Alpha Plus

SUBHEAD: A Brave New World of Bankster Godfathers.

By John Schettler on 26 January 2009 in The Writing Shop -
http://www.writingshop.ws/html/alpha_plus.html

Image above: detail of album cover for Iron Maiden's 2000 "Brave New World"

 
“Consumer” confidence plummeted to the lowest figure ever recorded in January. That is no surprise. The dismal Christmas selling season provided ample warning, but this year the normal psychology of change that the champagne of New Year’s brings did not offer solace, in spite of the uplifting change at the top of our government. The bad news continued unabated. January 26 week brought no less than 71,400 new job cuts on a single day! Profits are down, businesses are closing, foreclosures continue to rise, credit remains frozen. So it is no wonder that people are holding onto what little money they have.

They spend when they have hope that their future will be brighter than the present, and no one can see through the gloom to discern just how bad things will truly become, or when a recovery might be expected. Even with hope in abundance, “normal” spending still requires money. (I use quotations on the word “normal,” for in my mind most typical spending by Americans has long been excessive and unnecessary.) The hard times seem to have finally made the point that you cannot use other people’s money, (credit) to spend 25% more than you earn each year. The crisis in the economy is what happens when all that credit suddenly vanishes due to banking malfeasance, and “consumers” can no longer pay their bills, let alone consume.

When people don’t have money to pay their IED rigged mortgage, is it any surprise that they stop paying and default? And when they do, the housing market crashes. When they stop buying cars, the auto industry crashes. When they stop buying clothes, the retail sector crashes. And on it goes. The unemployment numbers are just starting to get warm. The real heat and fire is yet to come. A husband and wife both lost their jobs this week and both took their lives in a nice little suburb of LA--along with the lives of their five children.

This is pain and despair so deep that it boggles the mind. And the hardest thing about that story was this--where were their friends? Was there no one on this earth who knew them and loved them enough to offer help? That they felt so isolated, and so hopeless in their situation is a sad testimony to the state of our Society, with a capital S. As President Obama wrangled on the Hill for support for his $850 billion stimulus plan, I realize that we cannot wait for the Directors and Controllers of our Brave New World to save us. We have to save ourselves. If we cannot take care of each other on a personal level, and help one another through this, no amount of government bailout money will matter.

How did we get here, staring into the abyss of yet another economic collapse, and one to possibly rival or even eclipse the Great Depression of the 1930s? Is it all the fault of extravagant “consumers,” the millions of Betas and Deltas in the soma ridden shopping malls of our Brave New World? Or perhaps we should blame those further down on Society’s ladder of privilege, the “sub-prime” Gammas and Epsilons who were unable to escape the Alt-ARM reset traps the bankers set for them in their “home loan.”

No. We must look higher up if we are to find the real culprits. The real damage to Society did not occur in the copper gutted neighborhoods of Cleveland and Detroit, but in the glitz and opulence of Wall Street, with John Thain’s $80,000 area rugs and $1400 trash cans the accepted norm. The shiny new corporate jets that the CEOs of GM, Ford, and Chrysler used when they first flew to Washington to beg for money are another clue, along with the $50 million addition to Citigroup’s corporate jet fleet after that bank received over $50 billion in free taxpayer money.

The half million dollar party AIG threw after it received its $90 billion was yet another clue. Or perhaps we should look to the $13 million dollar estate of ex-Lehman Brothers CEO Richard Fuld, quietly sold to his wife for a sum of a hundred dollars to make sure it stays in the family… or to the millions in diamond studded jewelry Bernie Madoff tried to slip into the mailbox to his relatives and friends. No, my friends. If we want to point the finger of justice at anyone, we must look first to the very top, where our Alpha-Plus executives sit in their mansions and multi-million dollar office suites—the men who have brought some of the largest and most powerful institutions in the nation to the brink of bankruptcy through their excessive greed, incompetence, lack of prudence and foresight, and downright corruption. Now they are looting the public purse as well.


Paul Craig Roberts of Counterpunch said it well when he wrote: “The gangsters are using the crisis as an opportunity to steal from taxpayers and to finance their misdeeds and exorbitant salaries with Federal Reserve loans. Their shills among economists and the financial press tell the people that the solution is to fatten up the banks with funds so they will resume lending to an over-indebted public that will then return to the shopping malls.” In effect, they want to start the wheels turning again, greased by taxpayer money this time, so they can return to the same old game.

How did we get here? It’s no great secret. Quite simply, banks were playing a huge shell game with the world’s money supply, and with the trust and confidence of all their investors and customers. It started with a loan, a little nut placed under the first shell of a “home.” Then the hands of bankers and investors became that well practiced blur of distraction and deception as the loan was tranched away into securities and moved from one shell to another, and then off the table of reality altogether, deftly slipped up the banker’s sleeve to the nebulous world of “off balance sheet assets.”

And when the game was finally exposed for what it was—a massive con—all the other traders and investors around the game tables at places like Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs had a panic attack. All the betting stopped, and the trading of these rotten nut “assets” came to a screeching halt. Confidence in the gamesters plummeted, along with the stock value of financial institutions all across the globe. As one storied investment house after another began to collapse like the floors of the World Trade Center, bankers began to panic as well. They hoarded cash and stopped lending. Credit, the fuel the economy was running on, like cheap oil, underwent a massive contraction. And that was the end for the main street consumer, who had financed big spending almost entirely on credit cards and home equity loans.

Consumer spending fell off a cliff. Auto showrooms across the nation sat empty. Retail sales fell to new lows. Businesses, once flush with the frenzy of one day sales and blowout holiday specials, suddenly saw their margins evaporate and red ink swelled like a blood stain on their books. Inventory backed up on store shelves and could not be moved even at 70% discounts. Cars sat idle in the dockyards of American ports, in tens of thousands. The wheels of the economy finally stopped turning, the very same wheels that Huxley’s World Controller Mustopha Mond said must never stop.

Bush and Cheney sent our young men and women off to war for eight years to guard and secure the fuel we needed to keep those wheels constantly turning. They hunted out “enemies” in the caves of the Hindu-Kush, while all the while the real danger to Society was lurking in the plush high rise office suites of Wall Street. So if anyone is to be blamed, let us begin at the very top of the pyramid, where that all seeing eye surveils the world on the back of the almighty dollar. Let us begin with the very best and brightest men who were entrusted with the leadership of all these failed institutions, the masters of the shell game, the great con artists of our generation.

One writer at the “Debt Slavery Emancipation” blog expressed what many must surely feel about the Wall Street wizards competence: “One could understand how maybe a few mere mortals might have missed the warning signs, but how could the Masters of the Universe not have seen the tsunami of financial sewage that was headed toward this economy? After all, these are the people at the helm of the ship with a bird's eye view of the inner workings of the Ponzi scheme we know as banking. People that rise to these levels in business are more often than not grossly unqualified for their responsibilities - which include protecting the meager wealth of those who actually earn it through legitimate work. Cronyism and access to influence rule the day while good business sense and prudence have found their way onto the endangered species list.”

But for my money, let’s just stick with Aldous Huxley, who showed us how the Brave New World handled its fallen heroes.

“Ladies and gentlemen,” the Director repeated once more, “excuse me for thus interrupting your labors. A painful duty constrains me. The security and stability of Society are in danger! Yes, in danger, ladies and gentlemen. This man who stands before you here, this Alpha-Plus to whom much has been given, and from whom, in consequence, so much must be expected, this colleague of yours—or should I anticipate and say ex-colleague?—has grossly betrayed the trust imposed in him…For this reason I propose to dismiss him, to dismiss him with ignominy from the post he has held in this Center…In Iceland he will have a small opportunity to lead others astray by his unfordly example.” --Aldous Huxley, Brave New World

Here they are, ladies and gentlemen. I give you the Alpha-Plus of our own Brave New World of finance and banking: Ken Lewis of BofA, John Mack of Morgan Stanley, Angelo Mozilo or Countrywide Financial, Alan Schwartz of Bear Stearns, Vikram Pandit of Citigroup, Richard Fuld of Lehman Brothers, former NASDAQ head Bernie Madoff, and let us not forget the esteemed John Thain of Merrill Lynch…and the list goes on and on, from former WaMu CEO Killinger and on through one bank and mortgage lending boiler room after another, through hedge funds and junk bonds and credit defaults swapped from one to another in the greatest heist and squandering of wealth the world has ever seen. (And of course we must also include those at the very top of the Directorate itself, the Grand Maestro, Alan Greenspan, and his apprentice Ben Bernanke.) Oh how they culled and wooed and dissembled about the game tables, until they had not only destroyed the wealth and confidence of all their investors and shareholders, but also stole away the public trust and treasure in the bargain.

