George W. Bush was onto something in the fall of 2008 when he remarked apropos of the Lehman collapse: “…this sucker could go down.”
It’s my serene conviction, by the way, that this sucker actually is going down, right now, even as I clatter away at the keys — perhaps in slow motion, so that not many other bystanders have noticed yet, and the few who have noticed are mostly too crosseyed with nausea to speak.
It’s perhaps useful to define even what we mean when we say “this sucker.” Everybody knows what a sucker is, of course — say, a Midwestern public employees’ union pension fund snookered into buying a fat slice of equity tranche in a Goldman Sachs-engineered CDO. But “this sucker” is something else: a rather large cargo of commercial relations, entailed obligations, hopes, expectations, habits of daily life — indeed millions of whole lives — loaded onto the rather creaky vessel we call modern civilization. “This sucker” was such an apt term coming from someone whose understanding of civilization was like unto that of a boy who found a PlayStation under the Christmas tree.
It’s also perhaps useful to define what we mean by “going down.” To my mind it means an awful lot of money disappears and nobody can pay for anything and an awful of things that have kept going on promises to pay and to get paid will stop keeping going. I don’t think that the idea of money disappears — that is, paper certificates representing claims on future work — but there will be a lot less of it to go around. Eventually the idea of money could go, too, at least in its current form as Federal Reserve notes. But mostly for some years it will just be a lot of people, companies, and governments who are broke.
“Going down” will mean a society with no money and an infrastructure for daily life that requires gobs of money to run, and a populace too dazed, confused, and inflamed to do anything useful in the way of organizing new infrastructures for daily life for their new circumstances. In retrospect, the Great Depression of the 1930s will look like “The Philadelphia Story” compared to what we wake up to ten years from now.
President Obama’s speech at Cooper Union last week was a remarkable performance. It managed to appear forceful and serious without containing any really serious or forceful proposals to discipline a banking system that is running a hostage-and-ransom racket on civilization. If this is finally what the Obama Experience is all about than his detractors have been right all along: he is a tool. Finance reform aside, there are still plenty of laws left on the statute books that could be applied to the frauds and rackets that ran absolutely amok on Wall Street the past few years. I would still like to know why buying CDS “insurance” against your own issue of bonds deliberately engineered to default is NOT a form of insider trading, to put it as simply as possible.
The SEC action against Goldman Sachs is likely to open a Pandora’s box of troubles for that company, and perhaps all of the Too Big To Fail banks. But even so, I believe this sucker is going down before 99.9 percent of it is sorted out. Anyway, there was a lot about the SEC action that seemed curious, to put it mildly, from the timing of it, to the brevity of the document, to the strange fact that it emerged at all from an agency whose principal activity the past few years has been the viewing of internet porn, and which has otherwise behaved so indifferently in the face of numberless offenses to common decency, not to mention the public interest, that it might as well have been staffed by a thousand head of Holstein cows rather than licensed attorneys and graduates of accredited colleges.
This sucker is going down because the train of bankruptcies underway has a remorseless self-reinforcing power to provoke more and more bankruptcies at every stop along the line as every promise to pay is welshed on. The mortgages will not be paid and securities will not pay their investors and the banks will choke on the bad paper promises in their vaults and the pension funds will not pay their beneficiaries and the states and counties and municipalities will go broke and not pay their employees and creditors, and the federal government will not be able to “print” new money in sufficient quantities fast enough to compensate for all the money not being paid up-and-down the line… and one morning we will wake up and discover that all those promises to pay were sham promises based on no productive activity whatsoever… and that will be a sad day. Perhaps the Dow Jones Industrial Average will hit 35,000 on that day.
Nothing can stop this chain of bankruptcy. It’s already baked in the cake. There is probably some wish on the part of those in charge, like Mr. Obama, to try everything possible to postpone it. And there is likewise surely a huge effort underway in the banking sector right now to cream off as much cash as possible so that when this sucker does go down they will bethink themselves better positioned to survive the consequences.
Personally, I believe that the damage was mostly done during the tenure of poor dim George W. Bush, and his predecessor Bill Clinton. I suspect that Mr. Obama learned at the height of 2008 election campaign — during those days of the Lehman collapse and the TARP — just how completely the government — and the people of the USA — were in fact hostage to the banking system, and that it has been his unfortunate role to pretend that there is some other fate to bargain for besides this sucker going down. It is probably why he continues to smoke so much. He must be lighting one Marlboro off the tip of another, one after another, in whatever inner sanctum he repairs to when the midnight chimes toll around the White House. It’s sad to think of this graceful, still rather young man going down in history as the chump-of-the-century, a reincarnation of Herbert Hoover on steroids, with sugar on top.
Animosities brewing as they are among the white trash elements of the country, I just hope this sucker doesn’t resolve into an ugly bout of attempted ethnic cleansing. Certainly Obama’s racial make-up has inspired a revival of the Ku Klux spirit around the Nascar ovals. I’m sincerely worried that the misdeeds of people name Blankfein, Rubin, and Madoff could provoke a red-white-and-blue pogrom.
The big mystery for the moment is how come a few good men of stature in important places have not stepped forward to say the right thing or do the right deed. How come no US congressperson challenged the knavish behavior of Republicans who condone malicious idiocy that they know to be false like the so-called “birther” activity. How come no putative “progressive” has called the Democrats on their disingenuous failure to call illegal immigrants what they are. How come no state attorney general has filed charges against TBTF bank misconduct even if the US attorney general lies in state over at the US DOJ. How come no political figure of any stripe has called for the resignation of Summers, Rubin, Gensler and other Goldman Sachs “sleepers” infesting high levels of government. How come Dylan Ratigan is the only visible figure in any major newsroom willing to identify the precise nature of the meta-swindle.
When this sucker goes down, our primary task will be reorganizing American life on a much more local and de-complexified basis. It’s a very big assignment and especially daunting against a possible background of political disorder. The losses will be epic and the changes severe, but it doesn’t have to mean the end of recognizably American culture. There will be very little money around, and it may end up being a certificate backed by gold issued by a bank other than the Federal Reserve. Or maybe we’ll just be swapping stuff for the makings of dinner.
So many forces are roiling around ‘out there’ now that it’s hard to believe that the authorities in government and banking can keep the illusion of normality going a whole lot longer. The possible litigation against Goldman Sachs-style frauds by a thousand aggrieved victims is enough to paralyze the system. Meanwhile, trillions in credit default swaps are ticking away like dirty bombs. Greece is going down, with Portugal, Spain, Ireland, and the UK standing by to go next. Nobody can pay their bills. Before long, the old folks won’t get their checks. Then the poor folks. Lately, I wonder if there will even be an election six months from now.
This article has been previously published on the author’s blog.