"...Pretty bubbles in the air," crooned Henry Burr in 1918. Little did he know. At last count we have bubbles in the following economic sectors: oil and energy, commodities, tech, national debt, monetary policy, defense spending and executive compensation. We are tempted to add equities but that bubble may be popping.
We have, as one wag put it, a bubble in bubbles. If only it were as cute as it sounds. The problem we face is that the desperate measures to save the economy two years ago were instituted without any of safeguards recommended to curb abuses. Those that made it past the lobbyists were so watered down as to be almost useless.
There were high-fives all around in the American Banking Association a year ago when 'financial reform' was gutted like a young calf. As Paul Farrell comments in MarketWatch, here we are again. Except this time the economy is already on its knees. One thing seems pretty certain; there is no bailout coming this time. We'll see who's dancing when the music stops. JL:
"The 30-year Reaganomics Revolution will be over soon. Like the Roaring Twenties, ending in the game changing crash. Though more than 80 years apart, they share a common theme song of irrational exuberance: “I’m Forever Blowing Bubbles.”
That one song captures the collective mind-set of both the Roaring Twenties and the Reaganomics Revolution: “Forever blowing bubbles. Pretty bubbles in the air. Dreaming dreams. Scheming schemes. Building castles in the sky. Fortune’s always hiding. I’ve looked everywhere. Forever blowing bubbles. They fly so high, nearly reach the sky. Then like my dreams they fade and die.”
The bubbly went flat during the long Great Depression. It repeats with the Reaganomics Revolution’s “pretty bubbles.” For a generation we have watched the damage created by a selfish ideology: The S&L disaster. Dot-com crash. Subprime meltdown. Great Recession. And there’s more to come.
Irrational exuberance blinds us. On March 20, 2000, as dot-com exuberance raged, our column began: “Next Crash, You Won’t Hear It Coming.” Then came a 30-month recession. We went on reporting 20 advance warnings of the 2008 meltdown. Nobody listened. Till it was too late. Till a conflicted Treasury Secretary, myopic Fed Chairman and clueless Congress all panicked, making matters worse, setting up a new meltdown, dead ahead.
Reaganomics Revolution destroyed values of American Revolution 1776
Today our collective brain has been consumed by a greed-is-good virus. We have lost our moral compass. The values of the American Revolution of 1776 are dead. The Reaganomics Revolution has replaced those values with the unregulated free market with an “every man for himself, get rich quick” ideology that’s destroying America from within:
In the Bush years some cocky conservatives predicted a “permanent majority” lasting “for years, maybe decades.” The hubris gods had other plans. Then after Obama’s election, one cocky liberal wrote “40 More Years: How the Democrats Will Rule the Next Generation.” Wrong again. Both parties will lose in the final flame-out of the Reaganomics Revolution.
Yes, so many “pretty bubbles” merging. And still, the pundits and press love the bull, arguing that no one bubble is a game-ender. Even after a generation of increasingly bigger, more frequent economic disasters drain our fiscal and monetary resources, raising our debt to unsustainable levels, destroying our trust in democracy, it’s now obvious that America many “pretty bubbles” are making us vulnerable, inviting trouble.
Get it? Today any one “pretty bubble” can trigger a flash point, ignite a chain reaction, an economic nuclear bomb exploding the American Dream. Here are America’s most toxic bubbles, warnings of the coming crash … the one we refuse to hear:
New tech ‘pretty bubbles’
Bad sign: Pundits are desperately trying to dismiss the LinkedIn IPO, arguing it’s not another 1999 sock-puppet crash signal. They’re wrong. “LinkedIn inspires others” to “take serious step toward IPOs,” warns USA Today’s Matt Kranz. Another even bigger warning comes in an Economist cover story, “The New Tech Bubble: Irrational exuberance has returned to the Internet world. Investors should beware.”
The Economist has a great track record. It predicted the dot-com crash in advance. Years before the subprime meltdown, in a June 2005 cover story, it wrote: “The worldwide rise in house prices is the biggest bubble in history. … Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000.” Values increased 75% worldwide in 5 years. “Never before have real house prices risen so fast, for so long, in so many countries … the biggest bubble in history.” America ignored it. Warning, another huge tech bubble is brewing.
Oil-energy ‘pretty bubbles’
Whether it’s the BP Gulf spill, four-buck gas, oil-driven inflation, “peak oil” warnings, domestic political pressure to drill baby drill, that requiem to “The Oil Age” in Foreign Policy, or the oil giants’ ads bragging about what good guys they are, a big bubble is blowing.