The wheels have stopped, ladies and gentlemen, and they must never stop. Society is in danger. Who should we blame, the gammas and sub-prime epsilons these men burdened with loans that could never be repaid, or the Alpha-Plus at the very tip top of the pyramid, where all the rules were made, and then so egregiously bent and broken? And what should we do—send them all to Iceland? The banks, and the government, have failed there as well, stopping the wheels in that far flung outpost of Society and bringing down the local Directorate. Perhaps they can ply their deceptive and foolhardy craft in that isolated place, where the opportunity to lead other astray will be much diminished.

But even as these former titans of finance shuffle off, one after another, wholly discredited, who will replace them? How will the damage they have wrought be repaired? There has been much talk of late about the nationalization of the banks, following a model Sweden used to save itself in a similar crisis. The banks were nationalized, bad assets isolated and disposed of. Then they were recapitalized and sold back into private hands to start over. The UK is facing this very same problem, except the government is cowed by the fact that some of the nation’s largest banks have bad asset problems that dwarf the government current ability to redress them, many times over. The only solution seems to be the printing press, creating the money necessary to clean up the bad debt. Yet the danger in this is an eventual debasing of the currency when all that new money enters the real main street economy.

Have a look at the “liquidity” that has been slowly building up in the bank vaults of America. Want to know where all your taxpayer funded billions are being hoarded? Look no further. The banks are not lending this money because the reality of what they have done has finally dawned on them, and they realize the losses already on their books now, while cleverly hidden, render them technically insolvent. So, like water behind a dam, the bailout cash is rising ever higher. Current financial World Controller Ben Bernanke probably believes the banks will eventually release this tide in an “orderly fashion,” though I would not bet that it will quickly begin to circulate in the form of new loans.

So don’t worry about the value of the dollar just yet, or the specter of hyperinflation.” The most likely scenario is that all this bailout money will be devoured in the black debt hole of the banking system, which is already eating capital faster than it can be printed. Until this condition changes, we will continue in the ever darkening downward spiral of deflation that is now destroying the economy and taking us, most surely, into the maw of the next “Great Depression.”

Hang on to your soma, folks! Have a half-gram holiday and try to forget. Play another round or two of Obstacle Golf or take the family out to the Feelies tonight. Remember the teachings of Our Ford—that “every man, woman, and child is compelled to consume so much a year in the interests of Industry.” Console yourself by simply repeating the simple slogans born of happier times: “Ending is better than mending… the more stiches, the less riches…the more stiches, the less riches…” But through it all remember the words of the Director himself: “Happiness has to be paid for.” 

Boondoggles to the Rescue!

SUHEAD: Economic collapse has a way of turning economic negatives into positives. Image above: "Last of the Merlot" by by Mark Bryan at www.artofmarkbryan.com By Dmitry Orlov on 26 January 2009 in Club Orlov -

http://cluborlov.blogspot.com/2009/01/boondoggles-to-rescue.html

Just look around and you will see boondoggles sprouting up everywhere, in every field of endeavor: we have military boondoggles like Iraq, financial boondoggles like the doomed retirement system, medical boondoggles like private health insurance and legal boondoggles like the intellectual property system. At some point, creating another boondoggle becomes the preferred course of action: since the outcome can be predicted with complete accuracy,there is little risk. Proposing a solution that might work runs the risk of it not working. Economic collapse has a way of turning economic negatives into positives. It is not necessary for the United States to embrace the tenets of command economy and central planning to match the Soviet lackluster performance in this area. We have our own methods that are working almost as well. I call them “boondoggles.” They are solutions to problems that result in more severe problems than those they attempt to solve. So why not, as a matter of policy, only propose solutions that are guaranteed to simply create more problems, for which further solutions can then be proposed? At some point, a boondoggle event horizon is reached, like the light event horizon that exists at the surface of a black hole. Beyond that horizon, the only possible course of action is to create more boondoggles. The combined weight of all these boondoggles is slowly but surely pushing us all down. If it pushes us down far enough, then economic collapse, when it arrives, will be like falling out of a ground-floor window. We just have to help this process along, or at least not interfere with it. So if somebody comes to you and says, “I want to make a boondoggle that runs on hydrogen” — by all means encourage him! It’s not as good as a boondoggle that burns money directly, but it’s a step in the right direction. Once you understand the principles involved, boondoggling will come naturally. Let us work through a sample problem: there is no longer enough gasoline to go around. A simple but effective solution is to ban the sale of new cars, with the exception of certain fleet vehicles used by public services. First, older cars are overall more energy-efficient than new cars, because the massive amount of energy that went into manufacturing them is more highly amortized. Second, large energy savings accrue from the shutdown of an entire industry devoted to designing, building, marketing and financing new cars. Third, older cars require more maintenance, reinvigorating the local economy at the expense of mainly foreign car manufacturers, and helping reduce the trade deficit. Fourth, this will create a shortage of cars, translating automatically into fewer, shorter car trips, a higher passenger occupancy per trip and more bicycling and use of public transportation, saving even more energy. Lastly, this would allow the car to be made obsolete on about the same time line as the oil industry that made it possible. Of course, this solution does not qualify as a boondoggle, so it will not be seriously considered. The problems it creates are too small, and they offer too little scope for creating further boondoggles. Moreover, if this solution worked, then everyone would be happily driving their slightly older cars, completely unprepared for some inevitable, cataclysmic, economy-collapsing event. It is better to introduce some boondoggles, such as corn-based ethanol and coal-to-liquids conversion. Ethanol production creates very little additional energy but it does create some fantastic problems for further boondoggling: a shortage of food and higher food prices, malnutrition among the poor and inflation. It also reinforces a large existing boondoggle: by funneling resources to petrochemical-based agribusiness, which depletes and poisons the soil and has no future in an age when petrochemicals are scarce, it helps undermine futurefood security. Coal-to-liquids conversion offers similarly excellent opportunities. By attempting to alleviate a shortage of gasoline, it will cause a shortage of coal, resulting in power outages and dramatically higher electricity rates. It will add more carbon dioxide to the atmosphere, accelerating global warming. It will probably call for some coal imports, inefficiently moving a very bulky fuel from far away, and fostering energy dependence on suppliers such as Chinaand Russia, further enhancing the trade deficit. Along with corn-based ethanol, this excellent boondoggle reinforces the erroneous notion that Americans will be able to continue to drive cars into the indefinite future, conditioning them to clamor for more boondoggles in place of any real solutions. With a bit of practice, you should be able to come up with some excellent boondoggles of your own in your own field of endeavor. If your boondoggle works, it will create more problems for you to solve in the next round, as long as there is time for one more round. And if there is not, then you will be where you want to be: at a ground-floor window, staring into an abyss of only a couple of feet. Although by then it may feel unnatural, at that point you must resist the temptation to create yet another boondoggle by jumping down head-first. [Reinventing Collapse, pp 118-120]

Misperceptions about HSF

SUBHEAD: Special treatment for special interest.

 

By Andrea Brower, George Inouye, Noelani Rogers and Ed Coll 

on 26 January 2009 in The Garden Island News http://www.kauaiworld.com/articles/2009/01/26/opinion/kauai/doc497d331b4f8ac160221093.txt

Hawai‘i Superferry has been debated in Hawai‘i ever since the newly elected Gov. Lingle assigned her chief of staff, Bob Awana, to personally consult and expedite the HSF project back in 2002.

