Monday, January 19, 2009
I got a write-up in the New Yorker, in an article by Ben McGrath, Boom time for doomsayers, in the January 26 issue, which is on newsstands starting today. Also featured in his piece are James Howard Kunstler and Nassim Nicholas Taleb. Ben has been researching the subject for a couple of months, and his reaction to all he's learned is a thoughtful and friendly one. He says that it has started to color the way he sees the news; perhaps now he is more inclined to see ongoing collapse where before he saw nothing more than the usual "ups and downs" projected by the media hologram. But, as he confesses in an online interview, due to a combination of inertia and peer pressure, he is yet to make any changes in his life to make himself better prepared for what's coming. The article is worth reading, and I hope that, for your own sakes, you can pick up where Ben leaves off.
Ah, thanks. I looked for it on the January 19th issue and there was McGrath but writing about something else. However, check out the great article on Colorado miners by Caleb Crain in that issue.
Something is stirring in the mainstream press. The other day I read an article titled Globaloney on the Atlantic Monthly, written by the magazine's editor, that came surprisingly close to telling it like it is.
As to practical preparations, I think zoning will go by the wayside. That seems like a small thing, but it is not. A parallel economy will require a de facto abandonment of zoning. If the guy can repair your car for cheap at his home garage, zoning is a very secondary consideration. This is just one example.
Anyway, thanks for the good work and I am glad you are getting exposure. We have had enough gossip in this country to last several centuries. A little reality in the discourse is much needed.
McGrath also did a podcast on the subject at http://www.newyorker.com/online/2009/01/26/090126on_audio_mcgrath
Whenever I take my morning jog around the neighborhood, I'm haunted by the number of for sale signs on my block alone....seven. They're a constant reminder of what's to come. Thanks Dmitry...for your prolific and intelligent postings.. I've been reading your blog for months because I've sensed all wasn't right here for years. We lived in a small town in Germany and had to move back to the states in 2003. We didn't want to come back then because we somehow sensed what was happening here. I've told all my friends to read your posts, but no one has taken them seriously. We've sold a lot of our belongings for cash and have started to buy gold as well. Our passports are updated and sometime in August, we'll be moving out of the states. Family members believe we're being paranoid and that things will turn around in about six months! Some of my other friends accuse us of giving up by running away and that isn't the case. I don't want my girls to be around when the chaos kicks into high gear. I think any mother-in-the-know would do the same thing. I'm not ignorant. I know where we're going won't be a panacea but the population is smaller and the culture is in tact. Hopefully it will be the right decision for us. We have to at least try for our girls. Also, we find the prospect of moving to another country exciting as my husband and I don't like to stay in one place for too long. We don't view our move as being negative. In truth, we had plans to eventually leave the US. The current collapse only hastened our decision. Starting a new life in a new country is a challenge for personalities that crave new experiences. Luckily, our family fits that description!
I'll continue to look forward to your posts.
Good luck to everyone,
Just to agree with Eleni as to why it's important to go while there is still time. My wife and I made the same decision years ago, for our child's sake, when the signs pointing to what is just about to happen were only faintly discernable, and then only if one knew what to look for.
As she says, Europe is no panacea, but for the reasons she lists, and others, barring anything nuclear, I believe it will survive. It's had a lot more experience doing so than most other places.
Many thanks to Dmitri for writing again.
Best wishes all,
It's in The New Yorker January 26th issue. I just read it this morning, and noted that it said, "But in the past few months, judging from the e-mails he receives, Orlov has acquired a fourth audience [1 to 3 were mentioned as back-to-the-land types, peak oilers, and all-around Cassandras], composed of financial professionals, who have been, as he said, 'bolstering my gut feeling that the United States is bankrupt.'"
That comment inspired me to find this site (hadn't heard of this before) and get on here and mention "Market-Ticker" and Karl Denninger, at http://market-ticker.denninger.net/ for some very excellent analysis (daily and at times multiple times in a day!) on the current situation and its causes, effects, and possible solutions.
I had (prior to stumbling on that site) been unaware of a lot of what had been going on (in financial arenas) but aware that a lot of mortgages were being offered that were appraised by drive-by methods and other "guesses" and lack of documentation of income, etc. So I foresaw a lot of what has happened now, since back in 2004, just from extrapolation of that.
I have been reading JHK's CF Nation for about 3 years but it gets so trollish it is unreadable.
Anyhow, Denninger is well worth checking out (doesn't go in for the gold approach which is fine with me but some get irate about that, in the Comments section there.) He has an open Group on Facebook for Market Ticker also.
