The marketplace of ideas hasn’t quite become a closed loop. But the signs of sclerosis are everywhere. The political (and economic) imbalances keep accumulating. So do the bad ideas. Trend following behavior — self reinforcing, irrational, herd-like — is becoming the norm, not the exception, in the media as well the financial markets.
Back to Main
July 6, 2005
WB: Forever Blowing Bubbles
Comments
Right on target Billmon.
If I look at the US economy and I look at the Asian economies there is no doubt in my mind that the standard of living in the US will, relative to Asia, decline over time. And possibly, one day, decline very meaningfully, because in the US what you have is an asset bubble. In Asia we have basically an investment bubble: we have excessive capital spending in China and we have excess capacity. But if a disaster happens, at least we have built the roads, the bridges, the subways, and we have built the factories, and we have bought the machinery to produce goods.
…
So I think it is inevitable that, in due course, in the Western world, your children and my children will not have the enjoyment of rising standards of living, because a wealth creation that is purely based on inflating real estate prices and stock prices, isn’t going to work in the long run.
Marc Faber cited in my recent post here.
I’ve been using the Whiskey Bar as my blog hub for about a year now. I have a small AM radio show and use your site to bounce around for info and commentary. When I first found it..you weren’t posting comments at the time..just pictures and rather funny images and ideas. Since you came back..you did say that you stopped blogging for a while right?…I’ve been reading you before I go to my favorite sires for stories and issues to talk about.
I just felt like telling you that you seem like one smart son of a bitch. I always feel like you are informed about what you are saying. Thnaks for your site and insight.
Posted by: aaronpacy | Jul 6 2005 20:14 utc | 2
signs of sclerosis are everywhere. The political (and economic) imbalances keep accumulating.
Which suggests an analogy to the collapse of popular confidence in the Weimar political class. Wartime German politicians were notoriously deceitful about WWI and the basic woeful condition of Germany’s military. The resulting depression-fueled malaise provided many Germans reasons to trade tradtional democratic institutions for the guy w/ the funny moustache.
sorta makes you wonder what could happen here, as if, per b’s recent entry, Bush is a prelude for something more sinisterly rightwing. yow.
Posted by: slothrop | Jul 6 2005 21:46 utc | 4
whoever cleverly harnesses the growing discontent in order to create America’s new-fangled fascism will certainly have no shortage of pissed-off OIF vets who can be used to find and intimidate “internal enemies.”
Posted by: slothrop | Jul 6 2005 21:53 utc | 5
I agree with Aaron, Billmon. You are one smart son of a bitch. But even better, you can write. I read you and Josh Marshall every day, and look forward to Matt Taibbi once a week (when i’m lucky).
Posted by: Aloyisius | Jul 6 2005 22:38 utc | 6
It’s even worse than you portray it. It’s become irrelevant if one is correct or incorrect, as long as the myths of modern America are sustained. In fact, the worst transgression is to be correct when the “conventional wisdom” is wrong – how many times have you seen Jim McDermott or Scott Ritter interviewed in the past two years? They are still referred to as traitors and moonbats – even though virtually everything they said about invading Iraq has turned out to be correct. For their sin, apostasy, they have been banished to the wilderness. The myth of Cassandra is now in full bloom in our society. Prophets without honor, indeed.
Posted by: HankP | Jul 6 2005 22:54 utc | 7
I agree with the post ocmpletely. Every time I see one of these pundits that has been oh so wrong oh so many times but still brought back as an expert… Whatever happened to principles and integrity?
Posted by: Cali4nian | Jul 6 2005 22:58 utc | 8
The hot wind coming from the conservative noise machine has blown creases into the collective brain of the mainstream pressgang. No small breeze from the left will change that. No small sinkhole will change the direction of the stampede. I’m afraid it will take a meltdown of historic proportions to get the attention of the blathering class and the public. Depression, criminal conspiracy trials for the entire administration, footage of W. cornholing a goat on the White House lawn, something like that.
Which suggests an analogy to the collapse of popular confidence in the Weimar political class. Wartime German politicians were notoriously deceitful about WWI and the basic woeful condition of Germany’s military. The resulting depression-fueled malaise provided many Germans reasons to trade tradtional democratic institutions for the guy w/ the funny moustache.