Since then, volumes of information have reached every Hawai‘i resident; factual and informative, partial and biased, sometimes not true at all. As a result, public opinion has formed up around ideology and personal interest, often without basis in fact. Here, then, are four common misperceptions about the Superferry.

image above: Superferry tryiing to enter Nawiliwili Harbor on Kauai in August 2007  from www.sun-sentinel.com

The first misperception is that a study just released, mandated by the Oct. 29, 2007 Act II legislation, is a legitimate environmental impact statement. That report, being called an EIS, is lacking a critical component of a true Environmental Impact Statement, as defined in the National and Hawai‘i Environmental Policy Acts. Both include an option of “no action.”

That means if the study shows that environmental impacts are very serious and cannot be mitigated, then the project must be terminated. An EIS should be conducted before the start of a project in the same way that a driver should be licensed and the car have a safety check before being allowed on the road.

The misnamed “EIS” recently released by the contractor Belt Collins omits the “no action” alternative; it was custom-tailored by the legislature in special session to suit the needs of HSF. That means that any findings, no matter how disastrous to the environment, will not get in the way of the company’s operations.

The second misperception, fostered by the Lingle administration, is that there is no connection between HSF and the military. In its Public Utilities application in June 2004, HSF Inc. “anticipated that an entire battalion of 350 Stryker tanks will be able to be transported from O‘ahu to their training grounds on the Big Island in four trips...”

Soon after that, CEO John Lehman was quoted in Pacific Business News as saying the Superferry “will make it easier for soldiers to train when the Stryker Brigade comes to Hawai‘i.”

Misperception number three: Being against HSF is to be against alternative modes of transportation. This is a false division. Almost all “Superferry protesters” are in favor of an inter-island ferry service. How would these ferries be different? They would carry passengers only, with some cargo capacity.

That would substantially reduce the threat of invasive pest transfer and removal of already depleted ocean and mountain resources from the outer islands. No more searching of vehicles and personal property. Their speed would be like that of other inter-island vessels, the danger to whales being nearly eliminated. The ferries would be sized appropriately for our travel needs, would have a clean, cost-effective propulsion system and would be Hawai‘i-owned, either privately or publicly.

The fourth misperception is that those opposed to the Superferry don’t care about the economy. Hawaii’s economy starts and ends with our environment and our indigenous culture. It is worth noting that in a poll by National Geographic Travel Magazine to select favorite island vacation destinations, in which O‘ahu placed 104 out of 111 choices, poll respondents cited overdevelopment of the island and trivialization and commercialization of the Hawaiians’ culture.

Hawai‘i Superferry, publicizing itself as the H4, extends that develop-and-exploit mindset to the outer islands. Where did Kaua‘i place in that poll? 64th.

If viewed in the context of promoting a healthy local economy, those who think Superferry would be good for business should be careful what they wish for. Businesses on O‘ahu, from plumbers to surf instructors, would leap at the opportunity to expand to Kaua‘i. And with their higher sales volume allowing for lower profit margin, they would be very competitive indeed.

In a larger context, for many on the neighbor islands, a good portion of what they put on the table comes from the mountains and the sea. Unlike O‘ahu, we have considerable remaining natural resources.

When oil prices climb again, and traditional jobs and money become more scarce, these resources and our agricultural lands, our “natural” economy, will be needed to bridge us to a future where we must supply much more of our own needs, while maintaining and restoring the resources as well.

The real equation is: To oppose Superferry is to oppose the way the democratic process was completely discarded. Gov. Lingle bent over backward to give a New York corporation, the HSF, whatever it wanted, when it wanted.

That included calling the special session to craft a law, the constitutionality of which is now being questioned by the Hawai‘i Supreme Court.

Here we have neither a company nor an administration that have shown respect for our local communities.

• Andrea Brower is a coordinator for Malama Kaua‘i. George Inouye is a Westside fisherman. Noelani Rogers is a Kanaka Maoli activist. Ed Coll is a teacher at Kaua‘i Community College.

see also: 

Island Breath: Superferry - No look, No see 1/24/09

State of Cringe

SUBHEAD: We need to here something new from Mr. Obama.

  By James Kunstler on 26 Janaury 2009 in Clusterfuck Nation http://jameshowardkunstler.typepad.com/clusterfuck_nation/wmv.com/ Just as Mr. Obama has danced into the oval office, we've arrived at a moment when a lot of people have a hard time imagining the future. This includes especially the mainstream media, which has reached a state of zombification parallel to that of the banks. But even in the mighty blogosphere, with its thousands of voices unconstrained by craven advertisers or pandering managing editors, the view forward dims as a dark and ominous fog rolls over the landscape of possibilities.

image above: Super Obama from http://theresident.net For at least a year several story-lines have been slugging it out inconclusively for supremacy of the Web-waves. The main event has been the Deflationists versus the Inflationists. The first group basically says that so much "money" is being welshed out of existence that it dwarfs the new "money" being shoveled into existence in the form of bail-outs, tarps, and office re-decoration stipends. The Deflationists see the tattered remnants of the consumer credit economy auguring ever deeper into a hole until it is buried so far down that all the back-hoes ever sold will not be able to dig it out. The competing Inflationists say that the massive truckloads of shoveled-in "money" will soon overtake vanishing "wealth" and, in the process, make the US dollar worthless. Some of us see both outcomes in sequence: the deflationary "work out" of bad debt currently underway -- of loans that will will never be paid back, of acronymic paper securities revealed as frauds, of "non-performing" contracts entering the swamps of foreclosure, of banks pretending to still exist, of hallucinated "wealth" rushing into the cosmic worm-hole of oblivion -- can only go for so long before everyone who can go broke will go broke. Then, just as we find ourselves a nation of empty pockets, the tsunami of shoveled-in "money" designed to "reboot the consumer" (created not from productive activity but just printed recklessly), will start churning through the "economy," chasing products and commodities that became scarce during the deflationary phase -- and the result is hyper-inflation, the eraser of debt, destroyer of fortunes, and suicide pill of feckless governments. I guess the basic difference is that the hardcore Deflationists seem to think that their process can go on forever. The society just gets poorer and poorer until we're back at something like a scene out of Pieter Bruegel the Elder. The Inflationists see a fork in the road leading to more overt destruction, especially political turmoil as a lot of negative emotion joins the work-out orgy and overwhelms government. But in this moment, the week after a new president's inauguration, the deadly fog has rolled in and absolutely everyone dreads what lurks on the other side of it, without being able to discern the path through it. For example, the "bail-out fatigue" being reported suggests that congress may just call a halt to money-shoveling. Where would that leave Mr. Obama's urgent call for "stimulus?" Not to mention further TARP injections for redecorating bank offices. I've been skeptical of the "stimulus" as sketched out so far, aimed at refurbishing the infrastructure of Happy Motoring. To me, this is the epitome of a campaign to sustain the unsustainable -- since car-dependency is absolutely the last thing we need to shore up and promote. I haven't heard any talk so far about promoting walkable communities, or any meaningful plan to get serious about fixing passenger rail and integral public transit. Has Mr. Obama's circle lost sight of the fact that we import more than two-thirds of the oil we use, even during the current price hiatus? Or have they forgotten how vulnerable this leaves us to the slightest geopolitical spasm in such stable oil-exporting nations as Nigeria, Mexico, Venezuela, Libya, Algeria, Columbia, Iran, and the Middle East states? And we're going to rescue ourselves by driving cars? I know it is difficult for Americans at every level to imagine a different way-of-life, but we'd better start tuning up our imaginations, because endless motoring is not our destiny anymore. The message has not moved from the grassroots up, and so at this perilous stage the message had better come from the top down. Mr. Obama needs to go on TV and tell the American public that were done cruisin' for burgers. He could do that by drastically reviving his stimulus proposal as it currently stands. Putting aside whether this "stimulus" represents reckless money-printing in an insolvent society, let's just take it at face-value and ask where the "money" might be better directed: -- We have to rehabilitate thousands of downtowns all over the nation to accommodate the new re-scaled edition of local and regional trade that will follow the death of national chain-store retail of the WalMart ilk. Reactivated town centers and Main Streets are indispensable features of walkable communities. The Congress for the New Urbanism (CNU.org) ought to be consulted on the procedures for accomplishing this and for rehabilitating the traditional neighborhoods connected to our Main Streets. -- We have to reform food production (a.k.a. "farming"). Petro-dependent agri-biz will go the same way as the chain stores. Its equations will fail, especially in a credit-strapped society. That piece of the picture is so dire right now, as we prepare for the planting season, that many crops may not be put in for lack of front-money. This portends, at least, much higher food prices at the end of the year, if not outright scarcities and shortages. And the new government wants to gold-plate highway off-ramps instead? Earth to Rahm Emanuel: screw your head back on. -- As mentioned above, we have to get passenger rail going again because the airlines are going to die the next time there is an uptick in oil prices, or a spot shortage of oil. Let's not be too grandiose and attempt to build expensive high-speed or mag-lev networks -- certainly not right now -- because they require entirely new track systems. Let's fix those regular tracks already out there, rusting in the rain, or temporarily replaced by bike trails. Those are three biggies for moment and enough to keep this society busy for a couple of years. But more to the point of this blog, observers of all stripes are having trouble imagining any way out of our multiple predicaments. All the possible actions tried so far have have seemed absurd. Why even try to prop up inflated house values when the single most crucial need in this sector is for house prices to return to parity with incomes so the shrinking pool of ordinary people still employed can begin to think about buying one? Well, the obvious explanation is that politicians can't bear the pain of watching mass foreclosures and the ruination of families. This is pretty understandable, and it is tragic indeed. Frankly, I don't know of any political narcotic that can mitigate the pain that results from having made poor choices in life -- even if those choices were promoted and reinforced by the mighty ideology of "American Dreaming." Anyway, the foreclosures are well underway now, and perhaps the salient question is how long will the public's fury remain constrained while they hear about Wall Street executives buying $80,000 area rugs? Surely there is a tipping point of collective distress that is not too far from where we're at now. In the realm of TARPS and other continued bail-outs aimed at the banks, the car-makers, and a host of other corporate special pleaders, I wonder if we have already reached the saturation point. But opinion on the Web is starkly divided and a prime manifestation is the debate over whether it was a terrible blunder or the right thing to let Lehman Brothers sink into bankruptcy. Both sides make valid arguments, but virtually all the other super-banks right now have lurched to death's door and we have no clear guidance on what we should do about them. Each one is touted as "too big to fail," as well as being interlocked with the others on credit default swaps that would bring them all crashing down if one counter party truly failed. It seems to me that this is what lies at the heart of the present situation. Nobody I've encountered in the sphere of opinion-and-comment thinks that these banks will survive, and this outcome beats a short path to the conclusion that the entire banking system is fatally ill -- leading directly to a super-major crisis of political economy in which the whole reeking, leaking system just crashes. I think this is what lies behind Mr. Obama's appeals for very urgent action. But then we're back to square one: nobody, including Mr. O himself, has really proposed a set of actions that have not already been tried in the way of money-shoveling. So this will be a week in which, perhaps, some wise and intrepid figures -- perhaps even the president -- will articulate something we haven't heard before, perhaps even something like bearing our hardships bravely. It'll be a very interesting week, I'm sure.

