Economic Diaspora Over. Chickens Coming Home to Roast - er - Roost.

The days of college graduates having multiple job offers all over the world are clearly over. Their best bet now lies in moving in to mom's basement and taking bong hits with other 23 year olds in the same predicament. Mom and dad wouldnt mind so much, except that dad's real estate deal is $600k under water and mom's 401k is down 48% from its all-time high. Soon Junior gets married, and suddenly Lovely Laura is moving in also with a baby on the way. These 3 people will not be taking part in a process so stoked in tradition that it has never been questioned in almost 100 years: Household Formation. And as this scenario gets repeated millions of times, the only economic response is COLLAPSE. There can be nothing else. Everytime this happens, someone WILL NOT be giving mortgage business to a bank. WILL NOT be hiring a gardener. WILL NOT be needing new furniture. WILL NOT be paying property taxes. WILL NOT be buying a new car. WILL NOT be going to Vegas. WILL NOT be investing in the stock market. WILL NOT be very inclined to have real health care. WILL NOT be dining in fine restaurants. And on and on and on. So as the bubble-induced economic diaspora comes to a screeching halt, we will do something that in reality has been the case throughout 99% of mankind's history. Relying on and helping each other in a communal sort of way. Harsh economic realities now in effect for 3+ years haved forced even the most die-hard capitalists to realize this new reality. We will live with each other more often, nepotism will make a surging comeback from the highest to the lowest economic classes, and micro-socialism will be the norm among us as senseless economic policies are enacted merely as an attempt to placate the masses.

Aside from young graduates/new adults no longer taking part in the formation of new households, there also another dire situation taking place which is exacerbating the aforementioned phenomena: Household De-Formation. The number of men in the 30s living with their parents has also surged to all-time highs. So aside from a lack of new entrants into the household formation category, there are also millions of Gen Xers literally dropping out of society as we know it, and shacking up with mom and dad. Add to this the growing list of folks in their 70s and 80s who have been hit by the triple whammy of rising health care, zero interest on savings, and significant drops in 401k balances, and the holidays may soon be a time to get away from, rather than visit, the extended family.

Of course, a grand economic re-set would be one way to solve these problems. But that would entail a whole different class of folks taking huge economic hits. And those folks never take economic hits. You, on the other hand, do.

BCS Championship: Old Money vs. New Money

Well, they had a ball didnt they? They saw the burgeoning successful American middle class as on opportunity for just one thing: The Heist of the Millenium. And now it appears the vault is empty. There really isnt much else to plunder and pillage. Between housing, health care, education, utilites and consumerism, only the lucky ones still have a sustainable lifestyle, and even they are on borrowed time. So when theres nothing left to steal, nothing left to squeeze, and no one left to trick, the elites turn to each other. GAME ON, MF'ers!!!!. Get ready for the most epic battle of all-time, as TPTB set their sights on each other. The good news is, you are out of their cross-hairs. The bad news.... its only cause they blew you the fuck away.

Subtle hints of the elites turning on each other have been going on for a few years now. Making former BofA CEO Ken Lewis gobble up worthless entites like Countrywide and Merrill Lynch were some of the early opening salvos of this battle. Merril stock would have opened that Monday at about $0. But for some reason, Ken Lewis offered $29/ share on Sunday night. Then he was forced out. Do this. And this. Then get the fuck out! Thanks Ken. Or Dominic Strauss-Kahn getting pulled off an airplane about to depart and arrested on ultimately baseless rape charges. Never would have happened when all the elites were on the same page. The latest, of course, is Dave Corzine and MF Global. $1.2 billion in segregated customer money still missing. No real explanation of where it is. Turns out Corzine decided to load the boat on bail-out dependent European soveriegn bonds at a time when his brethren were despereately looking for a way out of these investments. How convenient. Global banks were all too happy to dump, and MF Global was gone in a poof. Of course, there will be no perp walk for Corzine..at least for now.