You confuse and oversimplify too many things here, historically , slothrop,
to have any “historical” credibility.
Stick to philosophy, please.
Posted by: Groucho | Jul 6 2005 23:34 utc | 10
Bush is a prelude for something more sinisterly rightwing.
you like prez cheney, or doesn’t he count cuz he’s already running the show?
Posted by: annie | Jul 6 2005 23:53 utc | 11
Stick to philosophy, please.
groucho, at least you could back up your mudslinging w/ some counteroffer, or are you just living up to your name?
Posted by: annie | Jul 6 2005 23:58 utc | 12
oh geez, that was supposed to say you mean ‘like’ cheney.
head in the sand, head in the sand
Posted by: annie | Jul 7 2005 0:01 utc | 13
Well sloth:
Just short. 1.The Weimar Republic did not become the government of Germany until the Kaiser abdicated in November 1918. Until then, as I remember, Germany was a constitutional monarchy.
2.Until the failure of the German offensive spring 1918, the Germans were holding their own. They had, among other things , knocked the Russians out of the war.
3.”basic woeful condition of Germany’s military”–I doubt that any allied troop that fought against them would have said that–even in Novenber 1918.
4.First inflation, sloth, 1923. It was horrendous.
5. Then war reparations.
6. Then depression, 1929.
7. Then Hitler, March 1933.
Posted by: Groucho | Jul 7 2005 0:18 utc | 14
I’m struck by Arendt and Friedrich accounts of the abandonment of dem institutions by Germany after the 1st war. Mommsen’s work shows how the nazis, as a matter of justifying NS radicalism, propogated crises of “liberalism” in this period. Stern’s book, offered by Billmon (imo the best one of the bunch there) provides the detail of protfascistic German thought, a panoply of race-baiting texts paving the way for an intellectual vindication of Hitler. Though sometimes an annoyingly unjustified polemic against “marxist” interpretations of NS, Paxton’s book does a good job demonstrating how Post-war public disaffection in Germany and Italy (though Italy was a victor, it made no great gains by way of Versailles) combined with economic decline set the stage for first Mussolini and then Hitler (Paxton’s book has an excellent annotated biblio btw). The Kershaw ed. Nazi Dictatorship does a good job introducing the myriad ways culture, economy, and defeatism opened the royal road to fascism.
Amazing, these readings provide chilling analogies to what seem to be happening now, to “us.”
In other words, Groucho, STFU. Also, your recent thinly-veiled immigrant-bashing in a previous thread says much about you, probably.
Posted by: slothrop | Jul 7 2005 0:20 utc | 15
the collapse is from every side.
fear of having no meaning results in walmart nation huddled to read the bible in the heartlands.
the lack of dynamic civilization results in our leader riding a bicyle, crashing into a policeman. what type of infantile preoccupation with adolescent sports identification renders our empire rudderless in such perilous times? i aint impressed with lance armstrong or bombing asteroids. oh twilight empire.
perfect storm for the the corporate neoliberal agenda. bird flu my axx.
Posted by: chimp on wheels | Jul 7 2005 0:22 utc | 16
my comrade slothrop
don’t forget our melancholic greek poulantzes
Posted by: remembereringgiap | Jul 7 2005 0:23 utc | 17
My mistake on Weimar…Kaiser leadership lied, obnviously.
Posted by: slothrop | Jul 7 2005 0:24 utc | 18
comrade s
is the poultanzes book fascism & dictatorship available in english
Posted by: remembereringgiap | Jul 7 2005 0:26 utc | 19
BTW, I claim expertise about nothing. Just trying to learn.
Posted by: slothrop | Jul 7 2005 0:27 utc | 20
Don’t know what you are smoking tonight, COW.
But I’d like to have some!
Posted by: Groucho | Jul 7 2005 0:34 utc | 22
comrade s
something about poulantzes really touched me. nicos was one of the very few visitors who kept on seeing althusser through his hospitalisations & through his worse manias & knowing that he was a very troubld man himself – i was moved by his kindness & generosity. if you like his exemplarity – & yet his thinking is like steel – not unlike benjamin in that sense – it appears loose but is in fact very, very tight. for me a bettter study of elites capital & dictatorship hasn’t been written
a close study of economics tied with a very precise understanding of human reality
so much since bukharin/gramsci suffussed in melancholy & light . hope darkness & fire
Posted by: remembereringgiap | Jul 7 2005 0:34 utc | 23
In other words, Groucho, STFU. Also, your recent thinly-veiled immigrant-bashing in a previous thread says much about you, probably
You don’t know me slotrop, so I am more amused than offended by your last remark.