Towards the Barackalypse

SUBHEAD: "We are of undiminished capacity" ? by Albert Bates on 25 January 2009 in The Great Change http://peaksurfer.blogspot.com/2009/01/slouching-towards-barackalypse.html Watching the drama unfold in Washington last week, and listening to the sound as it echoed around the planet, I was struck by how bi-polar our shared political reality has become. Many of us, probably the majority, are still hoping and praying that now that the wicked witch is dead, the Wizard will whisk us back to Kansas and Auntie Em will have a hot apple pie waiting. People in that category think either the recession will be shortened by Keynesian infusions and Rooseveltian public works, or if that fails and it enlarges into The Greater Depression, it will rebound eventually, perhaps a decade hence, just in time for the bulk of the baby boom to retire to their gated communities and golf courses, bent but unbroken.

image above: Washington crosses the Delaware from www.georgewashingtonmythsymbolandreality.org The other hemisphere of our brain is populated with EROIers, Malthusiasts, the Club of Rome, 2012ers, and The Doomsayers of various stripes. Of course, one is only a “doomer” if one turns out to have been wrong. If one turns out to have been right, the better term is “visionary.” We inhabit the bicameral mind of Joan of Arc or Nostradamus, and wonder, are the voices to be taken literally, or can we just write them off to hallucination? President Obama’s inaugural address, a bouquet of big tent politics with fragrant notes of a tent revival meeting, embraced both ends of that schizoid spectrum. Who could argue with this: … our time of standing pat, of protecting narrow interests and putting off unpleasant decisions — that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America. The problem is, those two very agreeable sentences were preceded by this: We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But… Now, saying we are of undiminished capacity is something a great many people would take issue with, and have. Let me quote a few. On the bioregional list, David Haenke said, We no longer have the vast bounties of nature to burn, and the enormous capacity of nature's sinks to absorb, dilute, and neutralize the entropies of a deliberately wasteful economy. Mr. Obama purports to go back to the playbook of 1933 and Lord Keynes and rev up the economy (viz.: burn resources, primarily fossil energy) to get us back "growth." As well, the total level of public and private debt for the U.S. has reached levels that are barely calculable, and then unfathomable. It's neither 1933 nor Kansas anymore. China took it as collateral. To the Clusterfuck Nation, James Howard Kunstler said, Credit may be in extremely short supply this year, and hence crops may be in short supply as we turn the corner into spring and summer. Just as in the case of WalMart versus Main Street, the reform of farming in America is one of those "changes" much larger than most of us imagine. I'd go so far to say that a large proportion of young people now in college will find themselves not working in office cubicles, but in some way or other in farming…. At Club Orlov, Dmitry Orlov said, According to the latest International Energy Agency projections, the half-life of industrial civilization can be capped at about 17 years: it's all downhill from here. All industrial countries will be forced to rapidly deindustrialize on this time scale, but the one that has spent the last century building an infrastructure that has no future -- based on little houses interconnected by cars, with all of the accompanying moribund, unmaintainable infrastructure -- is virtually guaranteed to fall the hardest. An American's two greatest enemies are his house and his car. But try telling that to most Americans, and you will get ridicule, consternation, and disbelief. From The Automatic Earth, Malibu Barbie edition, where Ilargi said, Our economies are shrinking, not growing, and they will continue on down that path for a very long time. Perpetual growth is over, and if you look closely, it has been for at least 30 years. Education, health care and many other fields have become more expensive and less affordable during that time. Who needed day-care in the 1960’s? Who could not afford to go to a doctor? Today, both parents need to work full-time -or more- just to pay the monthly bills. It wasn't like that in the 1960's. Not at all. So were our parents so much less happy than we are? Not at all. The fallacy of perpetual growth has led us into a sense of entitlement that is based on complete blindness and utterly wrong assumptions. If we are not awake enough to leave that behind, we will be the reason for fighting in the streets, in our own [Malibu] Barbie neighborhoods. If we want to prevent that from happening, we need to take not one, but 826 steps back. But the president of Hope and Belief talks about resuming the economy of growth. That is not possible. People need a reality check. They need to adjust to living on less personal, corporeal, space. If you think or hope that the PM of Iceland is the last one to be thrown out by the wayside, you need to start thinking instead of believing. Obama was right about one thing. This is not a crisis that can be solved by government. It won’t be fixed by printing more money. It will be a rough slog, no matter what, but to repeat again what our first President said at Valley Forge, Let it be told to the future world that in the depth of winter, when nothing but hope and virtue could survive, that the city and the country, alarmed at one common danger, came forth to meet it. Now, truth be told, old George knew that the odds of the American Revolution succeeding at that point were slim to none, and this is as much a wishful recruiting statement as a St. Crispin’s Day rallying cry but it contains some nuggets of eternal truth. As Mr. Kunstler opined, Many Americans of good will also stand ready to face reality, to roll up our sleeves, ditch the video games and the Nascar and the microwaved cheese treats, and the internet porn and all the other noxious, narcolepsy-inducing distractions of our time, and put our shoulders to the wheel to haul this nation into a plausible future. So if, in distant days, our progeny look back to where we coalesced our will, assembled our tattered permaculture army, joined hands between city and country, laid back the carbon under our desertifying farmland, and Hudson-River-landed our rusting steel spaceship into a brighter, more realistic future with a sustainable volume of frugal humans once again living in harmony with nature, then let them say this is where it began.