In reference to this blog's audience, I have no idea who reads it, but I am neither a back to the land type nor a Cassandra, whatever that is.
Back when we had (supposedly) prosperity under Clinton, I noticed that the government's inflation figures did not correspond to reality. I started feeling that money was worth less and less, that something was wrong. Later, in the early Bush years, I emailed an economist friend about this curious phenomenon of "low" inflation but the cost of living, the actual cost, going through the roof. He told me that he found it just as puzzling, especially when computing how many gallons of milk median earnings buys, or which multiple of median yearly income buys the median house. He told me he suspected the figures were manipulated and well below real inflation.
It was also evident, during the Clinton years, that jobs had become worse and lower-paying for most people, that the country was quickly becoming a country club, as Orlov indicates. It is much worse now, of course.
Later I found shadow statistics that correctly reflect inflation. According to one calculation, since the gold standard was abandoned, the dollar has lost 93% of its value, another important factor in the fake economy of the past several decades. Such an economy was based on 1) the dubious assumption that the future will always be better, 2) the Ponzi method of borrowing constantly in order to pay for expenditures and for "growth".
I have a nagging suspicion that (2) has something to do with a real doomster's view that the world is going to end soon so the borrowing will never have to be paid anyway. This is an extraordinality dangerous view, especially when it is held by economists (perhaps subliminally) and politicians (literally, in some cases).
When I saw Orlov's article in 2005, it clicked with reality, not just the reality of peak oil but the reality of constantly living on borrowed money, of living in unlivable places, of constantly deteriorating wages (in terms of real inflation).
In case anyone is interested, here is the excellent site that provides "shadow" (i.e., not manipulated) statistics:
Meanwhile, Obama has his work cut out for him. He did come close to saying that the country is broke, which is progress.
Hello. Nice & relevant comments, all. (I do second another poster's opinion about JHK's CFN blog)
BTW, at http://kunstler.com there's a link to the NYM article (upper left), but it requires a $ subscription. If anyone knows of a free version... :-)
I'm from near Prague, and even tho I have lived a very long time in the US, I still only have that passport. I live on what I call the best street in the US (50 blocks from downtown in a large PacNW city, 100 yo house w/view on a double lot, old trees and sidewalks that are used, most shopping is walk/bike, and there are three bus lines 3-4 blocks away). I still owe a significant amount, but I'm sure I could sell with a gain. Oh, and my full-time telecommute job went to India a few months back.
That said, I have no idea what to do yet. I somewhat agree with other posters about Europe, but I think Europe will be hit as well. (Everyone tried to be like the US, it seems.) Plus, the recent Russian natl gas outage: not a billing dispute but Moscow's jabbing at the EU, methinks. "Who's the boss?"
How about Argentina?
Anyway, enough of ranting for now. Let me also leave a couple of links:
Bill Bonner, the Daily Reckoning
Peter Schiff (of EuroPac Capital):
I now also read MarketWatch.com - usually not the articles, but the comments are great fairly frequently. The MW has this cool comment-rating capability, so one can tell readers' mood.
Anonymous is right when (s)he says:
"I have been reading JHK's CF Nation for about 3 years but it gets so trollish it is unreadable." Kunstler lately seems to have gone into meltdown for reasons I do not know and about which I will not speculate. I've pulled the link to him off of The Cyanide Hole, but I hope he gets well soon because he was fun to read when he was rational.
For many years I've understood capitalism as an elaborate realestate swindle in which zoning laws play a key role. The fact that realestate prices go up forever explains the inflation we've experienced throughout our lives. I'm only 60 years old, and I can remember when bread was 15 cents per loaf. It's up over $2 per loaf today. Pepsi Cola was a dime.
If you're a young person who needs proof of such radical inflation over time, just go down to the public library and dig into the microfilm newspaper index from 1950 or thereabouts: look at the prices in the grocery ads and compare those with what you pay at the store today. Look at the realestate ads: see what a new, three-bedroom ranch sold for in 1950.
The realization will rock you to your core, I promise. Today's American dollar is the flimsiest of toilet paper and will soon become worthless, even in the toilet.
Cassandra was Hector's sister, the daughter of Priam and Hecuba. She had the gift of prophecy and was ALWAYS right, but she was cursed by the god Apollo so that nobody would believe her prophecies.
Seriously, it seems most other advanced economies are sinking even faster than the US. Remember, an economic collapse is partly a relative thing compared to other countries.
Thus, there may be hope for the US after all!
See Mish for the best economic blog on the web. He strongly disagrees with Peter Schiff on dollar collapse, but shares many of his other views.
