The Teeming Brain

GENERAL COMMENT FROM CARDIN (two parts)

1. This is real life, not a disaster movie — and that’s frightening

In my February 6 “Headlines from the meltdown” post, I linked to and quoted from an article by economist and NYU professor Nouriel Roubini, the arch-pessimist of the current economic environment. The article listed what Roubini has dubbed the “twelve steps to financial disaster,” that is, the 12 events or developments that he says have the potential to utterly devastate America’s economy. I only quoted from the introduction to the piece, since the rest of it was available exclusively to paying subscribers to Global EconoMonitor, Roubini’s newsletter (although I myself found the entire text of the thing reprinted elsewhere).

Now Financial Times columnist Martin Wolf has summarized Roubini’s 12-step outline in detail for free public consumption. I’ve pasted the basic outline below, as the first of this edition’s linked readings. You really should click the link and read the entire piece, because, as you’ll notice if you’ve been following economic news at a variety of sites and sources (and I recommend CNNMoney, MarketWatch, Business Week, Newsweek, Prudent Bear, The International Herald Tribune, The Asia Times, The London Times, The London Telegraph, The New York Times, The Wall Street Journal, The Washington Post, The Daily Reckoning, The Financial Times, Buzzflash, AlterNet, CounterPunch, Countercurrents, CarolynBaker.net, the breaking news page at Life After the Oil Crash, plus a variety of blogs and columns) — you’ll notice, I say, that most of the developments Roubini outlines are already underway.

I know I’ve been openly cherry-picking the most dire-sounding, doomsdayish headlines and stories to post and chronicle here at The Teeming Brain. The point is not just to highlight what’s really happening but to paint the grimmest possible picture of it. Call it a combined matter of informed awareness and personal amusement. But in all honesty, I get a rumbling feeling of genuine unease when I scan the news and then hold up what’s actually going on against Roubini’s template for economic collapse. It’s really happening, folks. It’s more than just a matter of idle amusement or fiction-like excitement. America’s economic life has really tipped into the territory of full-blown emergency (as in, the long one elucidated by James Howard Kunstler, the one resulting from a confluence of multiple factors and events). It’s tempting and easy — believe me — to adopt an oddly detached attitude toward all of these things as you stare at them through a computer screen, television screen, or newspaper, an attitude that buffers their reality with the sense that they’re more like a disaster movie or novel than a real-life, real-time series of unfolding events. But they’re not. This isn’t fiction. It isn’t Independence Day or The Day After Tomorrow. It isn’t Armageddon or Godzilla. It isn’t even the 9/11 Commission Report. It’s real life, and while it is certainly possible to spin information in any number of emotional directions, grim or otherwise , the plain fact is that aside from any and all spin attempts by me or anyone else, objective events are fairly hair-raising.

2. The current situation is ripe with spiritual potential

I’ll let other writers make the point for me.

The ego is destined to dissolve, and all its ossified structures, whether they be religious or other institutions, corporations, or governments, will disintegrate from within, no matter how deeply entrenched they appear to be. The most rigid structures, the most impervious to change, will collapse first. This has already happened in the case of Soviet Communism. How deeply entrenched, how solid and monolithic it appeared, and yet within a few years, it disintegrated from within. No one foresaw this. All were taken by surprise. There are many more such surprises in store for us.

….A significant portion of the earth’s population will soon recognize, if they haven’t already done so, that humanity is now faced with a stark choice: Evolve or die. A still relatively small but rapidly growing percentage of humanity is already experiencing within themselves the breakup of the old egoic mind patterns and the emergence of a new dimension in consciousness.

Eckhart Tolle, A New Earth

Woe to him who piles up stolen goods and makes himself wealthy by extortion! How long must this go on? Will not your debtors suddenly arise? Will they not wake up and make you tremble? Then you will become their victim. Because you have plundered many nations, the peoples who are left will plunder you. For you have shed man’s blood; you have destroyed lands and cities and everyone in them.

Woe to him who builds his realm by unjust gain to set his nest on high, to escape the clutches of ruin! You have plotted the ruin of many peoples, shaming your own house and forfeiting your life. The stones of the wall will cry out, and the beams of the woodwork will echo it.

Woe to him who builds a city with bloodshed and establishes a town by crime! Has not the LORD Almighty determined that the people’s labor is only fuel for the fire, that the nations exhaust themselves for nothing?

For the earth will be filled with the knowledge of the glory of the LORD, as the waters cover the sea.

Habakkuk 2:6-14

If we totally experience hopelessness, giving up all hope of alternatives to the present moment, we can have a joyful relationship with our lives, an honest, direct relationship, one that no longer ignores the reality of impermanence and death.

Pema Chodron, When Things Fall Apart

A Chinese allegory tells how a monk set off on a long pilgrimage to find the Buddha. He spends years and years on his quest and finally he comes to the country where the Buddha lives. He crosses a river, it is a wide river, and he looks about him while the boatman rows him across.

There is a corpse floating on the water and it is coming closer. The monk looks. The corpse is so close he can touch it. He recognizes the corpse, it is his own.

The monk loses all self-control and wails. There he floats, dead. Nothing remains. Anything he has ever been, ever learned, ever owned, floats past him, still and without life, moved by the slow current of the wide river.

It is the first moment of his liberation.

Janwillem van de Wetering, A Glimpse of Nothingness

For those who want to save their life will lose it, and those who lose their life for my sake will save it. What does it profit them if they gain the whole world, but lose or forfeit themselves?

Luke 9:24-25

Approaching death and death itself, the dissolution of the physical form, is always a great opportunity for spiritual realization . . . . One of the most powerful spiritual exercises is to meditate on the mortality of physical forms, including your own. This is called: die before you die. Your physical form is dissolving, is no more. Then a moment comes when all mind-forms or thoughts also die. Yet you are still there — the divine presence that you are. Radiant, fully awake. Nothing that was real ever died, only names, forms, illusions.

Eckhart Tolle, The Power of Now

* * * * *

America’s economy risks the mother of all meltdowns

Martin Wolf, The Financial Times, Feb. 19

Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006. At that time, his view was extremely controversial. It is so no longer. Now he states that there is “a rising probability of a ‘catastrophic’ financial and economic outcome.” The characteristics of this scenario are, he argues: “A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.”

Prof Roubini is even fonder of lists than I am. Here are his 12 — yes, 12 — steps to financial disaster.

Step one is the worst housing recession in US history.

….Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages.

….Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.

Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.

Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.

Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.

Step eight would be a wave of corporate defaults.

….Step nine would be a meltdown in the “shadow financial system.”

Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.

Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.

Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices.”

….Is this kind of scenario at least plausible? It is. Furthermore, we can be confident that it would, if it came to pass, end all stories about “decoupling.”

….Can the Fed head this danger off? In a subsequent piece, Prof Roubini gives eight reasons why it cannot.

….The risks are indeed high and the ability of the authorities to deal with them more limited than most people hope. This is not to suggest that there are no ways out. Unfortunately, they are poisonous ones.

….The connection between the bursting of the housing bubble and the fragility of the financial system has created huge dangers, for the US and the rest of the world. The US public sector is now coming to the rescue, led by the Fed. In the end, they will succeed. But the journey is likely to be wretchedly uncomfortable.

* * * * *

Don’t look now, but a full-blown bank run is underway on Wall Street

David Ignatius, The Washington Post, Feb. 21

It doesn’t look like an old-fashioned bank run because it involves the biggest financial institutions trading paper assets so complicated that even top executives don’t fully understand the transactions. But that’s what it is — a spreading fear among financial institutions that their brethren can’t be trusted to honor their obligations.

Frightened financiers are pulling back from credit markets — going on strike, if you will — to escape the unraveling daisy chain of securitized assets and promissory notes that binds the global financial system. As each financier tries to protect against the next one’s mistakes, the whole system begins to sag. That’s what we’re seeing now, as credit market troubles spread from bundles of subprime residential mortgages to bundles of other kinds of debt — from student loans to retailers’ receivables to municipal bonds.

Investors are nervous because they aren’t sure how to value these bundles of securitized assets. So buyers stay away, prices fall further, and the damage spreads.

The public, fortunately, doesn’t understand how bad the situation is. If it did, we might have a real panic on our hands.

* * * * *

Wall Street banks bracing for a new wave of multibillion-dollar losses

The New York Times, Feb. 19

Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets.

In recent weeks one part of the debt market after another has buckled. High-risk loans used to finance corporate buyouts have plummeted in value. Securities backed by commercial real estate mortgages and student loans have fallen sharply. Even auction-rate securities, arcane investments usually considered as safe as cash, have stumbled.

The breadth and scale of the declines mean more pain for major banks, which have already written off more than $120 billion of losses stemming from bad mortgage-related investments.

The deepening losses might make banks even more reluctant to make the loans needed to prod the slowing American economy. They also could force some banks to raise more capital to bolster their weakened finances.