see also:

Ea O Ka Aina: Interview with Albert Bates 1/25/09

Keep it local

SUBHEAD: Move toward sustainability by relocalizing Kauai.   By Andrea Brower on 25 January 2009 in The Garden Island http://www.kauaiworld.com/articles/2009/01/25/business/kauai_business/doc497bd38717422952891157.txt As the fortunate inhabitants of beautiful Kaua‘i, the Garden Isle, we enjoy so much: clean air, warm oceans, abundant greenery, fresh rain-fed water and some of the most spectacular scenery in the world. Consequently, we must ask ourselves, “What is my kuleana, or responsibility, as a steward of this wonderful place and as a member of this diverse community?” Sustainability is about ensuring that the needs of everybody in our community are met without compromising the health of our resources and environment, and with a global perspective of the impact of our actions. As an isolated island heavily dependent on overseas resources, sustainability is largely about self-sufficiency. Few of us give a second thought to how dependent we are on each ship that brings fuel and food to our shores. The incredible irony is that the original inhabitants of Kaua‘i sustained, by some counts, as many as four times the current population, yet were completely self-reliant and maintained a harmonious balance with the ‘aina, or land.

Over the past century we have become dependent on cheap, abundant and convenient energy to fuel economic growth. It is likely that we have reached the inevitable decline of cheap oil and we have undeniably done great damage to our invaluable natural resources. Many in our community are scrambling to pay their rent and get food on the table as the cost of living rises and our major revenue generating industries decline. Economic diversification through strengthening and developing the industries that are most important to our survival — agriculture and food storage, renewable energy, non-fossil fuel-based transportation, sustainable fiber and building material production and zero waste systems — will create lasting jobs and keep money on island. Planning for a sustainable economic future is about relocalization — plugging dollar leakages to distant corporate headquarters with import-replacing local businesses that keep money, skills, commitment and support systems on island. Re-localization is not necessarily about producing everything we consume. It is about establishing a buffer for us to deal with the impacts of energy and climate uncertainty on transportation and land use, food and agriculture, jobs, the economy, and public and social services. Greater control over our resources and greater ability to provide for ourselves equates to greater control over our quality of life and determination of what we want for our island. The “relocalization” of Kaua‘i is an opportunity to unite around the common goal of a sustainable Kaua‘i where the ‘aina is healthy, people enjoy a high quality of life, the sense of community is strong and culture is respected and perpetuated. Relocalization begins with knowing our community and where the goods we consume are coming from. What is the basis of our economy? Where is our food and electricity coming from? What was Kaua‘i like 100 years ago? Where are we headed? By mapping Kaua‘i’s economic, social, ecological and cultural characteristics, we will be able to identify opportunities and constraints to relocalization. A series of articles by Malama Kaua‘i and guest writers will begin to address these critical topics. We all play an important role in relocalization, be it through our consumer choices, our involvement with government, or our grassroots actions to bring about change. Broad community participation in relocalization is the key to transitioning. We need to set our future together — if we can define a cohesive vision that takes into account quality of life, prosperity, aloha ‘aina, and respect for culture, then we can identify the most important immediate priorities to moving towards our shared goals. • Andrea Brower is projects supervisor at Malama Kaua‘i. She can be reached at 828-0685 ext. 11 or projects@malamakauai.org

No Look, No See

SUBHEAD: “I know a collision. That was a strike. That was no wave."    By Joan Conrow on 22 Janaury 2009 in kauaieclectic.blogspot.com

The feds have apparently closed their investigation into a passenger report that Hawaii Superferry hit a whale Wednesday morning. As the Star-Bulletin reported: Wendy Goo, spokeswoman for the National Oceanic and Atmospheric Administration, said a federal marine law enforcement officer happened to be shipping his car on the Superferry and was on the vessel. She said the officer conducted an investigation and interviewed passengers and the captain. "He concluded that there wasn't enough evidence to conclusively say there was a ship strike," Goo said. "We're not pursuing it further at this time."

image above: protest poster by Juan Wilson held at anti-Superferry demonstration in 2007 in Nawiliwili Harbor on Kauai

This conclusion doesn’t sit well with everyone. A friend, who is also a marine scientist, sent me this email: What bothers me most about the news reporting concerning the whale miss is that HSF really has no idea how many they have hit or "glanced off of" without knowing it. They have not put cameras on the bow and stern looking at water level or under water, they have not done inspections after every cruise to check for body parts (whale, monk seal, turtle), they have not put a meter on board that would record any de-acceleration caused by hitting something. If they don't see it with those eyes looking out forward, especially at night, then it didn't happen. They really cannot say, ethically, that they did not hit a whale, seal, turtle; just that they have no evidence of hitting one. And if you don't look closely and check for collisions you will never have any evidence. But you can't tell me they didn't hit anything. I don't believe that. The Save Kahului Harbor blog, in a post yesterday, also expressed reservations: The person who was onboard HSF and reported the whale strike to NMFS yesterday has lived his whole life on Maui, knows the ocean and feels that his observation of a whale strike is being dismissed and covered up.

 He reportedly said: “I know a collision. That was a strike. That was no wave. The entire boat shook underneath where I was sitting. They hit a whale. This was no calm maneuver. The boat slammed into a whale and came to stop. This is a cover up. They are covering this up. Other passengers around me felt the same impact. Other people in other parts of the boat did not." Apparently divers were ready to survey the hull yesterday but were told to stand down due to lack of ‘credible evidence’. Why not send divers on a hull survey, just to be sure and lay the matter fully to rest? If you look at the coverage carefully, the feds never do say conclusively that there was no strike. It also appears that the investigation was limited to interviews conducted by an agent who was himself patronizing HSF during the voyage in question. There’s no indication the boat was inspected. As The Garden Island, which had the most thorough coverage of the incident, reported: Goo said in a phone interview NOAA was initially “scrambling” to find an enforcement officer to meet the ship and conduct interviews when it arrived in Maui, but an O‘ahu-based officer was coincidentally on board the ship, not serving in any official capacity but taking a vehicle to Maui. The officer was able to conduct an investigation, talking to the ship’s captain, crew and passengers and eventually determining that there was “no compelling evidence that there was a strike,” Goo said, adding NOAA was “standing down on it because we don’t have any conclusive evidence.” Bill Robinson, regional administrator for the Pacific Islands regional office of NOAA Fisheries said yesterday in a phone interview that there was no confirmation of a whale strike. “That doesn’t close the issue entirely. If new information comes to light, then we would continue to look at it. At this point, there just isn’t any real evidence that there was an actual strike,” he said. When I first got word of the strike report and contacted the NOAA enforcement guys, I was surprised that their plan was to wait until the ferry docked at Kahului to check out the report. If the boat usually arrives about 10 a.m., and the report was made about 7:30 a.m., that means 2.5 hours elapsed — ample time for an injured or dead whale to leave the area or go out to sea. Surely, if they can mobilize the entire state’s Coast Guard contingent to prevent people from protesting HSF, they could send one CG boat or plane out to take a look. It seems it would be pretty easy to spot blood in the water. “But that’s assuming they really want to know if a whale was hit,” said an Oahu friend who is also involved in marine conservation issues. What possible reason could there be for not exploring the matter further, aside from adverse publicity? Well, as the Garden Island also reports: He [Robinson] said Hawai‘i Superferry has asked for an incidental take statement, a permit that allows holders to “take, harass and harm a marine mammal and be protected under the Endangered Species Act from prosecution.” NOAA is currently in consultation with Hawai‘i Superferry, so any incidental take — whale strike — to occur before the permit is issued could result in substantial penalties. A strike could also indicate that the avoidance measures recommended by NOAA in the interim are inadequate, or not being fully followed by HSF. As KGMB TV reported (and the emphasis is mine): "The Superferry is making a very conscious effort to implement many of the measures we recommended, and they're aware of the public controversy that would be caused if they did hit a whale," said Bill Robinson, NOAA regional administrator. Why isn't it implementing all of them, especially if it's trying to get an incidental take permit? Unless a whale washes ashore, we’ll likely never know if HSF did actually hit a humpback. And as my friend’s email noted, that’s precisely the point. We’ll never have a true picture of the marine carnage that the speeding HSF inflicts because no mechanisms are in place to find out. [Editor's Nore: Following is the Garden Island article] Superferry swerved to avoid hitting whale By Michael Levine on 22 January 2009 in The Garden Island