I imagine I’ve employed 500 Mexicans in my business in the last 20 years. I’ve helped them find housing, get green cards, get health care for this period.
And they are great people, the vast majority.
Some of my best friends are Mexicans. And most of them feel the same way.
Posted by: Groucho | Jul 7 2005 1:02 utc | 24
my grandfather used to say “hell, i ain’t prejudice, i hire ’em”
Posted by: annie | Jul 7 2005 1:17 utc | 25
billmon,
Keep reading your posts – can’t stay away. You are unique and your bar isn’t out there, or if it is, haven’t found it.
Yes indeed, it is a bubble!! Having been through two before, {real estate,not stock,—- that’s another story), for those of you out there, this is not the time to leverage!! You can loose everything.
My townhouse in 99 is now worth 3 x’s, mega bucks.
Makes me think of the lira in Italy in the 80’s. Subtract a couple of zeros.
joanna
Posted by: joanna | Jul 7 2005 1:27 utc | 26
Great column. And if you want to read a great dissection of people like Glassman, read this piece from a right-of-center blogger who works on Wall Street:
http://cunningrealist.blogspot.com/2005/04/running-of-permabulls.html
Posted by: Peter | Jul 7 2005 1:32 utc | 27
your bar isn’t out there, or if it is, haven’t found it.
we’re the barflies, you’ve found us.
thanks for the link peter
Posted by: annie | Jul 7 2005 1:42 utc | 28
Always have enjoyed your economic analysis. Now, how about some practical ideas as to how to survive financially in this economic climate? Or referrals. Not fair keeping your edge secret, if you have one. (only slight irony)
Posted by: DonS | Jul 7 2005 1:47 utc | 29
The marketplace of ideas hasn’t quite become a closed loop. But the signs of sclerosis are everywhere. The political (and economic) imbalances keep accumulating. So do the bad ideas. Trend following behavior — self reinforcing, irrational, herd-like — is becoming the norm, not the exception…
Question for the pundits out here. Is W a product of his times? i.e., are there (for lack of a better phrase – my training is neither in history nor sociology), “large scale historical forces” that cause unenlightened leadership to emerge or is it that a sick society throws up poor leaders?
Posted by: bvb09 | Jul 7 2005 2:14 utc | 30
3.”basic woeful condition of Germany’s military”–I doubt that any allied troop that fought against them would have said that–even in Novenber 1918.
Slothrop may have gotten some of his facts wrong, but his basic point is correct. The German Army was crapped out by November 1918 — in retreat everywhere along the Western front, short of troops, officers, artillery, railroad stock, horses. Austria-Hungary, Turkey and Bulgaria had already surrendered. All German U boats had been ordered back to port. The high command had known the war was lost for weeks — Ludendorff begged the Kaiser to ask for terms on October 1, then resigned on the 25th.
The hopelessness of the military situation was naturally hidden from the people and the troops — thus the shock and rage when the surrender was announced. After the war, the high command went to great lengths to try to pin responsibility for the decision to ask for an armistice on Prince Max (the Kaiser’s temporary successor) and his civilian cabinet. This included inventing the stabbed-in-the-back myth which the leader of a certain extreme nationalist party was to find so handy later. But the mutinies and revolts that broke out in late October and early November were not the cause of Germany’s defeat but a response to it. The myth, however, was widely believed and much of the blame attached to the politicians and institutions of Weimer.
I would suggest you shore up your own historical credibilty before telling others to “stick to philosophy,” groucho.
Posted by: Billmon | Jul 7 2005 2:43 utc | 31
Fear not. End of bubbles is on the way.
Tucked in the Energy bill is a section that entirely deregulates public utilities.