….“This correction feels a lot deeper and wider and more prolonged than what we have seen historically,” said one senior Wall Street executive who was not authorized to speak to the media.

* * * * *

Capitalism turns apocalyptic, financial elite begin to panic

Walden Bello, Foreign Policy in Focus, Feb. 20

Skyrocketing oil prices, a falling dollar, and collapsing financial markets are the key ingredients in an economic brew that could end up in more than just an ordinary recession. The falling dollar and rising oil prices have been rattling the global economy for sometime. But it is the dramatic implosion of financial markets that is driving the financial elite to panic.

And panic there is. Even as it characterized Federal Reserve Board Chairman Ben Bernanke’s deep cuts amounting to a 1.25 points off the prime rate in late January as a sign of panic, the Economist admitted that “there is no doubt that this is a frightening moment.” The losses stemming from bad securities tied up with defaulted mortgage loans by “subprime” borrowers are now estimated to be in the range of about $400 billion. But as the Financial Times warned, “the big question is what else is out there” at a time that the global financial system “is wide open to a catastrophic failure.”

….Some key movers and shakers sounded less panicky than resigned to some sort of apocalypse.

* * * * *

The Fed acknowledges the glass is half empty

The Washington Post, Feb. 21

[Cardin comments: Note that this revised and more pessimistic economic forecast from the Fed comes only a week after Fed chairman Bernanke teamed up with Treasury secretary Paulson to give a joint "Okay, it's worse than we've been saying" speech, as reported in last week's installment of "Headlines from the meltdown."]

The Federal Reserve yesterday slashed its forecast for the country’s economic growth as fresh evidence showed that prices for a wide range of goods are soaring. The twin announcements crystallize the challenge facing the central bank as it tries to prevent a recession without letting inflation get out of hand.

….As the economy slows, that combination creates a potentially toxic mix for American consumers of higher prices and slower growth in the number of jobs and wages. It could even be a milder version of the stagflation, or stagnant growth mixed with inflation, that crippled the nation’s economy in the 1970s.

That would be a central banker’s worst nightmare. For the Fed, it would be a failure to maintain either part of its “dual mandate” ordered by Congress of maintaining low unemployment and price stability.

* * * * *

Economic crisis hits main street, basic services to suffer

CNNMoney, Feb. 21

[Cardin comments: This particular story is hardly academic or remote for me and the other people living in my general neck of the woods, that is, southwest Missouri. The Saturday, February 16 edition of The News-Leader, the wide-circulation daily newspaper originating from nearby Springfield, Missouri -- which is the third largest city in the state, after St. Louis and Kansas City -- reported in a front-page story that Springfield is currently suffering a budget crisis from an unexpected decrease in sales tax revenue, and that a hiring freeze is now in effect while city leaders figure out what to do. The article mentions that planned new hires in the fire department are already affected. Beyond a mere freeze, the city is actively looking at cutting staff from various departments. On a wider scale, the entire state of Missouri itself is suffering from the same problem, with January's sales tax collections dropping a staggering five percent from the same month last year. The brief note about the problem at Missouri Digital News states the obvious ramification: "If we have a decrease in a major source of our general revenue fund we will be looking at serious problems in the provision of state services." The interaction of this phenomenon with the municipal bond crisis will surely have, shall we say, interesting effects on local and state infrastructures.]

“Without affordable funding, projects don’t get built, streets don’t get repaved,” [Wilkes-Barr, New York Mayor Thomas] Leighton said. “It affects the people driving on those roads and the people paving those roads.”

The credit crisis that began in the subprime mortgage market last year has now spread to municipal bonds. Governments and public authorities face steep increases in borrowing costs because investors are losing confidence in the credit markets and the companies that insure the debt.

Public officials nationwide are now weighing whether to restructure their debt to lower rates — if they have good enough credit ratings — or to ride out the storm with the hope that investors will return. However, some are concerned they may have to raise taxes or cut services to balance their budgets…..”The result of a destabilized bond insurance market is that some governments, already facing reduced income due to the slowing economy, will have higher borrowing costs,” said New York Gov. Eliot Spitzer, testifying before Congress last week. “That means shifting funds from schools and police to pay interest.”

….This spike in borrowing costs comes at a time when governments can least afford it. Many are already facing a budget squeeze from the national economic downturn. The drop in housing prices and sales and increase in foreclosures mean they are taking in less revenue from transaction fees and property tax revenue. On top of that, the pullback in construction and consumer spending translates into fewer sales tax dollars.

The lost revenue could total billions of dollars, according to the United States Conference of Mayors.

* * * * *

Food prices are on their way up, up, up

The Financial Times, Feb. 24

When William Lapp, of US-based consultancy Advanced Economic Solutions, took the podium at the annual US Department of Agriculture conference, the sentiment was already bullish for agricultural commodities boosted by demand from the biofuels industry and emerging countries.

He added a twist –- that rising agricultural raw material prices would translate this year into sharply higher food inflation.

“I hope you enjoy your meal,” Mr Lapp told delegates during a luncheon. “It is the cheapest one you are going to have at this forum for a while.”

His warning that a strong wave of food inflation is heading towards the world economy was met by nods from agriculture traders, food industry executives and western’s government officials at the USDA’s annual Agricultural Outlook Forum.

Larry Pope, chief executive of Smithfield Foods, the largest US pork processor, warned delegates of a wave of “real food inflation” just at the time central banks were under pressure to cut interest rates.

“I think we need to tell the American consumer that [prices] are going up,” he said. “We’re seeing cost increases that we’ve never seen in our business.”

* * * * *

U.N. warns over food scarcity

The Financial Times, Jan. 25

The pressures in global food markets have grown so intense that, for the first time in its history, the World Food Programme is finding it hard to procure supplies of essential commodities, senior officials at the United Nations body indicated on Friday.

In particular, they said, countries in the emerging world are now placing so many export controls on items such as wheat in order to conserve them for their own populations that they have sometimes refused to release supplies when the WFP has asked for emergency goods.

“We have never seen this before: we went begging for wheat and for two weeks we could not find it,” said a senior WFP official at the World Economic Forum in Davos, where growing geopolitical tensions over food supplies and other resources dominated many of the debates.

* * * * *

Economic collapse plus famine will lead to chaos

OpEdNews.com, Feb. 22

Oftentimes it seems so inconceivable that we could have come to this place, yet here is exactly what we are facing, right now: Depression in the housing market; retail inflation (due entirely to the price of oil and the plummeting dollar), credit availability all but shut down, and today we discover that grain stores are at their lowest point since they began measuring in 1960: 53 days. According to the CEO of Potash Corp., the Canadian fertilizer giant, if there is any disruption to this year’s grain harvest, the world will be facing famine in 2009. And this is not a question of the rock-concert-for-third-world-countries famine, folks. He is describing global shortages of wheat. Food prices are already on the rise; with grain shortages, will surely come hoarding and hyperinflation in food.

If you think times are getting tough, add a real food shortage. Now it’s time to grow backyard farms (Victory Gardens) – in fact it’s not at all a bad idea.

….[N]ot a single week has gone by this year (or, frankly for the second half of last year) without another jaw-dropping economic scandal. In addition to the grim aforementioned facts, of course, the housing slump and crumbling stock markets are continuing to run down the cumulative net worth of the entire American population, the bundled securities pyramid scheme has forced our financial institutions so near insolvency that the Fed quietly slipped them $50 billion to shore up their solvency, and now even state and municipal bonds are going unsold at auction. What more can happen, you ask? Well, I don’t need crystal balls to go foresee some “bank holidays,” as it has already begun in Great Britain, where the government just nationalized Northern Rock Bank. But how many banks could we absorb? How many retirement funds could sustain bond defaults? And how will people eat when food costs soar and the bank is closed?

* * * * *

No surprise: Current economic woes unmask long-felt unease

Yahoo! News (AP story), Feb. 17

Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction. True, jobs were relatively plentiful over the last few years.It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn’t feel right, even if they couldn’t quite explain why.

Now the economic tide is receding, and the undertow that was there all along is getting stronger. Take away the easy credit and consumers are left with paychecks that, for most, haven’t nearly kept pace with their need and propensity to spend.

….Americans’ declining confidence in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit, and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities.

….”This has just been a period of great disconnect between what the aggregate economic statistics show and what leading politicians talk about and what ordinary Americans are feeling,” said Jacob Hacker, a Yale University professor and author of “The Great Risk Shift,” which charts increased economic insecurity. “I think people are saying, where did the gains go? Where did the boom go? And now that it’s gone, what are we going to do?”

….”Over the past decades, whether inflation was much higher or lower, or incomes grew faster or more slowly, there has never been such a wide divergence in the experiences” separating richer households from poorer ones, Richard Curtin, the director of the University of Michigan’s consumer survey said in summing up the most recent figures.