http://www.kauaiworld.com The Hawai'i Superferry took evasive action to avoid striking a pod of humpback whales on an early morning trip from O'ahu to Maui yesterday, according to multiple officials. Initial reports that the 230-foot Alakai struck a whale were unconfirmed and largely dismissed. At roughly 7:30 a.m., the National Oceanic and Atmospheric Administration received a report that there had been a ship strike between the Superferry and a humpback whale, according to NOAA spokeswoman Wende Goo. Goo said in a phone interview NOAA was initially "scrambling" to find an enforcement officer to meet the ship and conduct interviews when it arrived in Maui, but an O'ahu-based officer was coincidentally on board the ship, not serving in any official capacity but taking a vehicle to Maui. The officer was able to conduct an investigation, talking to the ship's captain, crew and passengers and eventually determining that there was "no compelling evidence that there was a strike," Goo said, adding NOAA was "standing down on it because we don't have any conclusive evidence." "What we've been told is that the captain saw a pod of whales off in the distance, and kind of slammed on the brakes, tried to come to a quick stop," Goo said. "Then he maneuvered the ship in another direction to avoid the area of the pod." Superferry spokeswoman Lori Abe confirmed the incident in an e-mail, differing from Goo's account only in the number of whales: one. "During today's voyage from O'ahu to Maui, Hawai'i Superferry implemented its standard operating procedure for avoiding whales by turning its ship, the Alakai, away from the whale and coming to a complete stop. No contact with the whale occurred and the ship completed a normal voyage to Kahului Harbor," she wrote. "Hawai'i Superferry's whale avoidance policy and procedures were implemented and worked effectively." Bill Robinson, regional administrator for the Pacific Islands regional office of NOAA Fisheries said yesterday in a phone interview that there was no confirmation of a whale strike. "That doesn't close the issue entirely. If new information comes to light, then we would continue to look at it. At this point, there just isn't any real evidence that there was an actual strike," he said. The issue of whale safety has been one of many used by opponents of the Superferry to criticize the operation. The draft Environmental Impact Statement, released by the state's Department of Transportation earlier this month, said takes of humpback whales could be among the cumulative impacts of a large-capacity inter-island ferry system and listed among its proposed mitigation measures "whale avoidance protocols" to avoid those takes. Robinson went on to explain there are not currently any laws, rules or regulations in place for Superferry seeing a whale, but that the group has developed its own protocols. He said Hawai'i Superferry has asked for an incidental take statement, a permit that allows holders to "take, harass and harm a marine mammal and be protected under the Endangered Species Act from prosecution." Such a permit would cover only incidental takes, and feature a set of regulations governing its use, including "perhaps speed restrictions, perhaps area restrictions, what you do if you hit a whale" and other rules, Robinson said. "Whale population is growing, so whale density is increasing, and we are trying to warn people to be even more vigilant," Robinson said. NOAA is currently in consultation with Hawai'i Superferry, so any incidental take — whale strike — to occur before the permit is issued could result in substantial penalties. Fine amounts account for many factors, including the severity of the incident, whether appropriate caution was used, negligence, and ability to pay, according to Robinson, noting he was aware of a similar situation in Alaska that resulted in a fine of "hundreds of thousands of dollars." One of the first groups to receive word of the rumored strike was the Pacific Whale Foundation. Communications director Anne Rillero said yesterday the organization had received a call from a Superferry passenger that the ship had hit a whale, then passed the information on to NOAA. The foundation later heard back from NOAA that the ferry had successfully "swerved" to avoid a whale and did not actually strike one, Rillero said. Another member of the response network to receive a call yesterday was the Hawaiian Islands Humpback Whale National Marine Sanctuary, which uses disentanglement resources to get out and check on animals in distress, according to Maui-based Science and Rescue Coordinator David Mattila. Mattila said in a phone interview that the sanctuary "did get a report, but we saw it was at penguin bank in rough conditions, and it was unconfirmed," so no rescuers were sent to the scene. Penguin bank is in between O'ahu and Moloka'i, Mattila said, describing the area as "an extension of the shallow water that Moloka'i sits on, to the southwest of Moloka'i, sort of pointing towards O'ahu a little bit." "According to aerial surveys, that's one of the highest concentrations of humpback whales," Mattila said of the region, which is part of the sanctuary. "For some reason they really like it there."

see also:

Island Breath: Superferry hits whale? 1/21/09

NTBG wins LEED award

SUBHEAD: Botanical Research Center is first building certified on Kauai.    By John Letman on 20 January 2009 for NTBG www.ntbg.org The non-profit National Tropical Botanical Garden (NTBG) announced today that its new Botanical Research Center at Kalaheo headquarters has been awarded LEED® Gold Certification by the U.S. Green Building Council (USGBC). This makes it not only the first gold building on Kaua`i, but the first structure ever on the island to be certified by USGBC under The LEED (Leadership in Energy and Environmental Design) Green Building Rating System™.

image above: the Julia Rice Wichman Botanical Research Center. Photo by Jon Letman “LEED is a whole new way of looking at construction, how we use resources and reduce associated waste,” said NTBG Director and Chief Executive Officer Chipper Wichman. “The implications go far beyond the building itself and have the potential to influence people in all spheres. Conservation of natural resources and protection of the environment is integral to NTBG's mission, so building green just made perfect sense to us.” The two-story structure, with 20,000 square-feet of interior space, is the fourth building of the organization’s headquarters campus. It houses its herbarium (dried plant specimens used for research), an extensive botanical library, a seminar room, and laboratories for scientists and field biologists. It contains such “green features” as a rooftop photovoltaic system, rain catchment and storage systems, clerestory windows, and certified sustainable reclaimed tropical hardwoods that would otherwise have gone into landfills. The surrounding landscape was designed toward conservation of resources, as well as native plants, by using drought-tolerant species, and there is an electric car recharging station and gravelpave permeable-surface walkways. USGBC’s rating system is an internationally recognized feature-oriented rating system awarded to buildings that satisfy specified green building criteria. Projects must be registered with the Council and, after completion of construction, extensive documentation proving criteria have been met is submitted by the property owner for Council review. NTBG was notified that it had met LEED Gold criteria just 13 days shy of the Center’s one-year anniversary of its completion blessing. “NTBG’s Botanical Research Center efficiently uses our natural resources and makes an immediate, positive impact on our planet, which will tremendously benefit future generations to come,” said USGBC’s President, CEO, and Founding Chair Rick Fedrizzi. The Botanical Research Center was designed by architect Dean Sakamoto and built by Unlimited Construction Services, Inc. It will be dedicated as the Juliet Rice Wichman Botanical Research Center, in memory of one of the institution’s early Trustees and founders, in mid-February when NTBG’s governing board meets. For more information, the Garden’s website contains information about the Center at brc.ntbg.org. Media contact: Janet L. Leopold, NTBG Headquarters, administration@ntbg.org or Jon Letman, jletman@ntbg.org; main website: www.ntbg.org

Insolvent

SUBHEAD: The Black Hole of the US Banking System. 