Posted by: lightly | Jul 7 2005 3:02 utc | 32
“the Market can stay irrational a lot longer than you can stay solvent”
Keynes
or
“the trend is your friend”
Marty Zwieg
the bush adventure in Mesopotamia seemed a crap-shoot to anyone with any understanding of the situation their. It turned out snake-eyes and now we have to go through the horrible post-mortem
Posted by: ed_finnerty | Jul 7 2005 3:05 utc | 33
“large scale historical forces” that cause unenlightened leadership to emerge or is it that a sick society throws up poor leaders?
that’s a darned good question and I wish I had an answer. sometimes Bush reminds me of a boy-king, or a mentally retarded king, put on the throne by a cabal of powerful dukes and earls who govern the kingdom in his name. a puppet ruler. a classic form of poor governance with many historical precedents.
I think a lot lately about cycles of corruption and reform — trying to believe in a pendulum swing ahead. what is it that creates a backlash of public revulsion and revolt against money-power and public malfeasance? whence come sweeping movements of reform? is there really a “vanguard” (one of my least favourite revolutionary notions) or is it some kind of spontaneous populist ferment? what leads to a Hooverville, or a velvet revolution? is it something to do with the flagrancy of the corruption, or its duration, or does the corrupt government have to inflict suffering on a certain percentage of the population before a revulsion is provoked? do we really have to live through another crash, another Great Depression, to get to another New Deal?
it raises the question also, what exactly is “a sick society”? obviously the wingnuts have their answers — a “sick” society is one in which gay people can get married and single women can raise children, where married women can disobey their husbands and extramarital sex goes unpunished, etc. but when a more liberal-minded person gets the impression that there is something sick, some kind of illness or malaise in contemporary America, what do we mean? a decline of communitarian and altruistic/reciprocal values? some kind of moral autism in the business and social culture around us? a sense of aggression or potential violence building up? a feeling of being alienated from the mainstream culture to the point of disgust? a decay of trust? SusanG approached these issues over at euroboo in her essay “A Culture of Honor” (wishing she lived in one, that is, feeling a strong, wistful yearning for one).
billmon’s recent elegy to roadside diners and an America that once looked hopeful seems to be a piece of the puzzle: maybe a sick society is one in whcih people are losing hope, losing any sense of a better future.
Wow… dunno about y’all but I can no longer load the Main page. getting a 404 on http://www.moonofalabama.org/
I will study it closely and post one tomorrow.
Are you quoting a book there, BILLMON?
It is such beautiful writing.
Sounds like a story book.
Please give me an historical cite.
My point was that the troops did not know that they were beaten, and they were not beaten, on a strategic level until the Spring offensive of 1918.
And nobody they faced in October-November 1918 thought they were beaten.
Posted by: Groucho | Jul 7 2005 3:12 utc | 36
annie,
thanks!! good that some of the old group is still around.
Lupin is still here, thank you god.
joanna
Posted by: joanna | Jul 7 2005 3:30 utc | 38
“And nobody they faced in October-November 1918 thought they were beaten.”
After Oct. 4 the allies had pretty good reasonn to think so — that was the day the German sent their first request for an armistice.
On at strategy session Oct. 13, Lloyd George, the British PM, “raised for consideration the question as to whether the actual military defeat of Germany and the giving to the German people a real taste of war was not more important, from the point of view of the peace of the world, than a surrender at the present time when the German armies are still on foreign territory.”
Sounds like he knew.
The source is: The First World War: A Complete History, Martin Gilbert, Holt & Co, 1994.
Posted by: Billmon | Jul 7 2005 3:54 utc | 39
DeAnander-
There is no shortage of institutionalized compassion. My characterization of the sickness is a lack of respect for what matters – that is, the underlying forces that need to be nurtured for a society to flourish. e.g. good incentives. Everywhere I look the incentives are wrong. This is a byproduct of large government, now made into a critical situation by corrupt and foolish leadership. I believe no government employees or significant beneficiaries should be allowed to vote. This country used to at least consider libertarian ideas as sort of a foundation. No longer. They have apparently been discredited as inefficient. We’ll see how it works out.
Let me flesh this out a bit. It never ceases to amaze me how people will admire the past, while simultaneously supporting rules that would have made that past impossible. For example, you will hear a building inspector tell you how they like to vacation at this nice cabin in the woods. Does he ever stop to think that what he does every day prevents any more cabins like that from ever being built? Similarly, Billmon glorifies the hot dog man, but do we consider the reason there is no new hot dog man? In my opinion the reason is usually government regulation. Nobody wants a hot dog man right next door after all! You need a $400.000,00 lot for a legal location for starters (yes I approve of zoning). And try to start a packing plant. It’s a huge ironic twist where the people want safety and uniformity without realizing the overhead. Thus we have ADM or Conagra hot dogs, and that’s it. The new hot dog man will be someone who can get an SBA loan, not make good hot dogs.