….Maybe the downturn in optimism is temporary. Americans are voracious consumers and persistent optimists. But some believe a fundamental change in behavior and mind-set is taking place.

* * * * *

Designer of Toyota Prius: The oil age is seriously over

Bloomberg Markets Magazine, March 2008 (cover story)

[Cardin comments: I've included such lengthy chunks of this one because it's such a significant example of the way full-on peak oil thinking has broken through into the mainstream American press. This phenomenon first began in earnest last year with a flurry of stories in the likes of The New York Times, The Wall Street Journal, Time, and various others. Now Bloomberg, one of the major mainstream financial news sources, has run a very long, in-depth, extensively researched story about the reality of peak oil as focused through the vision and efforts of a high-level Toyota employee. And they have run it as the cover story for this month's issue of their markets magazine.

For readers and followers of the peak oil scene, not much of the information and opinions that follow will be radically new. The included facts about the peak in discoveries of new oil deposits back in the 1960s, the environmental devastation associated with extracting crude oil from tar sands, etc., and also the offered visions of a near future world convulsed by social, environmental, and economic crises as a result of an underlying crisis in energy supply, are old hat to people who are already peak oil aware. What's new is the fact that a major mainstream source like Bloomberg would run such a report. In the excerpts that follow, Bill Reinert (the Toyota employee) sounds a lot like James Howard Kunstler and other prominent peak oil exponents when he talks about the converging crises that are bearing down on a nation and world that really don't know how to deal with them, and that will utterly transform our way of life. It really sounds like Reinert and a couple of other people quoted in the story are talking about something akin to Kunstler's "long emergency."

Needless to say, it lends support to the peak oil hypothesis when the newness of this type of thing is rapidly wearing off. Peak oil is literally forcing itself into mainstream awareness because, well, it's real.

Need further proof? How about the inclusion of an entire chapter titled "Searching for Alternative Energy Solutions" in this year's installment of the annual Economic Report of the President to Congress, which Bush signed just two weeks ago. The chapter even includes a boxed-in sidebar specifically addressing the question of peak oil. So keep your eyes peeled and your ears open, because this story is only just starting to unfold. And it's the story we're living in.]

“This is what the end of the age of oil means,” says [Bill] Reinert, 60, who plans the vehicles Toyota will make in a quarter century as national manager for advanced technology at the U.S. sales unit in Torrance, California. “The car-based culture, the business-as- usual of building cars and trucks, is going to change dramatically.”

….Reinert says automakers are endangering themselves by basing sales and profits on the big, fast cars that many U.S. customers say they want in 2008. In five years, as oil shortages and global warming intensify, car companies may be out of step with drivers’ demands for fuel-efficient vehicles. Even worse, degrading stretches of the planet like Fort McMurray [in Alberta, Canada, where epic operations are underway to extract oil from enormous oil sands deposits,] will only delay — not prevent — the time when the world must function in a post-peak- petroleum economy.

….Reinert says nobody can say for sure how the separate tailpipe emission, fuel economy and manufacturing regulations promulgated worldwide by multiple levels of government will affect the environment. There’s no blueprint for the impact of increasingly scarce oil on a U.S. economy already laboring with a mortgage crisis and a dropping dollar. Add industrialization in China and India, and the number of cars and trucks worldwide may double to 2.1 billion by 2030, according to the Paris-based International Energy Agency.

“We don’t have a past, a history or a database that allows us to explore the simultaneous impact of recessions, disruptions to the energy supply and climate change,” says Reinert, who spent six years in the 1980s maintaining solar and wind-powered telephone towers in Colorado’s Rocky Mountains. “We don’t have the legislative, regulatory, financial or product planning tools.”

….The environmental desecration at Fort McMurray and the dangers in petroleum-rich countries such as Iraq and Saudi Arabia show why it’s foolish to brush off warnings about an energy-depleted future, says Jan Kreider, an engineering professor at the University of Colorado at Boulder who had Reinert as a graduate student. “We’re going to have to have crisis on top of crisis before energy policies change,” he says. “Americans have this shock mentality where they do what they want to do for as long as they can and then set up massive programs to fix everything in a few years.”

….”When you’re schlepping around two tons of sand [to extract a single barrel of crude oil from Alberta's oil sands], it shows that conventional oil is already well into depletion,” says Jeffrey Rubin, chief economist at CIBC World Markets Inc. in Toronto. “Price will ultimately ration demand. People won’t be able to afford to drive.”

….”It’s definitely true that the era of cheap and easy oil is over,” says Brad Bellows, spokesman for Suncor Energy Inc., which opened Fort McMurray’s first commercial oil sands mine in 1967. “Industry is looking offshore and to unconventional sources like oil sands.”

….Reinert says that without action, oil may become so expensive that the world would resemble the one in Blade Runner. In the 1982 film, the rich live hundreds of stories high and the poor walk dark, rain-soaked streets. Or the lack of oil may cause the breakdown of social order depicted in the 1979 movie Mad Max. Reinert says Fort McMurray provides a window into such fictional portrayals. He predicts that the clamor for energy security will trump all environmental concerns worldwide. And he forecasts that most alternatives to conventional petroleum, such as oil sands and ethanol, will make climate change and water shortages worse.

….If Reinert is sure of anything, it’s that Toyota can’t go into reverse. Since 1950, the world has been blessed with an eightfold increase in oil production. Yet the peak discoveries for new oil came in 1962, petroleum consultant [Peter] Wells says. Total production outside the former Soviet Union and the Organization of Petroleum Exporting Countries topped out two years ago, he says. Oil in the former Soviet Union will reach its highest level in about five years; OPEC will peak in about 10, he says.

In the interim, nations will be more dependent on the Middle East, where getting oil is complicated by war, political turmoil and declining output from mature wells. “After a series of incidents in the Persian Gulf, or a low-level nuclear exchange that shuts off oil supplies, you wouldn’t have a short-term disruption like Katrina,” Reinert says. “You would have a profound one- or two- or three-year period in which economies and governments fail.”

* * * * *

Reversing Escape from New York: Suburbs may be the next dystopian slums

The Atlantic, March 2008

[Cardin comments: Wow. The idea that America's wholesale rush toward suburbanization, which kicked off in earnest after WWII, will end with today's suburbs and McMansions becoming tomorrow's crumbling slums and tenements is a longstanding plank in the peak oil platform advanced by the likes of James Howard Kunstler. But to see a publication like The Atlantic predicting the same thing, and doing it in detail, right down to the Kunstler-like focus on rising fuel costs for home heating and long commutes and the grim future for McMansions hastily constructed from tinkertoy-like materials, is almost surreal.]

Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading.

….[T]he story of vacant suburban homes and declining suburban neighborhoods did not begin with the [subprime mortgage] crisis, and will not end with it. A structural change is under way in the housing market—a major shift in the way many Americans want to live and work. It has shaped the current downturn, steering some of the worst problems away from the cities and toward the suburban fringes. And its effects will be felt more strongly, and more broadly, as the years pass. Its ultimate impact on the suburbs, and the cities, will be profound.

….For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay.

….If gasoline and heating costs continue to rise, conventional suburban living may not be much of a bargain in the future. And as more Americans, particularly affluent Americans, move into urban communities, families may find that some of the suburbs’ other big advantages — better schools and safer communities — have eroded. Schooling and safety are likely to improve in urban areas, as those areas continue to gentrify; they may worsen in many suburbs if the tax base — often highly dependent on house values and new development — deteriorates.

….This future is not likely to wear well on suburban housing. Many of the inner-city neighborhoods that began their decline in the 1960s consisted of sturdily built, turn-of-the-century row houses, tough enough to withstand being broken up into apartments, and requiring relatively little upkeep. By comparison, modern suburban houses, even high-end McMansions, are cheaply built. Hollow doors and wallboard are less durable than solid-oak doors and lath-and-plaster walls. The plywood floors that lurk under wood veneers or carpeting tend to break up and warp as the glue that holds the wood together dries out; asphalt-shingle roofs typically need replacing after 10 years. Many recently built houses take what structural integrity they have from drywall — their thin wooden frames are too flimsy to hold the houses up.

….[M]uch of the future decline is likely to occur on the fringes, in towns far away from the central city, not served by rail transit, and lacking any real core. In other words, some of the worst problems are likely to be seen in some of the country’s more recently developed areas — and not only those inhabited by subprime-mortgage borrowers. Many of these areas will become magnets for poverty, crime, and social dysfunction.

….About 25 years ago, Escape From New York perfectly captured the zeitgeist of its moment. Two or three decades from now, the next Kurt Russell may find his breakout role in Escape From the Suburban Fringe.