 

By John Schettler on 22 January 2009 in The Writing Shop

http://www.writingshop.ws/html/insolvent.html

Scores of streets were shut down and cordoned off, while nearly two million people flock to the scene to bear witness to a unique moment in history. Barak Obama, campaigning on hope and change, will be a welcome new beacon for a nation that has been stumbling through the insanity and darkness of the Bush-Cheney years for so long. His rhetorical skills will be a relief from the inarticulate bumbling speech of the misunderestimated “decider” he replaces. And Obama wasted no time framing the problems we face in one concise paragraph: “That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.” Now, after the rhetoric, after the ceremony, the real work will still be before us, and it will be far more difficult than we realize.

image above: illustration by Steve Adams for http://www.camagazine.com/2/4/1/3/2/index1.shtml

Some feel the gala ceremony itself was the wrong message to send the nation in a time of great adversity. One intrepid blogger frowned on the inaugural ceremony this way: “In my opinion, Barack Obama should have canceled the inauguration celebration, re-directed all of the money set aside for the events to food banks around the nation, and modeled for the nation the sobering realities that we face. Instead he has chosen a grand and glorious wedding rather than a quiet marriage in front of a Justice of the Peace. He has opted for the ten thousand dollar wedding ring rather than weaving blades of grass together into a wedding band. And once the grand wedding is over, all of the drunk celebrants will return home and wake up on Wednesday morning with hangovers and less money in the bank and will scratch their heads and wonder what happens next.” The writer characterized the ceremony as nothing more than a dangerous false hope, and he could be correct if that is all we take from the moment. But in my opinion we need to start at least with that—with some sense of hope that we can take a new direction, build a new future—or what’s a heaven for? Just looking at the faces of the nearly two million people who flooded the Washington Mall, many traveling for 10 hours or more to reach the place and huddling in sub-zero temperatures for hours, was ample evidence that the ceremony was money well spent.

This is not to say that I underestimate the enormous work ahead of us now. As President Obama steps into office he will inherit a wrecked economy, staggering deficits, colossal national debt, and a financial system hemorrhaging from so many places that it is hard to determine how it could possibly be saved. As I stated earlier, like a building rigged for demolition, all the key underlying supports in the economy have already been blown. The building is falling, and it is simply too late for things like tax cuts, stimulus checks, and bailout money to forestall the collapse. Yet the prevailing talk is all about how to “get the economy moving again,” how to restore growth, create jobs, stabilize the banking system. This is the first great trap we must avoid if we are to truly revitalize this nation—our effort must not be to restore the old status quo, to return to the indulgent largesse of easy credit based consumption so that GM, Ford and Chrysler can find a way to remain in business. Far from it. Our first task is to realize that the old way of life we are all so accustomed to is not coming back. It was a life style financed through enormous financial hocus pocus, and built on a mountain of debt so high that it will now take generations to even begin to pay it down.

The facts of the matter are simply too grave to ignore. Think of our situation as a sand castle on the shoreline with a rapidly rising tide. What can we do? The waves have begun to eat away at the foundations, threatening to bring the whole edifice down. Do we scoop up more and more sand, like the billions in bailout money we’ve been throwing at the problem, and hope our castle can weather the storm?

Ben Bernanke defends the policies adopted thus far by the Treasury and Fed with another metaphor. He stated that “You have to put out the fire first. Then you can talk about changing the fire code.” His remarks explained the need for his own bailing policy, pouring on the liquidity in hundred billion dollar buckets. The intention is to somehow stabilize the banking system, but the glaring reality of insolvency is not yet being faced, openly acknowledged, or dealt with, and it may be that we have to let it all burn down and then build something new.

Bloomberg quoted Analyst Nouriel Rabini putting his incisive finger on the nub of the problem again: “I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital base of $1.4 trillion. This is a systemic banking crisis.”

Yes, let’s use the correct word. The banks are insolvent. The UK Independent also reported Tuesday: “Britain’s biggest banks are ‘technically insolvent,’ Royal Bank of Scotland said yesterday, as the global banking industry was rocked by another day of turmoil, including the announcement of $23bn of new losses from Merrill Lynch and Citigroup, the giant US institutions.” The article was subsequently pulled, and could only be accessed by viewing a cached page in Google. Clearly, no one wants the truth to be spoken openly.

The banks have been insolvent for years, but choose not to list their “assets” by any realistic current market value. By not “marking to market” they pretend that all the loans, securities, derivatives, CDOs, bonds, SIVs and other financial “instruments” they have created over the years are still worth what they were during the height of the housing boom, when in fact they would not be worth anything if sold in today’s market. These arrangements and gentlemen’s agreements the have banks made for their profit have all failed. The great misconception about what is happening in the financial markets is that banks need “liquidity,” to maintain normal operations. But the junk on their books is worthless, and can’t be sold. The game of securitization trades has come to a screeching halt. Because they can’t be sold or traded to the next schmuck in the investment chain, these former “assets” are now said to be “illiquid.” So the government pours on the cheap money thinking it has a liquidity crisis. But this is not a liquidity crisis, and never has been. It is a crisis of insolvency, though banks stolidly delude themselves, (and would be investors), with accounting tricks and secrecy that prevents any real understanding of the huge losses already on their books—losses that will only increase in the months ahead. It’s not that the securities can no longer be traded—the fact is, there is nothing of value there to trade! They are worthless! They are not assets at all, but huge liabilities, investments gone bad. The weight of these bad bets overshadows everything else on the bank balance sheet, so the banks simply remove it from their books in a fit of denial. But the basic fact remains—their liabilities exceed their real assets by a factor of many, many times. They are therefore insolvent.

The Global Europe Anticipation Bulletin (GEAB) wrote: “Contrary to what political leaders and their central bankers seem to believe worldwide, the problem of liquidity that they are striving to solve by means of historic interest rate drops and unlimited money creation, is not a cause but a consequence of the current crisis. It is in fact a problem of solvency which is digging black holes where liquidities disappear, whether we call these holes bank balance sheets, household debt, corporate bankruptcies, or public deficits.” This is exactly what we are seeing unfold. All the traditional havens for investment and wealth are now tar pits of insolvency. The world stock markets alone have lost a cumulative $22.2 trillion in wealth in 2008.

Consider that we have now thrown upwards of $9 trillion dollars at the financial system since September of 2008, a sum that is more that everything we spent in Korea, Vietnam, and the two Gulf wars, and still we get talk that if something isn’t done, something sweeping and dramatic, the system will fail. This tells you just how grave the situation really is. It tells you just how massive the liabilities and bad debts hidden on bank balance sheets actually are. When mid size banks like WaMu and Wachovia failed last year, they were gobbled up by larger institutions like BofA. Now the big boys have a stomach ache from all the toxic sludge they have swallowed. Citigroup is slowly cracking up like the Antarctic ice shelf, and calving off non-performing divisions into the sea of insolvency.

Bank Of America was “injected” with another twenty billion in emergency bailout money and then given a further backstop of $100 billion against future losses. They swallowed Countrywide and Merrill Lynch, and now the poison further sickens one of the nation’s largest banks. ( Financial Times reported that just before it failed, Merrill Lynch accelerated its bonus schedule and paid out $4 billion in bonus money on Dec 29, just three days before BofA took the institution over! In the last three months of 2008 Merrill Lynch lost $15 billion dollars, but still paid that same amount out in bonuses and compensation to employees in 2008. Amazing!) Now BofA owns the problem. It’s stock position erodes to what I call the “Starbucks” failure benchmark. With the price hovering near $5 a share the stock will soon be worth little more than a cup of coffee. So goes confidence in the whole system, vanishing into that bottomless cup, and any hopes that the Obama administration can do anything at all to halt the carnage may be misplaced. While talk of hope and change is a welcome effort to restore our confidence, it will not be enough.

President Sarkozy of France took a step in the right direction when he demanded top French bank executives give up all bonuses if they are to receive any government bailout money. “We ask banks that make a profit to finance the economy and not reward shareholders,” said Finance Minister Christine Lagarde. We could take that advice to heart over here as well, where huge allotments of the initial $350 billion in TARP relief money went into the bonus bin at all these failed institutions. Bonus money for insolvency. What a concept.

In England the situation is equally dire. UK Independent reported: “It is finally dawning on the Government that the liabilities of the British banks grew to be so vast in the boom years that they now eclipse the entire economy. Unfortunately, the Treasury is pledged to honor those liabilities because it has guaranteed not to let a British bank go down. RBS (Royal Bank of Scotland) has liabilities of £1.8 trillion, three times annual UK government spending!”