Annon 11:19 said, "Remember, an economic collapse is partly a relative thing compared to other countries."
Uh, so if things in Belarus are worse, when average life expectancy here falls to the early 50s (as it did in Russia post-1991), that's nothing to worry about? OK, you meant currency collapse. They are not the same!
There are good reasons that central banks with specific inflation targets (which the Fed has never had) set them in the range of one to three percent, not zero. Mild inflation acts as a lubricant in the economy. It's just part of the way capitalism works and nothing to get excited about. If a gallon of milk cost $1.35 back when that was minimum wage and still costs minimum wage today, so what?
My "doom boom" indicator of the week was Geithner's calling out China on currency manipulation. He has set some people on edge by being blunt, but it's the healthiest thing I've heard from the Obama team.
Global trade is crashing, and that's not good. One Somalia is one too many. Competitive currency revaluations are a real threat and the fact that a very prominent member of the incoming team was willing to be frank says a lot.
The run-up to the G20 meet on April 2 will be interesting. My doom meter will go down in proportion to the willingness of policy makers to engage reality.
PS: Click my name for James Kwak today on relative currency valuations.
I did catch the Geithner gesture (let's call it that for now) about China's currency. I doubt that Geithner will dare do anything serious, though. If China dumps the dollar, even if it does so gradually (as it would), the US economy, which already consists mostly of hot air, will start to smell of sulphur.
The moment nobody wants those bonds is the moment of doom. At that point, there won't even be symbolic gestures left to the US bureaucrats. They will have to pack up and leave. That may be the end of perestroika and it may not be so far away if Geithner gets tough with China (i.e., not just a gesture but concrete measures).
Peter Morici, an honest man, has been speaking and writing repeatedly about the trade deficit with China as the most urgent problem to be dealth with. I have no doubt that Morici would do something if he were in charge, but Geithner... he probably does not want to be remembered as the guy who finally sank the dollar.
The trade deficit with China is not part of Obama's plans as laid out in his website.
Today I finally had time to read the McGrath article. While very well written and suitably distant, I got the impression that he was trying to present characters such as Orlov and Kunstler as "singularities" rather than people who are reacting rationally and radically to a real situation. In other words, it seems to me that McGrath views the phenomenon as yet another picturesque piece of Americana, a favorite subject in the New Yorker since its founding.
There wasn't enough discussion of the problems that the various authors are trying to address. While I, being interested and conversant with the problems, could interpolate and contextualize the words of those interviewed, I don't think a typical reader would interpret this as anything other than a window into excentricity.
There is a danger that today's "doomsayers" and "collapsists" be viewed as old-fashioned survivalists, who have been a subject of derision for a long time.
The difference is that those who have been warning about collapse in recent years have presented a rational case which is not even predominantly political. In other words, these are practical warnings about practical life based on real information and analysis. If anything, contemporary doomsters are the descendants of Schumacher, not of some crazy prophet of the hills. McGrath does not make this clear.
That is my brief impression of the article, which I nevertheless recommend.
The New Yorker article also mentions the Second Vermont Republic and one of my favourite books, 'The Black Swan' by Nassim Nicholas Taleb. The following article, 'Code Red, Economy in Collapse' doesn't directly compare Geithner to Ayn Rand's Wesley Mouch character, but anyone who has read that book should immediately see the parallel:
So, who thinks that the intellectuals mentioned in this second article will get lined up against a brick wall as an example to others to be more careful, and who thinks we will simply be left alone?
What inherent value does gold have anyway for people to think that it will save them from monetary collapse ? I believe that it is a fallacy to imagine that a person or small community can be truely independant of society. I do try to buy what food I don't produce myself food from local producers. I trade, I work under the table in masonry and carpentry. I live in rural southern France where medicine is still socialized, I garden, I own sheep, I own bee hives, I heat my house with wood which I collect.. All of this, but when the shit hits the fan, I'm going to get splattered just like everyone else.
Don't have a head for numbers but enjoy music? Then listen to this: stock charts fed through Microsoft Songsmith. It's catchy!
Some of you clearly don't get the point made by our doomsters in the US about your situation there.
It has never been contended that Europe would not be hit by this definitive depression. The extremely significant point being missed, is that the social, political and commercial fabric of the US is little short of anarchic, in comparison with continental Europe - even, to some extent, in comparison with your offshore beach-head, the UK.
A world of intensely anomian competition would seem a fairly apt description of the US. A jungle. Them and us, grifters and pigeons, with a vengeance. It's as if you had been ruled by Vikings, but without the intelligence or the courage. Just the badness.
Post a Comment