General comment from Cardin: It’s worse than they’re telling us

Henry Paulson Jr., secretary of Treasury, left, with Ben Bernanke, chairman of the Federal Reserve, during a Senate hearing Thursday. (Doug Mills/The New York Times)

As the intentionally redundant saying goes, it’s deja vu all over again. Be sure to read the first two items below very carefully, and as you read them, remind yourself of what various rah-rah optimistic economists, politicians, and members of the real estate industry were saying all during the initial stages of the housing crash during 2006 and early 2007: “The bottom is in sight. This is just a brief market correction. We think it’s almost over. Get ready to start making money again. Don’t panic! Everything’s wonderful! No, I mean it!!!“

Okay, yes, I’m exaggerating ever so slightly with the sarcastic tone — but only very, very slightly. It was deliriously shocking, hilarious, and sickening to watch and listen to the chorus of naysayers denying the obvious, undeniable, slap-you-in-the-face fact that the most bloated housing bubble in history had sprung a leak and was inevitably deflating into a sucking economic void reminiscent of a black hole. And yet they kept chanting this litany of denial for months. Currently they’re all eating crow, and some of them have publicly admitted, “Yes, we completely fornicated with the canine on that one.”

Now, several months into the undeniability stage of the crisis, enter Ben Bernanke and Henry Paulson, respectively the chairman of the U.S. Federal Reserve and Secretary of the Treasury. They spoke at a Senate hearing in Washington on Valentine’s Day. That’s what the first two news items below are about. Please remember that army of housing crash naysayers and the black birds they’re all eating now when you read things like this in the reports below: “The nation’s two top economic policy makers acknowledged Thursday that the outlook for the economy had worsened, as both came under criticism for being overtaken by events and failing to act boldly enough.” “Bernanke said that in his own economic forecast he did not predict a recession but a period of sluggish growth.” “[Bernanke] pointed out that problems in housing and mortgage-related markets had spread more widely and proved more intractable than he predicted three months ago. . . . Both [Bernanke and Paulson] continued to avoid predicting a recession but said they were scaling back the more optimistic forecasts they had issued in November.”

Yes indeed, it’s deja vu all over again. Please forgive my pessimism, but the comments from Messrs. Bernanke and Paulson smell just like the same early-stage denials and soft-peddlings given to us by the real estate crowd. And I’m predicting that as in that more limited case, the wider problem of the U.S. economy in general will go south vastly farther and faster than Bernanke and Paulson are admitting.

Two things to bear in mind about these kinds of forecasts coming from a guy like me: First, I am not an economist, nor do I play one on TV (and please forgive me for using that hackneyed formulation). I’m just a generally educated person who has taken a great interest in current economic matters. I scan, read, digest, analyze, and react to all of these news stories not as a trained economist or policy analyst but simply on the level of plain logic, informed by a good dose of gut and intuition. The thing is, my reasoning, gut, and intuition have been proved uncomfortably accurate by events over the past several months.

Second, I don’t make the shallow-minded mistake of indiscriminately lumping the likes of Bernanke and Paulson in with the now-discredited cheerleaders of the real estate bubble. Those cheerleaders were blatant shills who deserve the humiliation they’ve received, whereas Bernanke and Paulson are smart and capable men, highly qualified to perform their respective duties, probably possessed of decent motives, who I suspect are doing the best job they can (although I’m inclined for some reason to impute better motives and greater overall effectiveness to Bernanke than to Paulson, who at times comes off as inept). The thing is, a part of their jobs is necessarily vested in politics and appearances. They know their words and even their facial expressions and tones of voice send ripple effects across the economic and social worlds. Witness the 175-point drop in the Dow on the day they gave the remarks reported on below. Prudence demands that they speak in a measured and conservative manner, avoiding hyperbole and putting a positive or at least neutral spin (if the latter isn’t an oxymoron) on facts whenever possible. I don’t blame them for that.

But prudence also demands that we ordinary folks recognize these things for what they are, and the actual situation for what it is. If Bernanke and Paulson are saying blatantly grim things and struggling to find positive angles, as the following stories report, then the reality of the overall situation is very likely akin to the early stages of the housing collapse. That is, the relevant public figures are putting as happy a face as possible on the whole mess while the brute reality is more akin to a grimace, or maybe the mottled visage of a plague victim. My gut and intuition are telling me that the American economy is staggering toward an imminent collapse. Moreover, as the authors of the ever trusty Daily Reckoning speculate about in the third piece linked below, the transition to a vastly slower-paced and lower-strung standard of living may be permanent.

I could well be mistaken. I half hope I am. The other half recognizes that the past few years and decades of the United States’ social, political, economic, and cultural history represent such a stupendous Faustian/Huxleyan ascent (or descent) into heretofore unexplored realms of excess, internal rot, and imperial hubris that an equally stupendous crash, while it will certainly result in much real suffering, may be necessary to save our collective soul.

Oh — and while we’re talking about the issue of appearances and perceptions among prominent government employees, is it just me or is last Friday’s sudden, shocking announcement by David Walker, the U.S. comptroller general, that he’s resigning his job as the head of the GAO (see link and excerpts below) more than a little concerning? For over than a year he’s been touring the country and speaking on television, outside of official government channels, to warn that the U.S. is bankrupt and currently perched on a “burning platform of unsustainable policies.” Now he quits his government post for the stated reason that he can effect more positive change and get his message out more clearly in the private sector. Uh-ohs all around, says I, for various reasons.

* * * * *

Bernanke warns of worsening economy

The Associated Press, Feb. 14

WASHINGTON — Using words like “sluggish” and “deteriorated,” Federal Reserv Chairman Ben Bernanke gave a starkly pessimistic assessment of the nation’s economy on Thursday and signaled that the Fed will cut interest rate cuts further if needed to combat the adverse effects of a prolonged housing slump and a severe credit crisis.

….Bernanke told the Senate Banking Committee the serious housing slump and a credit crisis triggered by rising defaults in subprime mortgages had greatly strained the economy. “The outlook for the economy has worsened in recent months and the downside risks to growth have increased,” Bernanke told the committee. “To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so.”

….Bernanke said that in his own economic forecast he did not predict a recession [!!!] but a period of sluggish growth “followed by a somewhat stronger pace of growth starting later this year” as the impacts of the Fed’s rate cuts and the $168 billion economic stimulus package of tax rebates begin to be felt.

However, he also said there were significant downside risks ranging from the threat that the housing slide could become even more severe, the job market could deteriorate more than currently expected or that the credit squeeze will intensify.

* * * * *

Top officials see bleaker outlook for the economy

The New York Times, Feb. 15

With the credit markets once again deteriorating, the nation’s two top economic policy makers acknowledged Thursday that the outlook for the economy had worsened, as both came under criticism for being overtaken by events and failing to act boldly enough.

In testimony to Congress, Ben S. Bernanke, the chairman of the Federal Reserve, signaled that the Fed was ready to reduce interest rates yet again, pointing out that problems in housing and mortgage-related markets had spread more widely and proved more intractable than he predicted three months ago.

His sobering assessment was echoed by Treasury Secretary Henry M. Paulson Jr., who appeared with him. Both continued to avoid predicting a recession but said they were scaling back the more optimistic forecasts they had issued in November.

….Stock prices, which normally rally when the Fed hints it will lower borrowing costs, tumbled instead. The Dow Jones industrial average dropped 175 points, or 1.4 percent; broader stock indexes dropped by similar amounts.

Anxiety is escalating among institutional lenders and major borrowers, as the panic over soaring default rates on subprime mortgages that began last summer continues to spread, freezing up credit for municipalities, hospitals, student loans and even investment funds holding the most conservative bonds.

….Senator Christopher J. Dodd of Connecticut, chairman of the Banking Committee, told reporters after the hearing that “it just seems as if they aren’t as concerned about the magnitude of the problem.”

* * * * *

U.S. government accountability chief abruptly resigns

Yahoo! News, (AFP story), Feb. 16

The head of the audit and investigative arm of the US Congress announced his resignation Friday, citing “real limitations” on what he could do. David Walker, 51, a respected voice on fiscal matters, said he was making an early departure from the US Government Accountability Office (GAO) to head a new public interest foundation.

“As Comptroller General of the United States and head of the GAO, there are real limitations on what I can do and say in connection with key public policy issues, especially issues that directly relate to GAO’s client — the Congress,” Walker said in a statement.

He did not elaborate but Walker last year issued an unusually downbeat assessment of his country’s future in a report that drew parallels with the end of the Roman empire.

He had warned that the US government was on a “burning platform” of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action was not taken soon.

There were “striking similarities” between America’s current situation and the factors that brought down Rome, he had said.

These included “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government.”

* * * * *

New data look bleak for U.S. economy

The International Herald Tribune, Feb. 15

A fresh batch of data on Friday presented a bleak picture of the U.S. economy, with rising prices of imported goods, struggling manufacturing and an erosion in consumer confidence.

With the price of oil near record levels, import costs grew in January at the highest annual rate in a quarter century, the Labor Department said. In New York, manufacturing activity fell to its lowest level in five years. And consumers, responding to a national survey, said they felt worse about the economy than any time since the recession era of the early 1990s.

