For those of you who are familiar with James Howard Kunstler, he has been predicting various problems for America on his blog and in his books. His blog, Clusterfuck Nation, is a great read each Monday and often gets me thinking about where America is and where America is going. In The Long Emergency, the collapse of America is foreshadowed as a result of our dependence on foreign oil, as the ability to cheaply bring the commodity out of the ground runs into trouble worldwide.
When I first read The Long Emergency back in 2006, I wasn't super knowledgeable about the world oil scene or the housing debacle and as a result of the book I was able to mentally get in front of the trouble currently coming home to roost in America. Since I get asked a lot for my opinions on both situations, here goes.
The crisis in the financials markets first and foremost pisses me off, because the people at the top were/are paid a lot of money for the jobs that they do. I always assumed the primary objective of running an enterprise was to ensure its livelihood; i.e. not wreck it with irresponsible polices, strategies, management, etc. By law, shareholders of American corporations are allowed to sue in the event that the company isn't engaging in money making activities deemed to best represent the interests of said shareholders, yet I am unsure of exactly how that would work. One of the defenses I have heard about the financial crisis when discussing the role of former Citi Group CEO Chuck Prince is, "When the music is on, you've got to dance," implying that since the other financial services companies were making money selling CMOs, CDOs, etc, that therefore Citi had to do it as well. Yes, everyone was doing it. But does that make it right? It reminds me of a conversation between a parent and a child who was caught drinking alcohol at the prom. "But Mom! Everyone else was doing it!" These were supposedly the best financial minds America had to offer, and no one realized that the structure of selling the mortgage debt only worked when the home values were rising? Not one of the highly paid executives said, "Guys, this model doesn't work when home values are declining," or "When the value of the home is less than the value of the mortgage, the value of the CDO declines too, effecting the yield..."? Not one person said that? No one knew?
To me, this is why government regulation exists, and the cries for "deregulation" on the part of the Republicans over the past 15 years were dangerous. Some industries are dominated by the classic "herd mentality" in which the prevalent ways of thinking dominate the culture. The investment banks were smitten with a new way to make money by securitizing debt that it clouded their judgement as to the true definition of risk. Here we are today, without one stand alone investment bank on the shores of the United States of America. Those financial professionals were paid a lot of money to evaluate the risk of what they were doing, and failed, because "everyone else was doing it." Now our country is in deep shit, and they are all still rich, yet the middle income people hurt by all of this aren't too big to fail, so they don't qualify for gov't handouts. It pisses me off. The Republicans who looked the other way are just as responsible for not supervising what the financial institutions were doing. They were just as worried about getting rich too, and most still are. Yet they have the nerve to spend taxpayer money on this mess and talk shit about the Democrats without taking any responsibility. It pisses me off. One thing I hear about is how, "Democrats lie too," as if its ok that the Republicans wrecked this country because the left lies. The left doesn't deregulate so those in the know can get rich at the expense of the rest of us.
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