In Ben Casselman’s recent Wall Street Journal feature, “Facing Up to the End of Easy Oil,” energy analyst Alex Munton says the “major oil fields in the Gulf region have pumped more than half their oil, the point at which production traditionally begins to decline.” Supplies are disappearing: “The U.S. Energy Information Administration said earlier this month that world-wide oil consumption would hit a record 88 million barrels a day this year,” with global reserves of 434 billion recoverable barrels of heavy-crude, costly using existing technology. Peak oil, demand up, costs up, war risks increasing.
Wall Street-Federal Reserve ‘pretty bubbles’
Or call it the “Cheap Money Bubble.” First it was Greenspan’s obsession with Reaganomics, now Bernanke. Both so deep in bed with Wall Street banks they’ve lost perspective, putting the bank demands ahead of consumers, taxpayers, investors … feeding on cheap money, huge bonuses, arrogance and greed … feeding off high unemployment, foreclosures, a declining dollar, foreign capital … feeding on mercenary lobbyists with no moral integrity, bought congressional votes, self-serving regulations, market manipulation and information control that’s killing capitalism and democracy.
How? Because Wall Street’s banks do control the Fed, Congress and the presidency. They install insiders and tell the Fed bosses what to do. Yes, folks, this “pretty bubble” has been pop-popping throughout the 30-year Reaganomics Revolution.
Megadebts ‘pretty bubbles’
Even if the GOP/Tea Party of No-No fails to get a no vote on the debt limit, America’s too deep in a hole. One that the GAO, CBO and others warn we may never be able to dig out. And it’s not just federal debt at a ratio of debt to GDP over the 90% danger point, but excessive debt throughout the economy: consumer debt, state budgets, corporate, underfunded state and municipal pensions, the insolvent Fannie Mae and Freddie Mac, and a Social Security Trust Fund that doesn’t have a dime in it, except the questionable “good faith and credit” of a declining dollar. This bubble is about to pop.
Military war spending ‘pretty bubbles’
Yes, the GOP’s Ryan Plan may be backfiring on Medicare, but military spending is still off the table. Why? The GOP loves war. Ever since Reagan, conservatives have given the Pentagon a blank check. Now, thanks to misguided war policies, the military wastes half the Federal budget, and is now the major cause for America’s $14 trillion debt, along with Bush tax cuts for the rich.
Which reminds us of Nixon strategist and historian Kevin Phillips’ warning: “Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out.”
Commodities: Oh so many ‘pretty bubbles’
All over the world, commodities are getting scarcer and costlier as population grows, demanding more. China is buying and hoarding huge reserves worldwide. Of seven billion on the planet, two billion people live in poverty, spending 50%-70% of their income on food. When food staples recently soared, desperation increased, many cut from two meals a day to one.
Money manager Jeremy Grantham warns, “The world is using up its natural resources at an alarming rate. This has caused a permanent shift in their value.” And still, world leaders are turning a blind eye, can’t hear, won’t listen … till it’s too late.
Many more ‘pretty bubbles’
Warning: Our world is filled with many more “pretty bubbles” rubbing against one another, heating to a flash point that can easily trigger a cascade of unstable ticking time bombs: Out-of-control health-care costs … the Social Security bubble … a politicians/lobbyists/special interests bubble destroying our democracy … the unregulated $680 trillion global derivatives casino bubble … China owning over a trillion of our debt, with China’s GDP predicted to exceed America’s in five years … and the biggest, the exploding global population bubble that doubled the past two generations, now at seven billion, predicted at nine billion by 2040 … more “pretty bubbles” of humans demanding their own version of the American dream … and when they get it, all demanding nonrenewable resources at the same rate as America.
Eulogy: Reaganomics, you’ve had a generation to do the right thing for America. But you got too greedy. Too arrogant. Lost your moral compass. Became a myopic, ego-centric ideology. Soon you will pay the price. So will America. All of us. With a collapse of markets, the economy, democracy. Collapse of your kamikaze capitalism.
So now, as in the Roaring Twenties, your theme song builds to a crescendo: “Forever blowing bubbles. Building castles in the air. Dreaming dreams. Scheming schemes. Blowing pretty bubbles … they fly so high, nearly reach the sky ... but like all dreams … they fade … they die … still you can’t see … can’t stop … keep blowing … pretty bubbles in the air … till it’s too late … till another meltdown … game over … R.I.P. Reaganomics
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