I suppose you all may find this an embarrasing libertarian rant. Well, it simply comes back to what works. We have to protect everyone’s air and water and we should protect health and educate as a group. But we need some sort of individuality and that comes from within individuals. That needs to be honored more I think. In terms of economics it means there have to be some cuts in military spending and frivolous spending.
Posted by: correlator | Jul 7 2005 4:15 utc | 40
@correlator, you’d be surprised how much sympathy I have with some libertarian positions 🙂 I’m opposed to the “culture of Total Safety” (the increasing tendency to prohibit individuals from taking voluntary risks) and the way in which it has prepared and conditioned Americans for the culture of the Security State (from nanny-state to security state is not so long a step, under the “right” leadership).
I breathe a deep sigh of relief when I go to Canada and enjoy fishing piers without waist-high steel railings and hysterical warning signs; ironically perhaps it is Canada’s “nanny state” universal health care with its contained costs, which reduces the litigious fever over accidents and injuries, which leaves Canadians with more freedom of movement and less intelligence-insulting signage than Americans. which I guess is what makes me “a libertarian socialist.”
what the hell is that, you may ask (and who could blame you). I haven’t worked out all the ideological details myself yet, but it has something to do with the polity providing a basic safety net for citizens, but not trying to micromanage their lives. public transit is good; having to submit to a retinal scan to get onto public transit is bad. some kind of police force is good; intrusive surveillance is bad. universal single-payer health care is good and cost-effective; being told which doctor you must go to and when is bad. privacy and autonomy are good; but throwing vulnerable citizens to the wolves is bad. thus my reasoning: the polity should ensure some kind of safety net for everyone, but not micromanage and microregulate the very sectors (small business, family farming, independent home building) which offer the most hope for a sustainable economy. this kind of regulation is often a cover for subsidising megascale business and punishing the small operator.
some say that we need to micromanage people in order to contain costs — i.e. if we offer universal health care then we need diet and lifestyle police to make sure that people don’t pursue autopathic habits — smoking, drinking, eating unhealthily, being sedentary — giving them expensive diseases which we then all have to pay to treat. but as far as I can tell from our current insane system, we’d pay more in wages to all those nosy lifestyle police than we’d save 🙂 I’d rather “waste” some money treating people for avoidable conditions than know that people were dying or families being bankrupted for lack of affordable health care. and lord knows, for what we just spent on invading Iraq in order to rescue Halliburton’s stock prices, we could have offered universal health care to a whole lot of Americans.
there ought to be some sense of scale in regulatory enthusiasm, too (sometimes there is). the local farmers’ market stallholders, who offer produce to a few tens of people, should not be held to the same rigorous standards of food packaging as, say, a giant corporate ag combine whose products ship in the millions of units per month and could theoretically poison thousands in one day if improperly packaged or handled. this scale thing gets crazy sometimes. f’rexample.. in one state where a friend of mine operates a small organic farm, iirc, small dairy farmers are damn near crippled by well-meaning (maybe) legislation that prevents them from shipping their milk any distance on public roads except in a government-approved refrigerated bulk-carrier truck. this means that it is technically illegal for someone with a herd of a dozen Jerseys to truck her milk to the farmer’s market 15 miles down the road on a Saturday morning, or to a cheese-maker 20 miles away in the other direction. and it is hardly worth renting or hiring a bulk carrier truck for a few tens of gallons.
in this case the regulation was probably intended to prevent the delivery and sale of spoilt milk (not a bad idea), but was then interpreted to support only corporate-scale farming. the result is that if you are a small dairy farmer and you want to make cheese, you’d better learn to do it on your own premises or risk an FDA citation if you’re caught transporting your milk unofficially.