“This is just horrible,” wrote Ian Shepherdson, the chief United States economist for High Frequency Economics, a research firm. “The sustained volatility in the markets, the rise in energy and food prices and, of course, the catastrophe in the housing market, is making consumers extraordinarily miserable.”

* * * * *

Technically, Scarlet, it’s a depression

Doug Noland, Credit Bubble Bulletin, Feb. 7

[Cardin comments: If you're not reading Doug Noland's regular weekly report, then you should be. Note that the top portion always consists of a categorized and dated roundup of the week's major economic news stories. To find Noland's unfailingly perceptive and provocative comments and analysis, scroll to the bottom of the page.]

The leveraged speculating community has suffered the occasional tough month — last August providing a recent case in point. Each time, however, performance quickly bounced back. In true Bubble fashion, each quick recovery from a setback emboldened all involved; industry fund inflows not only never missed a beat — they accelerated. Yet a strong case can be made today that this (historic) Bubble has now burst — that last year was the “last gasp” before succumbing to New Post-Credit Bubble Realities. I don’t expect performance to bounce back, while I do foresee a flight away from the leveraged speculating now beginning in earnest. With “crowded trades” unraveling virtually across the board, marketplace risk is now escalating significantly for leveraged strategies in general. Systemic liquidity issues and dislocated market conditions have created an environment where there is seemingly no place to hide.

Importantly, a leveraged speculating community “unraveling” would prove a death blow for myriad sophisticated trading strategies and risk models, with enormous ramifications for systemic stability. There are unmistakable “Ponzi Dynamics” involved here worthy of a few Bulletins.

Going forward, I expect a foundering leveraged speculating community to be At The Heart of Deepening Monetary Disorder. The initial victims appear the fragile global equities market Bubbles and the U.S. Corporate Credit market. Forced deleveraging of hedge fund corporate debt and derivatives is in the process of creating a massive overhang of securities to sell, in the process profoundly curtailing Credit Availability and Marketplace Liquidity throughout. The ramifications for our finance-based Bubble Economy are momentous. As an economic and financial analyst (as opposed to “fear-monger”), I feel it is imperative to highlight that it is more “technically” accurate to categorize the unfolding scenario in the historical context of an economic “depression” rather than “recession.” This is certainly not shaping up as a short-term inventory-led economic adjustment or “mid-cycle” slowdown. Instead, we have now entered the very initial stages of what will likely prove a deep, prolonged and arduous adjustment to the underlying structure of our Credit and economic systems.

* * * * *

The U.S. economy may be crippled — permanently

The Daily Reckoning, Feb. 15

One thing that bothers us about our dim outlook for the U.S. economy is that so many others seem to see things the same way.

….It is always worrisome when people in positions of responsibility agree with us. It troubles us, for example, that so many people think they see a recession coming. Maybe we won’t have one after all.

Or . . . maybe we won’t have the recession they all expect.

….[W]hen Bernanke delivered the bad news to Congress yesterday, the news he gave out was not as bad as you might expect. He said the economy would be softer than expected, but that it would recover before the end of the year. That is the message that practically all the experts are peddling: look for a slump in the first part of the year, recovery later on.Yesterday, we noted that homeowners typically believe that the downturn in housing prices may last one or two years. They still believe that “house prices always go up in the long run.” Stock buyers seem to think the same thing. Many are talking about a bottom already. Some think the bottom has already come and gone — in January. They believe we’re now in a new phase of what is, for them, an eternal bull market.

Mr. Market always has a trick up his sleeve. What if his big surprise is that this downturn doesn’t go away after six months? What if house prices grind downward for five years. . . or more? What if we have begun a major bear market on Wall Street, with the Dow falling, in real terms, for the next 15 years? And what if Warren Buffett is wrong? What if America has topped out? What if, after 232 years of coming up in the world…it will go down for the next 232? What if it is now smart to short the United States — its currency, its stocks, its labor and even its military?

The U.S. enjoyed an extraordinary run of good luck. It had rich farmland. . . with huge oil deposits under it. It had energetic labor and low taxes. It had innovators, risk takers. . . and a government that left them alone. It had thrifty, hard-working people who asked for nothing but the chance to work. This combination of hard work and good luck put America on top of the world. But that’s the trouble with being on top of the world; there’s no where to go but down. Now, the U.S. is a net importer of food. . . and fuel. Its government seeks to control not only the lives of its citizens, but the fates of other peoples half way around the globe. Its citizens work harder than ever. . . but they are now competing with people who work even harder than they do. . . people who are willing to work for one tenth the compensation and then save half of what they earn. These same U.S. citizens are bending under the heaviest burden of private and public debt the world has ever seen, while their government encourages them to spend more.

Here’s a surprise for you, dear reader. What if this great economy didn’t “emerge even stronger”…but instead was crippled, and never recovered?

* * * * *

NY governor warns of ‘financial tsunami’

Yahoo! News (AFP story), Feb. 14

New York state governor Eliot Spitzer warned Thursday that bond and credit woes afflicting Wall Street and global markets could turn into a more damaging “financial tsunami.”

In testimony to the US Congress, Spitzer urged lawmakers and regulators to urgently address the bond and credit problems roiling the financial industry which have forced some big firms to writeoff billions of dollars in troubled securities.

“If we do not take effective action, this could be a financial tsunami that causes substantial damage throughout our economy,” Spitzer said, according to a transcript.

He said the financial difficulties of bond insurance companies could have a widespread effect because they insure a broad range of bonds and securities such as municipal bonds, college loans and even relate to museum budgets.

* * * * *

“Neutron bomb” mortgages (option ARMs) exploding everywhere, foiling Bernanke’s attempts to calm markets

Bloomberg, Feb. 7

The estimated 1 million homeowners with $500 billion of option ARMs are beyond the help of interest-rate cuts by Federal Reserve Chairman Ben S. Bernanke. While subprime borrowers face an average increase of 8 percent or less when their adjustable- rate mortgages reset, option ARM homeowners may see their monthly payments double after their adjustments kick in.

“We call them neutron loans because they’re like a neutron bomb,” said Brock Davis, a broker with U.S. Express Mortgage Corp. in Las Vegas. “Three years later the house is still there and the people are gone.”

….”These could be called long-fuse, exploding ARMs,” said Kathleen Keest, former assistant Iowa attorney general and now senior policy counsel at the Center for Responsible Lending in Durham, North Carolina. “I’ve heard people say they are the most complicated product ever offered to consumers. They are the real liar loans.”

The loans accounted for 8.9 percent of the almost $3 trillion in U.S. home loans made in 2006, up from 8.3 percent in 2005, according to an estimate by industry newsletter Inside Mortgage Finance.

* * * * *

Mortgage Crisis Spreads Past Subprime Loans

The New York Times, Feb. 12

The credit crisis is no longer just a subprime mortgage problem. As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.

….Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or subprime, credit. “This collapse in housing value is sucking in all borrowers,” said Mark Zandi, chief economist at Moody’s Economy.com.

….The bursting of [the generalized credit/debt] bubble has led to steep losses across the financial industry. American International Group said on Monday that auditors found it may have understated losses on complex financial instruments linked to mortgages and corporate loans.

….And it is not just first-mortgage default rates that are rising. About 5.7 percent of home equity lines of credit were delinquent or in default at the end of last year, up from 4.5 percent a year earlier, according to Moody’s Economy.com and Equifax, the credit bureau.

About 7.1 percent of auto loans were in trouble, up from 6.1 percent. Personal bankruptcy filings, which fell significantly after a 2005 federal law made it harder to wipe out debts in bankruptcy, are starting to inch up.

* * * * *

Hedge funds: First they redefined Americans’ notions of wealth, now they’re tanking spectacularly

The New York Times, Feb. 12

After years of explosive growth, this secretive, sometimes volatile corner of the financial world is entering a dangerous new era. The running turmoil in the markets is stirring fears that more of these funds will fail, some, perhaps, spectacularly.

“This will be the year with the highest number of hedge fund failures given the huge number of new and untested hedge funds,” said Bradley H. Alford, founder of the Atlanta-based Alpha Capital Management, an investment advisory business.

….“People who have been in business for 20 years are saying January was one of the most difficult and challenging times they have ever seen,” said a manager who oversees a fund of hedge funds, who asked not to be identified because he does business with many managers.

It is a remarkable turnabout for an industry that upended the old order on Wall Street and, in the process, redefined Americans’ notions of wealth. In recent years hedge fund money has driven up prices of everything from New York apartments to Andy Warhol paintings and reshaped the worlds of philanthropy and politics.

Managing a hedge fund has become the running dream on Wall Street. Since 2000, the number of funds has more than doubled, to 10,000. These private pools of capital now sit atop almost $1.9 trillion in assets.

