Forecast for 2008

[Crewleader]

by Jim Kunstler

For the tiny fraction of people who actually pay attention to real events -- those, for instance, who know the difference between Narnia and Kandahar -- the final hours of 2007 leading into the fog-shrouded abyss of 2008 must induce great racking shudders of nausea. Has there ever been a society so exquisitely rigged for implosion? The whole listing, creaking, reeking edifice stands like one of those obsolete Las Vegas pleasure palaces awaiting a mere pulse of electrons to ignite a thousand explosive charges perfectly placed to blow away the structural supports.

The inertia holding everything together that I described in last year's forecast finally melted away at mid-summer and events began spooling out of control. Specifically, the massive tonnage of debt-backed securities circulating through the financial sector stood revealed for the mostly worthless bales of paper they truly are, and the investment community was left suspended in mid-air, grinning unconvincingly, like Wile E. Coyote thirteen yards beyond the edge of the mesa, with a sputtering grenade in each hand and an anvil tied to his ankles.

The whole second half of 2007 in the ranks of finance was a desperate rear-guard action to stave off the inevitable work-out. The fiasco over at Bear Stearns was instructive. Not long after two of their hedge funds blew up in August, the company announced that the funds had been chartered in the Cayman Islands and were therefore beyond the reach of official US legal machinery -- meaning, forget about lawsuits, you losers, chumps, and suckers who bought into our jerry-rigged scams... submit your complaints to the Tough Noogies desk and begone with you! This dodge might have benefited Bear Stearns in the short term, but in the long term it's hard to see why anybody would ever after cast one red cent in Bear Stearns' direction (in the life of this universe or several like it).

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2007/12/forecast-for-20.html

[SlowDownFast]

1. Here';s my forecast:

Grim and grimmer.

Ain't no way for even the smartest economists out 'o' this one:

Dues where dues are paid.*

*of course some alternate reality could be instituted. "They've" been known to do it before.

[Zenlitened]

2. I was a bit surprised to see Paul Krugman expressing ambivalence today.

Posted in his NYT blog that he is "uncertain about where things go this year."

In a recent post I pointed out that up through the third quarter of 2007 rising exports had roughly offset the impact of the housing bust...

So did the U.S. economy dodge a bullet?

Yes, it did — which is why I haven’t been as sure about a looming recession as, say, Larry Summers or Marty Feldstein, let alone Nouriel Roubini. (No, I’m not always a doom and gloom guy — only when the situation warrants, which has been pretty often lately.)

While we dodged a bullet, however, there are between one and three more bullets headed our way.

More:
http://krugman.blogs.nytimes.com/2008/01/01/did-we-dodge-a-bullet/

FYI, the other "bullets" he discusses are continued housing declines... suggestions of commercial real estate slump amid lower biz investment overall... plus consumer spending cooling off.

[sendero]

3. Well worth reading..

... (unless you are an HRC fan :)) and spot on.

2008 is going to be a rough year. The only good thing about it is that for once the bad actors are going to get hit along with the little guys.

[TalkingDog]

4. Actually, in a perverse sort of way, it's better for those on the lowest rung.

The spousal unit and I were discussing- the creaky, fuel leaking plane headed, quite directly, for the side of the looming fog-shrouded mountainside, that encapsulates- the world's current status and came to the conclusion that:

Although it may be dire and horrifying, the people at the bottom might actually suffer least, because they have the least to lose. They are used to poverty and "making do". Having lived in that type of poverty, I can say it ain't pretty, but I know it can be done. And, bonus, I already know how to do it.

The real suffering will happen with the young middle and upper-middle classes, who have never had a whim they could not fulfill by buying some trinket. I teach and have taught young adults in college and the inability to use a manual can opener will be the downfall of many of them, since they don't know how to cook, raise food or even what a baking potato looks like (honestly, I've had cashiers ask what common food items were in checkout because they've never seen them raw)

Adults in their late 20's didn't even get to live through the recession of the 70's as a means of comparison.

Time will tell. As for me, all I can do is live the Realist's Motto: Hope for the best. Expect the worst.


My Favorite Master Artist: Karen Parker GhostWoman Studios

[sendero]

5. I agree....

... it's the $500 a week millionaires that are really going to get a wake-up call, and Dallas is full of them.

A bunch of the glib "pull yourself up with your own bootstraps" crowd is about to get a well deserved and painfully instructive lesson.

[abelenkpe]

6. perhaps

I am evil, but I sincerely hope that is true.

[Warpy]

7. That conservative cohort that were the younger boomers

and were the backbone of support for the policies of the GOP are getting slammed the hardest right now. They were kids or in college during the hell of the 70s and really didn't feel the brunt of it the way we old boomers did.

(Yeah, I know people in that cohort who post on DU aren't still part of that conservative cohort, no matter what they once were or were not. Spare the flames).

I have to feel a little sorry for them. They came of age when deregulation started to make debt first available on plastic and then cheap. They bought into the whole conspicuous consumption on credit lifestyle. Now they're going to get obliterated.

We old folks had parents who remembered the Depression even if they were too hazy on what caused it to keep it from happening again. They taught us that debt is poison and living within one's means is the only way to survive long term. Many of us are in our first houses and the bastards are almost paid off or are paid off. We have a better chance of weathering the crisis if our health holds up.

The younger boomers had parents who reaped the rewards of the postwar boom and only hazy memories of the Depression as little kids didn't teach the lessons we got. They were the ones who bought into the dollar down, dollar a week philosophy and taught it to their kids.

What we all need to do is keep teaching the lesson as long as we are alive that when wealth is concentrated into the fewest hands at the top and debt is substituted for good wages at the bottom, bad things always happen to good people. We need to teach them who their enemies are: anyone who says business can function without regulation, that natural monopolies like water and power should be in private instead of public hands, and that the rich and corporate are blessed by gawd and should escape high taxes because it's somehow "fair."

In the meantime, we are about to live in interesting times. Remember to be generous to each other and we'll get through them.

[nadinbrzezinski]

8. There is a difference between Narnia and Kandahar?

Really? just ask some of our candidates for president...

:-)