I could go on at length about the fossilised regulations of planning departments both US and Canadian — how they militate strongly against the use of sustainable construction materials and energy-efficient techniques like strawbale, how they militate against water-saving devices like composting toilets, etc. we must be kept “safe” even if the “safe” practise is far more harmful in the long run than the suspect innovation. I could go on about insurance cartels and the enormous coercive power they exercise in a litigious culture. we could probably have a good time reciting our favourite the-lawyers-made-me-do-it language from product brochures (my all time winner is “do not attempt to carve roast while rotisserie is in motion”).
so I think we have a certain amount of ground for agreement. both litigation-mad American state capitalism and Soviet totalitarian state communism have in common the mania for regulating and policing and surveilling the average citizen into the ground — in their different ways. I mean, what do we make of a country where you are not allowed to have a bakery ice a well-known cartoon character onto your kid’s birthday cake because intelprop lawyers might come and shut down the bakery? sheesh, can we spell “no sense of proportion”?
what would be far more effective (mho) would be for the State to take care of the very broad-brush issues like (as you say) health care, education, roads, trains, parks, environmental accounting and protection, enforcement of basic business and civil law, blah blah; but to give individuals, small collectives and coops, families, villages, farmers more slack to innovate, experiment, and improvise.
as to cutting military spending, you’re not likely to find much disagreement here, though the Wars R US economy would have to be significantly retooled… and speaking of ranting, I think someone must have slipped some caffeine into my drink… time to shut up now…
The barkeep was on-fire again today. The one thing that has consistently gotten my goat the last few years is wonder when as Billmon says, the “market will clear” for the punditocracy. I prefer to think of it as a “market correction”, but that is aside from the point.
The summer of ’01, as many pointed out, was all about Shark attacks and other nonsense. After 911, I remember hearing a number of pressmen declare triumphantly that everthing has changed and now they are recommitted to dilligent performance of their craft. Following that, they they proceeded to shout down anyone who had an opposing view about the possibility of a non-omniscient W who neither be given omnipotent powers. Then they proceeded to fail to cover media consolidation rules at the FCC and then they shilled for the administration on the Iraq buildup. Our popular president, as he was known then, was supposed godly perfection.
But after the WMD was not found, again I remember reading the NYT in their non-apologia and other puditocrats wring their hands over how they got it so wrong on WMD, repleat with promises to do better and redouble efforts to get the story right. Then we had Mark Felt come out and every journalist then supposedly had a chance to reflect on what a moment Watergate was for their profession and again be introspective about how we have come to where we are now. At each turn however where I would expect the punditocrats to have a chance to “clear the markets”, they have taken the opportunity to feel emboldened.
Now, I have no idea what is going to do the trick. Another national catastrophe could be just another rally ’round Bush opportunity. A market downturn or energy crisis is just a chance to blame obstructionist Democrats for failing to pass more tax cuts or the leave no energy exec behind bill. I fear that the only thing that will do the trick is a recession so bad, that most of these fools lose jobs too. But then I or people close to me would be hurt too and that is nothing good to wish for.
Posted by: Bubb Rubb | Jul 7 2005 4:49 utc | 42
Billmon, you might be interested in the extraordinarily frothy mixture of ideology and speculation happening over at The Iraqi Investors Forum, needless to say, a message board dominated by true believers in Bush’s promises that a stable Switzerland-on-the-Euphrates is just around the corner
(h/t , who gets his very own Iraqi Investors thread here.)
Posted by: Jackmormon | Jul 7 2005 4:56 utc | 43
… In fact, the worst transgression is to be correct when the “conventional wisdom” is wrong – how many times have you seen Jim McDermott or Scott Ritter interviewed in the past two years?
Indeed! Sean Penn is still working, however. Thanks for that post HankP.
And to Peter for the link.
And @bvb09: Good question, though I am not pundit enough to take it on tonight. But some kind of reverse Darwinism seems to be taking hold – the greater the crises, the greater the propensity to choose leaders who have absolutely no clue how to deal with them. This tendency is not a good sign for the human race.
Posted by: tgs | Jul 7 2005 5:27 utc | 44
don’t know what’s up, but “forever blowing bubbles” post is no longer up at WB. 🙁
Posted by: esme | Jul 7 2005 13:16 utc | 45
@BILLMON;
Re: WWI
Just Briefly:
When I was writing that the German army was not beaten in November 1918, I meant beaten spiritually or morale-wise.
I will write with more clarity and precision in the future.
Martin Gilbert’s work is of course the best one-voulume history of WWI in the last 30 years.
Posted by: Groucho | Jul 7 2005 16:34 utc | 46