….Sol Waksman, president of Barclay Group, an alternative investment database, said that three-quarters of the 1,241 hedge funds that have reported returns for January lost money. “That’s a scary number,” Mr. Waksman said.

Many managers fear things will only get worse.

* * * * *

Food prices in Asia are spiraling out of control

Yahoo! News (AFP story), Feb. 10

[Cardin comments: Methinks this is not currently, nor will it be in the future, a problem for Asia alone. Just as Africa is currently serving a canary-in-a-coal-mine function for the issue of electrical blackouts, with events on that continent demonstrating the devastating effects of chronic and severe energy shortages on electrically powered societies, so Asia is probably serving a similar warning function for the problem of food shortages and price spikes based on the tangled interplay of things like global warming, fossil fuels, peak oil and energy, growth-based economic systems, rising lifestyle expectations, crop failures, and so on. We already saw a flurry of events and accompanying news stories early last year about turmoil in Mexico over the spike in corn prices caused by the ethanol boom. As The Economist reported two months ago, the era of cheap and steadily falling food prices is over. Also check out the Financial Times article below.]

Rising food prices have hit Asia’s poor so hard that many have taken to the streets in protest, but experts see few signs of respite from the growing problem.

An array of factors, from rising food demand and high oil prices to global warming, could make high costs for essentials such as rice, wheat and milk a permanent fixture, they say.

“The indications are in general pointing to high prices,” Abdolreza Abbassian, a senior grains analyst at the UN Food and Agriculture Organisation in Rome, told AFP.

The agency’s figures show food prices globally soared nearly 40 percent in 2007, helping stoke protests in Myanmar, Pakistan, Indonesia and Malaysia.

“High growth in per capita income, especially in Asia, is driving demand for food,” said von Braun, the Washington-based group’s director general.

At the same time, Asia’s growth has left many of its poor behind, he added. They spend between 50 and 70 percent of their meagre incomes on food, making price rises especially debilitating.

….Drought and bad weather, high oil prices stoking transport costs, spiking biofuel demand and low reserves have also played their part, experts say.

….Experts are still wary of pinning the blame for these events explicitly on the impact of global warming.But a Stanford University study found that climate change could cut South Asian millet, maize and rice production by 10 percent or more by 2030. Climate change, in particular the drive to cut greenhouse gas emissions from conventional fuels to curb global warming, has also driven demand for biofuels.

The high cost of crude oil, which hit record levels in January, has made biofuel production more commercially viable. Farmers are switching to growing crops such as corn or jatropha, a weed, to feed the biofuel industry rather than crops destined for the dinner table.

“Ambitious government biofuel targets are leading to pressure on prices and probably to some sort of structural increase overall in trend food prices,” said Dean.

* * * * *

Financial Times: The next crisis will be over food

The Financial Times, Feb. 14

James Howard Kunstler: America’s financial house is burning down

ClusterFuck Nation, Feb. 11

Behind all the blather and bullshit about the Federal Reserve’s rescue gambits and the machinations of the ratings agencies, and the wiles of foreign sovereign wealth, and the incomprehensible mysteries of markets, and the various weather forecasts of a gathering “recession” is the simple fact that the USA is a way poorer nation than we imagined ourselves to be six months ago. The American economy has been running on the fumes of “creatively engineered” finance (i.e. new-and-improved swindling) for years, and now these swindles are unraveling. In their aftermath, they leave empty wallets, drained bank accounts, plundered retirements funds, boiled away capital reserves, worthless stocks, bankrupt companies, vandalized housing tracts, ruined families, and Wall Street executives who are still pulling down multimillion-dollar pay packages despite running their companies into the ground.

We’re burning down the house and kidding ourselves that there is a remedy for it. All the rate cuts and loans to big banks and bank-like corporate organisms, and “monoline” bond insurers, and mortgage mills amount to little more than a final desperate shell game to conceal the radioactive pea of aggregate loss. The losses are everywhere, and when you add up seven billion here and eleven billion there they probably amount to something like a trillion dollars in sheer capital evaporation — not counting the abstract “positions” that the capital was leveraged onto by the playerz and boyz who mistook algorithms for productive activity.

The shell game may run a few more weeks but personally I believe the timbers are burning. The losses are no longer “contained” or concealable.

….This new depression, which I call The Long Emergency, will play out against the background of a society that has pissed away its oil endowment, bulldozed its factories, arbitraged its productive labor, destroyed both family farms and the commercial infrastructure of main street, and trained its population to become overfed diabetic TV zombie “consumers” of other peoples’ productivity, paid for by “money” they haven’t earned.

….It’s not hard to understand why the Bernankes, Paulsons, Lawrence Kudlows and other public representatives of capital keep pretending that everything is under control. On the other side of their pretenses lies disorder and hardship. One wonders, of course, what they really see in their private minds’ eyes. Do they actually believe that the statistics issued by their serveling agencies amount to a plausible picture of reality? Are they so lost in their fantasies of “management” that they think they’re controlling events?

My guess is that their credibility is spent. In the weeks ahead, nobody will know who or what to believe. We may even run out of questions to ask as we just all collectively stand there in a thrall of wonder and nausea, watching the nation’s financial house burn down.

America’s accountant-in-chief: The United States is bankrupt (streaming videos)

60 Minutes, March 2007

The Real Story, CNN, March 2007

[Cardin comments: What a difference a year makes, at least in today's world of throwaway news and entertainment with its attention span dwindling to such a vanishingly small point that it verges on instant amnesia. When was the last time you heard any mainstream news source talking about David Walker, the comptroller general of the U.S., the guy who heads up the Government Accountability Office (GAO)? Almost a year ago he and his dire warning about America's economic future were the subject of a flurry of print and electronic headlines. Now it seems the attention of the Mad Monkey that is contemporary media culture has turned elsewhere. Economic doomsday stories abound but they're focused mostly on "news of the day," including the largely ephemeral fluctuations of the stock market.

But Walker's warning is more substantial than that. In the words of a 60 Minutes broadcast from March 2007 (rebroadcast in July), "When the stock market soars or plunges, everyone pays attention. But short term results aren't that important to the man you're about to meet. David Walker thinks the biggest economic peril facing the nation is being ignored, and for nearly two years now he has been traveling the country like an Old Testament prophet, urging people to wake up before its too late." That peril, in the words of the same story, is a financial overstretch so epic that it threatens the very survival of the United States: "He's totaled up our government's income, liabilities, and future obligations and concluded that our current standard of living is unsustainable unless some drastic action is taken. And he's not alone. It's been called the 'dirty little secret everyone in Washington knows' -- a set of financial truths so inconvenient that most elected officials don't even want to talk about them, which is exactly why David Walker does. . . . As Walker sees it, the survival of the republic is at stake."

I wrote about Walker here at The Teeming Brain last year, referencing the 60 Minutes story and linking to a Financial Times article that detailed his comparison of the U.S., with its current fiscal overextension and cultural decline, to the late Roman empire. That was six months ago. Today, only a breath but seemingly an eon later, financial news is more focused on consumer spending and the economic poison of the credit derivative market.

Against the current cacophony of these things, it's worth revisiting Walker's long-term warning about America's unsustainable fiscal policies. For those who missed the 60 Minutes broadcast, here it is, in the first of the video windows below. The second is from CNN's The Real Story, from a program that aired just last month, on January 8. Okay, yes, I was exaggerating just a little bit when I railed a moment ago on the instant amnesia of mass media culture. Some corners of the media world are still bringing Walker and his warning to light. But they're blessed few in light of the severity of his message. Host Glenn Beck of The Real Story interviewed Walker last month in a segment of that day's edition titled "Fiscal Tsunami." Beck began with these words: "If you name any of the real big threats that our nation faces, you are bound to find a large number of respected people who will argue that it's really no big deal. There is one exception to this, one scenario that we face as a nation that virtually every expert agrees could bring America to its knees. And it ain't global warming." You can watch and listen to the rest below. Or, if you prefer, you can read the transcript; the portion about Walker and America's "fiscal tsunami" begins about halfway through.]

60 Minutes piece about David Walker and America’s long-term fiscal emergency — March 2007:

CNN’s The Real Story: Fiscal Tsunami (interview with David Walker) - January 8, 2008:

* * * * *

America’s financial engine is broken, worst is still ahead for credit crisis

The Economist, Feb. 7

When a British Airways Boeing 777 crash-landed just short of the runway at Heathrow Airport a few weeks ago, there was a lively debate about why its twin engines had suddenly lost power at the same time. People might well ask the same question about the twin engines of America’s credit system — the capital markets and the banks — whose simultaneous misfiring has helped drive the country close to, or into, recession.

….Regulators are getting nervous. In a speech to Florida bankers at the end of January, John Dugan, the Comptroller of the Currency, noted that more than one-third of America’s community banks — and more than three-fifths of Florida’s — have commercial-property loans that are more than three times their capital. And he went on to predict increases in loan-loss reserves and a rise in bank failures. How bad could things get? Gerard Cassidy of RBC Capital Markets estimates that between 50 and 150 banks with assets of up to a couple of billion dollars each could fail in the next couple of years, the highest rate since the savings-and-loan crisis of the late 1980s.