Is it any wonder that confidence in the financial system is in short supply these days? Regulators were stunned to discover that former NASDAQ head Bernie Madoff may have never executed a single trade in his titanic $50 billion dollar Ponzi scheme! In effect, he used his position and “credibility” to attract wealthy investor deposits, then simply created fraudulent statements, using money from one investor to pay another as they signed on. He made no real investment of the funds or market trades that yielded any real profit. It was all a great lie, and one that allowed him to skim countless millions, if not billions, in profits over the twenty odd years he plied his deceptive and criminal craft. Then, after being exposed and placed under house arrest, he “inadvertently” mailed millions in diamonds and other jewels to friends and relatives last week from his luxurious penthouse apartment. Where is justice? Roy Brown, a homeless man in Shreveport, was recently convicted for stealing $100. from a local bank, a crime that landed him a 15 year jail sentence. Madoff steals a cool $50 billion and is presently relaxing in his $7 million dollar penthouse estate and sorting through his jewelry collection. This vast disparity is a symbol of the basic inequity and unfairness of our entire system, where the “rich get richer and the poor stay poor.”

The damage wrought by men like Bernie Madoff, and countless others still wearing suits and ties in our financial institutions, is only now beginning to be revealed. If you think “sub-prime” loans were the culprit in all of this you are decidedly wrong. The gravest threats, all engineered by the banks and stately investment firms, still remain on the near horizon. While sub-prime loans may have accounted for $1.25 trillion, there are another $25 trillion in commercial real estate loans out there that are now in grave jeopardy. As corporations fail, like Circuit City closing 567 store locations, massive vacancies are now forming in the commercial real estate sector. Who will occupy those vacant suites? The answer is no one. The commercial sector is in the midst of a rapid contraction, and it will not recover for years. When these commercial loans begin to fail in significant numbers, and all the securities and derivatives sitting on top of them also become worthless, we will have a problem that dwarfs what we have seen so far.

These are the massive losses the banks are hiding on their books. They are the reason that the staggering sum of $9 trillion in bailouts have not unfrozen the credit markets, or restored confidence, and the reason that another $850 billion “stimulus” package will do nothing to solve the crisis. The damage will spread. Insurance companies, Federal Home Loan Banks, Pension Funds are all next in line to falter and fail. Who will bail them out? How much money can the government pledge when the US treasury itself is already bankrupt? The government has no money. It runs on a massive deficit that now exceeds a trillion dollars. Taxes will not pay for these bailouts. The money is being borrowed through treasury note sales, or simply printed.

There is talk about creating a large “bad bank,” an aggregator bank, that will absorb all these toxic losses, like a huge financial landfill. The idea is to get all the bad debt off the banks books and shovel it into one black hole that will then be sold to—you and me, John Q. Public, the humble taxpayer. Please understand what this means: the banks, private corporations, have incurred staggering losses from bad investment schemes. They now want to “sell” all these bad investments to a new government bank, funded by taxpayer money. In effect, they want to pass all their bad investments to you, to your children, and grandchildren so that they can regain solvency. This little idea is from the folks who brand you with a FICO score to see if they are willing to create a loan for you from thin air, then charge 30% interest on that credit to make you a debt slave for life. If that were not insult enough, they now ask you to absorb all the losses they have incurred with their wild, overleveraged speculation in securities schemes. This is outrageous!

Ilargi of the excellent blog “Automatic Earth” wrote: “Meanwhile, it doesn't help that governments refuse to help their citizens, but instead elect to put them deeper into debt by handing their money to banks, a move that doesn't just fail to aid the public, but is utterly contradictory to the public's best interest! What we see coming out of parliaments, government cabinets and presidential residences today doesn't solve anything, it makes it all much worse…Nobody talks about the fact that the banks—in all likelihood—have far too much of the paper than any government can afford to buy, provided at least they wish to have a functioning economy. The idea is that if they succeed in hiding what it is they buy, how much it is, how much (or little) it is truly worth, that they can get away with this. For the time being.” He believes we have just a few weeks for the banks to come clean and reveal the full extent of the losses now carried on their balance sheets. Otherwise confidence in the system as a whole will simply collapse altogether. Even as Obama spoke of hope, the markets fell nearly 4% on bad news from the banking system. That is a sobering reminder that the wolf is still at the door.

We so desperately need the hope Obama spoke of, but the great danger that hides behind a mask of hope is the belief that we can put Humpty Dumpty back together again as he once was. We cannot restore the system to its old leveraged glory, and get the milk and honey of easy credit flowing again to restart the game of “flip that house.” Gretchen Morgenson of the NY Times said it well with this assessment: “Clearly, the entire financial industry is in the midst of a makeover. And while no one wants to call it nationalization, perhaps we can agree on this much: The money business as we have come to know it over the last two decades — with its lush salaries, big-swinging risk-takers and ultrathin capital cushions — is a goner. Got that? Toast. Toe-tagged. And that’s a good thing, because maybe we can go back to a banking model that is designed to do more than simply enrich the folks at the top of the enterprise while shareholders and taxpayers absorb all the hits.”

Recovery must begin with accountability, transparency, and real responsibility from the banks. They must suffer the pain of their own misdeeds. This means no bloated CEO salaries, not a nickel in bonus money, no dividends paid out to “investors” whatsoever. You don’t get dividends for a loss. And that is just a starting point.

John Heinzl of “Your Money” had it right when he wrote: “What was the root cause of this mess we're in? Everybody understands that this happened because there was no regulation. But you have to ask the next question: Why wasn't there any regulation? And the answer is [U.S. politicians] were being paid to deregulate. They were accepting enormous campaign contributions from corporations, banks, hedge funds and Wall Street institutions. So the entire system has to change? They have to get big-business lobbying and corporate campaign contributions out of Washington. It's not that our government is ineffective. It's just not effective working for the American taxpayer. It has a different boss. It's working for its biggest contributors.” Following the tally of bailouts also tells this same story. The banks got $9 trillion in loans, guarantees and backstops. Joe taxpayer got a $300 rebate check, and then he and all his future generations will get the bill for that $9 trillion.

The hope of change that president Obama brings as he assumes the office must be more than a change of faces and personalities. It is clear we have a change of attitude and intentions in the new administration, but time is running out fast in the rapidly eroding financial sector. If restoring the old system becomes the goal, then we will only end up with half measures and more multi-billion dollar fingers in the dike—a lot of wasted effort and money. When these fail we may be one step closer to change that will come in a most unwelcome form in this country—change that may be far more uncomfortable that anyone has seen in America since the Civil War.

How ironic that Obama swore his oath on Lincoln’s bible. He will face a maelstrom every bit as severe as Lincoln did if we do not make drastic and immediate reforms in our banking system. By drastic I am speaking of changing the rules of the banking game at a fundamental level. Abolish the Fed, a conglomeration of private banks that wreak bubble havoc on the economy by rigging interest rates and printing money willy nilly. And no more “fractional reserve lending,” where money is created by banks on a whim when they literally “make” a loan, and these loans are backed by only a small fraction in actual reserves. You lend what you have taken in as deposits, nothing more. I’m not holding my breath that this will ever happen. Change only goes so far. Banking, as a business, may be inherently corrupt, but it is too deeply entrenched to be rooted out without something as cathartic as the French or Russian Revolutions. These things have happened before, and could happen again. Just ponder the fate of the Romanovs.

In Europe the situation is already skirting the edge of that potential violence as the Baltic states joined Greece with rioting in the streets. Protesters flung huge chunks of ice, smashing up the financial district in Latvia and threatening to storm parliament. The UK Telegraph reported: “Events are moving fast in Europe. The worst riots since the fall of Communism have swept the Baltics and the south Balkans. An incipient crisis is taking shape in the Club Med bond markets. S&P has cut Greek debt to near junk. Spanish, Portuguese, and Irish bonds are on negative watch….A great ring of EU states stretching from Eastern Europe down across Mare Nostrum to the Celtic fringe are either in a 1930s depression already or soon will be. Greece's social fabric is unraveling before the pain begins, which bodes ill.”

Could it happen here? President Obama referenced our own revolution as a guidepost to the change he wants to inspire. If things get much worse, and the real truth about our banks is known, the people just might take him up on that idea. “If the public had any real understanding of how the banking system works,” said Henry Ford, “there would be a revolution in this country overnight.” In the short run, however, we will get new policies, bailout programs, stimulus packages, and tax reform, all aimed at righting the sinking ship and restoring the old game. It is a dangerous misconception of the enormity of our current crisis.