I wander across the deck, sloshing my way toward the wet bar for one, last martini. The waves lapping against the gunwale gently spray my face as the solemn strains of Nearer, My God, to Thee float through the crisp night air.
Improbably enough — given the situation — it is the words of King Théoden of Rohan that haunt my thoughts:
Where is the horse and rider? Where is the horn that was blowing?
They have passed like rain on the mountain, like a wind in the meadow.
The days have gone down in the West, behind the hills into shadow.
How did it come to this?
The signs are everywhere now. One needn’t be an apocalyptic LewRockwell junkie to notice that something is wrong.
Just for the heck of it, I’ve been keeping a little journal of events that I call "Milestones on the Road to the Depression."
In the past few months, I’ve had to make a slew of new entries.
#1. First run on a bank: Northern Rock Bank, September 15, 2007
The International Herald Tribune caught the mood quite nicely:
Terry Mays and his wife, both British retirees, decided during the weekend that a promise by the Bank of England to provide emergency financing for Northern Rock, the troubled British mortgage lender that has most of their savings, was not sufficient to calm their nerves.
The couple joined hundreds of other Northern Rock customers Monday as lines formed for a third day in front of branches where people waited to withdraw their savings.
“I don’t think the bank will collapse — but we just don’t have the nerves,” he said, surrounded by a group of depositors who had traveled with him to the central London branch from a southern one after being told that the wait there would be at least six hours. “I took some financial advice over the weekend, and I’m taking the money out to get peace of mind. We’re relying on this money for our pension.”
All I can say is, "Good luck, Mr. Mays."
#2. First Nationalization of a Bank: Northern Rock Bank, February 17, 2008
Unable to find private investors crazy enough to take over the failing institution, the British government went ahead and nationalized it. They will, no doubt, run it just as efficiently as the coterie of con-artists who were running it before.
The Washington Post quoted the polished and soothing words of UK Treasury chief Alistair Darling:
Darling told a news conference that the mortgage lender would be placed under temporary public ownership because both bids had failed to meet the government’s criteria for protecting taxpayers.
“The new board and the company will operate at arm’s length from the government, with complete commercial autonomy for their decisions,” Darling said.
I have no comment on this last assertion. I’m sure they’ll be every bit as independent as is our own Federal Reserve.
#3. First Housing Riot: Florida, March 12, 2008
The official policy of our government over the past several decades has been to help people realize "the American Dream." In practice, this has meant wholesale government interference in the mortgage industry for one purpose: cajoling financial institutions into making loans to marginal customers who wouldn’t ordinarily qualify for a mortgage.
In essence, the feds demanded easy loan policies, prompting financial institutions to loan money to practically anyone who could fog a mirror.
And now (surprise!) we come to find that people with bad credit are, well, bad credit risks!
Moving forward a few years, these sub-prime borrowers are now being tossed out of their homes en masse (although they should never have gotten a mortgage to begin with). And they are getting angry.
The Palm Beach Post describes the scene:
The overwhelming turnout of people desperate for housing money came as little surprise to Suzanne Cabrera, president of the Housing Leadership Council of Palm Beach County.
“This is an indication that housing it’s still a huge problem,” Cabrera said this afternoon. “It’s a reflection of people’s concern for housing, their uncertainty. I got people today asking me: was this my last chance to get housing I can afford?”
Several other things, such as mortgage foreclosures and high gas prices, are contributing to that feeling of insecurity and desperation, she said.
So whenever word gets out that voucher applications are being handed out, which she said doesn’t happen very often, people get full of hope
It appears that the government bureaucrats were unprepared and didn’t bring enough applications (…no shocker there), and the crowd turned ugly:
People grew agitated. Several fights broke out. Police and firefighters said they were prepared if things were to turn violent on a large scale. Nearly 50 firefighters and paramedics from the city, county and Delray Beach set up across the street in the Town Center mall parking lot.
Then an official came out of the housing authority building and announced through a megaphone that disabled people should come forward.
Instead, the entire crowd surged forward. People fell down and were close to being trampled, witnesses said.
“That’s when all hell broke loose,” said Shannon Pierce, 26, of Lake Worth. Pierce, who is six months pregnant and had been waiting in line since 6 a.m. “We almost got trampled over.”
What can you say? It’s subprime behavior from subprime borrowers.
This may have been the first housing riot, but I doubt it’ll be the last.
#4 Gold surpasses $1000 per ounce and oil passes $110 per barrel: March 13, 2008
There’s no real shocker here, either. When a government begins to "expand the money supply," the effects eventually manifest themselves in the price of those commodities that the government cannot manipulate or create out of thin air. After Bernanke cranks up the presses, more dollars end up chasing a finite quantity of oil and gold.
So, unsurprisingly, the price goes up.
But there could be something even more disturbing at work here. Namely, Bush and company may be preparing another war.
Iran? Syria? Lebanon?
We "wee folk" won’t find out until the bombs start to fall.
In a republic, the process of making war is simple and open. The people and their leaders debate the issues, weigh the opposing arguments, and then they make a decision. If they decide for war, the men go home, get their rifles, and form up on the village square (with their leaders in the front row).
In an empire like ours, wars are the result of the fog and mist of imperial politics. Lies and propaganda become the coin of the realm as competing factions struggle for power. Outside observers must learn to operate like Kremlinologists of old.
Which advisor is the most favored? Which lobbying group has purchased the most senators? Which general is about to get fired?
Without inside access, we are reduced to watching in horror as the various interest groups struggle to gain the upper hand, leaving us merely to wonder who our next "enemy" will be.
America is heading into a deep systemic crisis. Our currency continues its free fall, unemployment is rising, and inflation is surging. Our political system has become radically dysfunctional. Our next Great Leader will be either Dr. Strangelove, The Wicked Witch of the West, or a genteel facsimile of Louis Farrakhan.
As the French foreign minister so undiplomatically observed, the magic is over.
America’s days as the world economic hegemon are winding down.
The sad thing about this mess is that it was completely avoidable.
The underlying cause is both simple and obvious: activist government (with a healthy dollop of incompetence and corruption).
Our ruling elite actually believed it could bring democracy to the Middle East by military force. The numbskulls actually thought that they could make every American a homeowner by the magic of regulatory fiat. They were absolutely convinced they could maintain an eternal "Goldilocks economy" through the wizardry of fiat currency expansion.
Like the Good Book says: Pride goeth before a Fall.
To be honest, it has been somewhat depressing to have spent years writing about this…all seemingly for naught.
So what’s left but to throw back that martini?
And hold the ice…there’s plenty of that where we’re all going.
Steven LaTulippe [send him mail] is a physician currently practicing in Ohio. He was an officer in the United States Air Force for 13 years.