* * * * *

Regulators deliver grim assessment on credit crisis

Reuters, Feb. 9

TOKYO (Reuters) - Financial regulators and central bankers delivered a grim assessment of the credit market upheaval on Saturday, warning that worse may lie ahead as banks tighten lending and an economic slowdown spreads.

In an interim report to the Group of Seven finance ministers, the Financial Stability Forum cautioned against a rush to regulate into this vicious cycle of credit writedowns, preferring to allow markets-based systems to operate.

….FSF President Mario Draghi told a news conference that the next 10 days to two weeks would be crucial to understanding the extent of damage to the financial system as many banks issue their first audited accounts since the crisis started.

Asked about the extent of total exposure to the U.S. sub prime mortgage sector, he replied, “the only thing we know is that it’s big and we keep on discovering new dimensions to it.“

* * * * *

Retailers closing, scaling down, pulling back all over the place

CoStar Group, Feb. 6

Announcements over the last couple months include Movie Gallery closing another 400 stores; Charming Shoppes closing 150 stores and cutting expansion plans by 50%; Starbucks closing 100 stores and slowing expansion plans by 34%; Ann Taylor shuttering 117 stores and slowing store growth; Boston Market evaluating its real estate opportunities; Buffet Holdings sorting out its underperformers; Sprint Nextel closing 125 stores and 4,000 distribution points; Cost Plus World Market closing 18 stores; Liz Claiborne closing 54 Sigrid Olsen stores; New York & Company axing the Jasmine Sola brand and its 32 stores; Ethan Allen closing 12 stores; PacSun closing all of its 173 demo stores; and Talbots exiting its kids and men’s lines through closure of 78 stores.

Others include Rite Aid exiting Nevada by closing 28 stores; Macy’s closing nine stores; Krispy Kreme expecting many franchisees to close stores; Kirkland’s Home likely closing 130 stores; CompUSA’s remaining 103 stores being disposed of; Rent-A-Center closing 280 stores; Sofa Express closing 44 stores in bankruptcy; 84 Lumber closing 12 stores; Home Depot closings some call centers; Levitz Furniture disposing of 76 stores in bankruptcy; Pep Boys closing 31 stores; Lifetime Brands closing 30 stores; Big A Drugs liquidating its 21 stores; and more.

* * * * *

WSJ: Rising credit card delinquincies show some Americans at the end of their rope

The Wall Street Journal, Feb. 8

[Cardin comments: The bulk of this article is behind a paywall. The excerpts below include snippets from the subscriber-only portion.]

Credit-card delinquencies are rising across the nation, a sign that some Americans are at the end of their rope financially. And these mounting delinquencies, in turn, have prompted banks to tighten lending standards, keeping people who have maxed out their cards from finding new sources of credit.

The result could be a sharp pullback in consumer spending that would further weaken the slowing U.S. economy.

….Sinking home prices have made it much harder to convert home equity into cash for living expenses. At the same time, plastic has pushed into every corner of American life, making new inroads that worry some economists and card issuers.

In past economic downturns, Americans used credit cards mainly for discretionary purchases, such as furniture, appliances and jewelry. Now, however, many of them regularly whip out plastic to pay for groceries, gasoline and other everyday necessities. Credit-card issuers won’t disclose exact figures, but they say it is evident that a growing percentage of card volume is for basic purchases. Many issuers even dole out extra rewards for such transactions.

….Indeed, many Americans are so dependent on their credit cards for basic needs that about 25% of the clients walking into Margo Mitchell’s credit-counseling office in Tulsa, Okla., have opted to pay their monthly credit-cards bills before their mortgages. “The credit card is a means for them to supplement their income and becomes a cushion to buy groceries,” she says.

But when recessions hit, consumer borrowing typically drops off substantially as consumers, facing the mounting threat of job losses and lower household income, can no longer keep up with their card payments.

“Many Americans don’t realize the direct correlation between the need to change their behavior and their income,” said Bill Druliner, a credit counselor for GreenPath Inc. “The longer somebody maintains that lifestyle, the bigger the crash is when it finally comes down to earth.”

* * * * *

OPEC may abandon dollar, start pricing oil in euros

Reuters, Feb. 8

[Cardin comments: You may not recognize the significance of this story right away if you haven't educated yourself on the history of oil economics and America's global dominance. If this describes you, then just be aware of this: The fact that a senior official with OPEC is talking publicly about abandoning the dollar as the currency to which oil is pegged should be stated in CAPS and BOLDFACE with ***ASTERISKS*** around it for proper emotional effect. Flashing red letters would be nice, too, but I'm not that proficient with HTML. The decision several decades ago to price oil internationally in dollars -- which is referenced in the story below -- was the crucial economic fact underlying the post-WWII explosion of American material prosperity at home and economic dominance abroad. A shift away from the dollar by OPEC, the world's largest collective oil producer, would signal the figurative and literal end of an era, with all of the real-world, life-on-the-ground effects that such transitions always involve. We continue to live right in the heart of the Chinese curse; these are very interesting times indeed.]

DUBAI — OPEC may abandon the dollar for pricing oil and adopt the euro but any such switch will “take time”, OPEC Secretary-General Abdullah al-Badri was quoted as saying by a weekly magazine.

A decline in the dollar has eroded oil exporters’ purchasing power, prompting some members of the Organization of the Petroleum Exporting Countries to call for a switch away from the U.S. currency.

Badri’s remarks sent the dollar lower against the euro on Friday.

“Maybe we can price the oil in the euro,” the London-based Middle East Economic Digest (MEED) quoted Badri as saying in an interview. “It can be done, but it will take time.”

….”Badri tells MEED … that the producers’ cartel may switch to the euro within a decade to combat the dollar’s decline,” the magazine said without providing a direct quote about the time frame.

“It took two world wars and more than 50 years for the dollar to become the dominant currency. Now we are seeing another strong currency coming into the, which is the euro,” said Badri, who is Libyan.

* * * * *

James Howard Kunstler: End of the “bubble” economy means end of America’s current way of life

Clusterfuck Nation, Feb. 4

[T]he 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.

Analyst says dozens of U.S. banks will fail by 2010

Ottowa Citizen (Reuters wire piece), Feb. 6

Dozens of U.S. banks will fail in the next two years as losses from soured loans mount and regulators crack down on lenders that take too much risk, especially in real estate and construction, an analyst said.

….Between 50 and 150 U.S. banks — as many as one in 57 — could fail by early 2010, mostly those with no more than a couple of billion dollars of assets, Cassidy said. That rate of failure would be the highest in at least 15 years, or since the winding down of the savings-and-loan debacle.

“The initial round of failures will come from smaller banks with limited access to capital and overexposure to commercial real estate,” Cassidy said.

“Could banks with $75 billion or $100 billion of assets fail? That’s hard to say, but it depends on the severity of the economic downturn and the real estate decline,” he added.

* * * * *

The FDIC has begun its death watch

Mike Whitney, Information Clearing House, Feb. 7

On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor….as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.”

The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC’s job nearly impossible.

….So, what does it all mean?

It means there’s going to be an unprecedented wave of bank closures in the US and that people who want to hold on to their life savings are going have to be extra vigilant as the situation continues to deteriorate. And it is deteriorating very quickly.

* * * * *

Wal-Mart is the canary in the coalmine — and the canary is choking

CNNMoney.com, Feb. 7

U.S. retailers are on track to report their slowest monthly sales growth in five years, which would further cement fears that American consumers are buckling under the weight of a slowing economy.

Leading the way is No. 1 retailer Wal-Mart Stores Inc., which on Thursday reported a big miss in its January same-store sales, or sales at stores open at least a year. Same-store sales is a key measure of performance in the retail industry.

Wal-Mart partly blamed its soft sales on poor gift card redemptions, but one retail analyst wasn’t buying that explanation.

“Wal-Mart’s not a top destination for gift card redemptions,” said Ken Perkins, president of sales tracking firm Retail Metrics. “I think its results show that its core low-income shoppers and now the middle-class households who shop there are scaling back.”

* * * * *

Retail sales for January: weakest in nearly 40 years

Yahoo! Finance (AP wire piece), Feb. 7

The nation’s retailers delivered more evidence of a stumbling economy Thursday, as merchants reported their weakest January performance in nearly four decades, extending a malaise that has deepened since the holiday shopping season.

The sales figures made it clear that consumers wrestling with high gas and food prices, a slumping housing market, an escalating credit crisis and a weakening job market retrenched further, buying mostly necessities even when redeeming their holiday gift cards. The disappointments cut across all sectors including discounters like Wal-Mart Stores Inc., teen retailers including Pacific Sunwear of California Inc. and mall-based apparel chain Limited Brands Inc. Even affluent shoppers are pulling back, hurting stores like Nordstrom Inc.

