A friend writes from New Orleans…
“… one of the greatest tragedies in the history of our nation has been visited on my little corner of the world.
“Don’t let the shrieking headlines fool you — the vast, vast majority of the people being affected by this disaster are good-hearted, hard-working people. The salt of the earth, as they say. A small number of hoodlums have tarnished the reputation of the greater, better whole, and this has only been made possible by the treasonous inaction, utter disregard and disdain of the federal authorities.
“Imagine if you spent a harrowing day or two trapped in an attic or, if you were lucky, baking on your roof, in 95 degree heat and 95% humidity. And this after losing everything you owned. Now youre corralled with hundreds of others on a hot street, and told to wait because buses, boats, food and water were on the way. One day passes. Then another. And nothing comes.
“In the meantime, people are literally dying around you. Bodies are floating by. Your children’s cries are growing more faint. And, somewhere beyond your little hell, politicians are elbowing each other for face time in front of the cameras, figuratively standing on the bodies of your friends and loved ones to further their petty ambitions.”
The story from N.O. is not a pretty one. Many residents of the Big Easy did not behave themselves. Instead of looking out for their neighbors, they turned on them.
But what do you expect? Everything has its time…its season.
Our mission is merely to try to understand what season we are in. Then, we can guess about what comes next.
So far, it seems to most people that the United States is enjoying a very long, very hot summer. For the last several years, there has been little change; the sun shone every day. So hot has the real estate market been that the average house has increased 50% in price since 2001. Why is a house worth 50% more this year than it was just four years ago? It is exactly the same house in exactly the same place rendering exactly the same service to its owners. There are plenty of explanations for why it is now more valuable, but almost all of them are foolish: growing population, growing wealth, shrinking availability, echo boom buyers. Nothing has really changed between 2001 and 2005 that would make houses more valuable. What has changed is that the Feds have made much more money and credit available which has found its way into the one consumer item (mistaken for a capital asset) that the Chinese couldn’t produce: houses.
In Nevada, house prices have been as hot as the desert itself. Last year, houses sizzled 28%. In Las Vegas the growth slowed down to only 26.9%. Local ‘experts’ thought this was a good thing. “They can’t keep going up at 50% a year,” said one. This will give the market a time to catch its breath, he continued, so as to “avoid future problems.”
It is far too late to avoid future problems…at least, that is our guess. The season if too advanced. America no longer basks in the warm sunshine of growth and progress, but in a fantasy moonshine of its own making.
In this soft and agreeable world there is no wind so ill it blows no one good — not even one of the worst natural disasters in American history. The Fed will stop raising rates. Homebuilders will begin replacing 100,000 houses. Stocks rose yesterday…as investors anticipated another wash of easy credit…another fraud…and another boom. Laissez les bons temps roulez.
But sometime the wind will shift…and the season will change. When the bons temps stop rouling, will Americans pull together with the calm spirit that marked London during the Blitz…or will they turn on one another?
• America uses too much energy, says the Economist. How they know how much the United States should use is a mystery. But they think they have found a problem that needs a solution.
“The best long-term solution — for America as well as the world economy-would be higher petrol taxes in the United States. Alas, there is little prospect of that happening. America, unlike Europe, has preferred fuel-economy regulations to petrol taxes. But even with those it has failed abysmally. These regulations have been so abused that the oil efficiency of its vehicles has fallen to a 20-year low. This week, the Bush administration announced proposals for changing the fuel-economy rules governing trucks and sport-utility vehicles, but failed to close loopholes that allow these gas guzzlers to use more petrol than normal cars, a shameful concession to carmakers.”
• This view — that central authorities know better than individual consumers and producers how much oil a person should use and how much they should pay for it — is widely shared. New Times columnist Thomas Friedman makes it a cornerstone of his earnest mittel-brow weltanschaung.
Of course, we are just lonely scribblers. Friedman is a media star…almost a guru to the rich, the powerful, and the hollow dummies.
“He dazzles crowds. He brews conventional wisdom. He charms CEOs. And he drives some people crazy. Meet Tom Friedman, the oracle of the Global Century,” says Fortune Magazine:
“With all the famous people clogging the sidewalks and mountain trails of Aspen, you might think that no one there would make a fuss over a newspaper columnist. Try making the rounds of the Colorado resort town with Thomas Friedman. Everywhere you go, people stop him to gush. They tell him they loved his Aug. 10 performance at Aspen’s Benedict Music Tent, where he wowed a crowd of 1,700 (ticket prices: $50 and $75) with his tales of the ever-troubled Middle East and the ever-changing global economy. They bring up one of his twice-weekly columns in the New York Times, or one of his four books, or one of his appearances on Charlie Rose. They just want to shake his hand. For a reporter in Friedman’s wake, the celebrity moments just keep coming: Cosmetics magnate Leonard Lauder presents a detailed analysis of Friedman’s writing style; venture capitalist John Doerr tells of his annual New Year’s Day cross-country ski outings with the writer; Queen Noor of Jordan offers up some of her French fries.
“Aspen isn’t the only place it happens. At the National Governors Association summer meeting in July in Des Moines, Friedman also outshone the stars…. At an August breakfast in New York City to unveil September’s Playboy interview — a conversation with Friedman, of course -it was more of the same. Fox News czar Roger Ailes was among the bigwigs who listened raptly while Friedman told tales of terrorism, Iraq, and Indian call centers. Finally Steven Silverstein, CEO of shopping-mall stalwart Spencer Gifts, blurted out what must have been on the minds of several around the table: “I understand from what you’ve said today that you are running for President. You have my vote.””
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.