage
> process - to ask ourselves how much of this stuff do we just let go of
> and which parts do we actually keep. Thousands of miles of suburban
> commercial strip highway six-laners may not be needed at that "level
> of
> service". What becomes of them? Do we run trains down the interstates?
> Surely, we don't want our bridges to crumble.
>
> By the same token, I wonder if our investments in alternative energy
> will prove to be chimerical - things wished and hoped for but
> impossible
> to achieve. My own hunch is that our notions of scale are not
> consistent
> with what reality will permit in this field. I don't believe that we
> will build more than a few giant wind farm installations. Rather, I
> believe we'll discover that wind power is only really practical on the
> household or extremely local basis. Ditto solar. I also doubt that we
> will continue to get all the necessary exotic metals needed to
> fabricate
> the hardware for these things. Along similar lines, I believe our
> expectations for ethanol and bio-diesel fuel production will prove to
> be
> not only disappointing but destructive to the food production sector.
>
> All of which is to say that an investment campaign aimed at sustaining
> the unsustainable by other means would end in tears. Personally, I
> don't
> think there will be a "next bubble". I think we're out of bubbles and
> that our current mode of life in this nation is running out of time.
> We're facing such an array of potential instabilities that even
> assuming
> we continue to live in an orderly society may be too much. Like every
> other activity in our lives, finance, too, may be in for an epochal
> downscaling.
>
> http://jameshowardkunstler.typepad.com/clusterfuck_nation/
>