“Clearly, this is a reflection of a very difficult environment for the consumer,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. “It looks like consumer spending is stalling.”

* * * * *

Bad sign: Shoppers using gift cards for groceries and other necessities

MSNBC , Feb. 7

Here’s a sign of how shaky the economy has become: Wal-Mart says its shoppers are redeeming their holiday gift cards for basic items — pasta sauce, diapers, laundry detergent — instead of iPods or DVDs.

Merchants had hoped shoppers armed with gift cards would provide a lift after a dismal holiday shopping season — partly because shoppers tend to spend even more than the value of the card. But that didn’t seem to happen last month, and retailers are feeling the pain.

On Thursday, the nation’s retailers turned in their worst January in almost four decades as high gas and food prices, a slumping housing market, tighter credit and a tougher job market pushed consumers to the edge.

* * * * *

Economy-watchers sound apocalyptic over slowing service sector

Andrew Leonard, Salon, Feb. 5

This was supposed to be a slow week for economic indicators. Then came a report from the Institute of Supply Management (ISM), documenting a precipitous drop in the strength of the United Service service sector in January. Investors instantaneously ran for cover — at 12:25 p.m. EST, the Dow Jones industrial average was down 248 points and economy-watchers were verging on the apocalyptic. (UPDATE: the Dow closed down 370 points.)

Wall Street Journal: “[The ISM data] has recession written all over it. It’s not that it’s weak. It’s a complete collapse in the number, one of the lowest readings this statistic has ever had,” said Jim Paulsen, chief investment strategist at Wells Capital Management.

Bloomberg: “This is a stunning fall,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York. “If accurate, it’s dire news on the economy.”

Calculated Risk: “It couldn’t be much worse.”

Why such a big deal? Well, for one thing the service sector is only responsible for 90 percent of the American economy. As if Super Tuesday needed help in getting any more exciting!

* * * * *

U.S. economy’s descent steepens

International Herald Tribune, Feb. 7

Job losses and a contraction in the business sector where more than 80 percent of Americans work show that the angle of descent for the U.S. economy is steepening. Unsurprisingly, while problems are spreading to the formerly indefatigable American consumer, the old issues — falling home prices and crippled credit markets — show no signs of healing themselves or being healed from on high.

And yet, the Dow Jones industrial average is just 14 percent below its all-time closing high, an improbable combination.

The big question — can the economy possibly shake off a deflating debt bubble? — seems to have been answered.

….An increasing number of American businesses and consumers will be finding credit harder to come by. The great piggy bank called home is definitely tapped out, with declining house prices and banks’ unwillingness to extend more credit making further borrowing difficult.

….In a week of incredible stories, maybe the most amazing was that Fitch Ratings was reviewing 172,326 bond issues after putting on a negative watch the triple-A ratings of one such insurer, MBIA

* * * * *

Mortgage crisis has only just begun, will slam into nonfinancial companies next

CFO.com, Feb. 7

The next wave from the subprime mortgage crisis will flow past lenders and homebuilders and strike nonfinancial U.S. companies with forced write-downs, the chief executive of PricewaterhouseCoopers warned.

Samuel DiPiazza, chief executive of the Big Four accounting firm, pointed out that many nonfinancial companies were exposed through securities in their own investment portfolios, according to a Reuters report.

“It’s not just in banks,” DiPiazza said. “These securities sit in cash equivalent accounts of industrials; they sit in investment portfolios of pensions. We are having to deal with this with thousands of companies, not just a handful of big banks.

….”I will not underestimate the challenge we have working through a lot of complex securities and getting them valued,” said DiPiazza. “We have to ask the question: What’s under the surface?”

* * * * *

More than 10 million Britons may default on debts in 2008

The London Telegraph, Feb. 7

More than 10 million people may default on repayments for mortgages, credit cards or personal loans by the end of the year.

A forecast from one of Britain’s biggest accountancy firms, says that “the merry-go-round of credit is about to stop”, as millions of people realise their take-home pay is not enough to service their debts.

….[Jeff] Randall [the Daily Telegraph's Editor at Large] who . . . met people who had been driven to the point of suicide by their debts, said: “What we believed was widespread economic prosperity turns out for many to have been an illusion, funded by excessive debt.”

* * * * *

Foreclosure nightmare leads middle class to flee Miami

CBS4, Feb. 6

Florida has been faced with more foreclosures in 2007 than 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1990, 1991, 1992 combined. The year 2007 was a record.

….Every week, inside our county courthouses, banks try to sell hundreds of foreclosed homes. Some of them are half off, most of them with little success.

….Where American dreams are struggling, [Miami resident Cathi] DeThomas said, “I don’t think the middle class can survive here. Your nurses and teachers and postal workers, and all of our middle professional people who aren’t upper management, it’s like we don’t have an option.”

She reiterates a common theme in today’s economy that people are caught in the middle.

“Every day it’s getting worse. Every hour it’s getting worse. It’s getting harder and harder for people to survive. There are people who commit suicide over the same situation. It’s just that serious.”

By the numbers, South Florida appears to be in a state of metamorphosis. Its middle class is leaving, and quickly being replaced by a wealthier class. People may have to be wealthier not only to survive in South Florida, but to thrive.

* * * * *

America’s newspaper industry in freefall — shrinking readership, falling profits, layoffs, the works

The New York Times, Feb. 7

In just the last few weeks, The San Diego Union-Tribune eliminated more than 100 jobs, one-tenth of its work force. The Chicago Sun-Times began a major round of newsroom layoffs, then put itself up for sale, and publishers in Minneapolis and Philadelphia warned that tough economics could force cuts there.

Not long ago, news like that would have drawn much commentary and hand-wringing in the newspaper business, but in the last few months, reductions have become so routine that they barely make a ripple outside each paper’s hometown. Since mid-2007, major downsizing — often coupled with grim financial reports — has been imposed at The San Francisco Chronicle, The Seattle Times, The San Jose Mercury News, USA Today and many others.

The talk of newspapers’ demise is older than some of the reporters who write about it, but what is happening now is something new, something more serious than anyone has experienced in generations. Last year started badly and ended worse, with shrinking profits and tumbling stock prices, and 2008 is shaping up as more of the same, prompting louder talk about a dark turning point.

“I’m an optimist, but it is very hard to be positive about what’s going on,” said Brian P. Tierney, publisher of The Philadelphia Inquirer and The Philadelphia Daily News. “The next few years are transitional, and I think some papers aren’t going to make it.”

….Newspaper executives and analysts say that it could take five to 10 years for the industry’s finances to stabilize and that many of the papers that survive will be smaller and will practice less ambitious journalism.

* * * * *

Recession Road Trip: A sampling of America’s local economies

David Whitford, Economy, February 8

[Cardin comments: What follows is the introduction to an article that I encourage you to read in full. As the author explains below, he took a road trip last month to get an impressionistic idea -- "I wasn't looking for a snapshot but a kaleidoscope," he stresses -- of what life is really like on the ground right now, in real American cities and towns, beneath and behind the types of gloomy headlines that I've been chronicling here in these Headlines from the Meltdown posts. His itinerary included Medford, Oregon; Phoenix; El Paso; Sioux Falls, South Dakota; Cincinnati; Charleston, South Carolina; and Portland, Maine. The picture that emerges in the article is quite varied but Whitford ends it on a note of patent hope. One thing he isn't taking into account, though, is the dramatic onset of troubles related to peak oil (cf. the two articles below this one). These still represent a wild card, or rather a looming and present certainty, that will cut right through all other problems and issues. Nevertheless, I still find Whitford's approach to be extremely valuable in exactly the way he meant it to be: as a counterweight and antidote to the widespread practice of making pronouncements about the American economy that are derived purely and solely from "staring at a computer screen or studying survey results."]

We’re entering a recession. That’s what the power brokers in Washington and Wall Street have recently concluded. Or we will be soon. Or else it started a while ago and we’re just now finding out. In any case, the pundits are gloomy, and the politicians all have plans. They trot out some scary numbers. But here’s what I was wondering: How are American business owners really coping with all this confusion? What does the economy truly look like? Not when you’re staring at a computer screen or studying survey results, but when you actually go someplace that’s not a major media market (the farther from those places, the better) and you introduce yourself to a stranger and ask him how he’s doing.

During the last full week in January, I did just that, visiting cities from the Pacific Northwest to the desert Southwest, from Texas to the Great Plains, from the Midwest to the Deep South, and all the way up to northern New England. I met a restaurateur in Arizona, a statue manufacturer in South Dakota, and a jewelry wholesaler in Ohio. I touched a broad, if admittedly somewhat arbitrary, cross-section of America. I wasn’t looking for a snapshot but rather a kaleidosco