So its Old Money vs New Money. And though it might be billed as the Ali-Frazier analog of Wall Street, in reality, it will be no contest. Old money will blow out New Money. See, Old Money is clean. Made many times over, over the course of 100+ years in some cases. Pure. No debt, no derivatives, no 30-1 leverage, no CDS. Just pure money, free and clear. New money on the other hand, is largely dependent on leverage, accounting trickery, fractional reserve lending, and stock market levels. It is the new money that is desperately seeking to hold on to what they have. It is new money that will implode should the derivatives market, or interest rates, or emerging markets, or real estate be allowed to find their natural levels. Thus all the shenanigans and bailouts by the Fed, US Govt, and the Euro counterparts. But the Old Money is getting tired of carrying the New Money. They kindly, though reluctantly, let the Grand Global Bailout Scheme have a chance to succeed. But now its grown long in the tooth. And so the Old Money is getting ready to pull the plug. All the plugs. They realize that no country or union's currency that was predicated on foolish printing, or endless and unlimited bailouts, has ever flourished. It will be ugly. But it should happen relatively quickly. And then, we start over. Week 1.

The Slave Morality

Wilhelm Freidrich Nietzsche wrote about the slave morality and the master morality.  The two are locked in an eternal dance through human history and psychology.  Nietzsche abhorred the slave morality and saw himself as a champion or a savior for the master morality.

And he may have been on to something these strange days, although not in the way he would have anticipated.  How many people do you encounter on a daily basis who, although having attained higher degrees and professional success, are so out of touch with what is really going on, that you find it hard to apprehend?  Have you encountered these types in your daily life?  It may go something like this.  (The names have been changed to protect the guilty.)  You have a neighbor or someone you know at work.  You typically only talk about the yard, if it's your neighbor, or work, if it's your co-worker.  Then something slips into the conversation, seemingly innocently.  These days, it may involve something about the government, a look into the invisible Iron Curtain that runs between Blue America and Red America, or, worse, something about religion.

So it falls into the conversation.  You suddenly realize that this person is one of them.  Almost like the aliens from the movie "They Live," this is one of them, and now you can see it.  Somehow, they have bought into the media lies that stream and spill 24 hours per day, seven days per week.  They have bought into the lie that the government is evil and that its supposed spending habits somehow resulted in this person's slavery.  It doesn't even make logical sense, and you have been over it in your head again and again.  It still doesn't make any sense.  Yet this person has been led by the nose to believe it, and believe it this person did.

It could also be about Barack Obama.  I recall speaking with a long-lost friend who kept referring to "him" and what "he" was doing.  After some time of politely nodding, hoping that it would end, I finally ventured to ask him, "who is 'he'"?  Silence.  He looked at me testingly.  Perhaps it was for him the reverse of the experience I was having.  Perhaps he was questioning, wondering whether I was one of "them," albeit a "them" diametrically opposed to him and all that he apparently stands for.  Then he suddenly and nervously laughed.  "Surely," he thought, I "can't be one of them."  So he continued.  "Yeah, so he bought not one but two black buses, and he had them flown around the country."  There was a litany of things that "he" (or "He") had supposedly done or been doing, and it sounded bizarrely conspiratorial, and very personal.  Eventually, I asked him about economic policy.  Back to "him" it went.  "No," I asked him, "forget 'him' for just a minute, and focus on the policy aspects and implications of what we are talking about."  He looked at me for a split second, then responded with "But you can't."  I tuned out, having peered into the chasm separating us, and realizing it was a waste of my time and energy to try to help this person.

You see, people must be viewed more than just by their intelligence.  Because some moderately intelligent and very capable people can be so lost in the media brainwash that one would think intelligence would allow them to think their way out of it.  But it doesn't work that way.  In addition to intelligence, each person has a level of slave morality.  The level of slave morality corresponds directly to their ability to think for themselves and escape the media matrix.  A low level of slave morality means that the person is not likely to succumb to the lies about the government and forced to vote as their religion tells them to vote.  A high level of slave morality is the exact opposite:  such a person is a mental slave.

This convention allows you to deal with the dissonance much better, the dissonance between the truth as those with a low slave morality can discern it, and what we are told by the media -- Fox News, AM radio, and the Republican presidential hopefuls -- and what we know to be the unattractive truth.

Because being in the middle of that dissonance for long periods of time is difficult.

You: Statistical Outlier

Ever wonder why, when you wake up in the morning, you have fresh running water, or delicious food you can cook or buy? Ever wonder why you get to sit in an air-conditioned setting on a 104 degree day. Is it because you are a raging success? Is it because God loves you more than say, the Somalians? Or is it perhaps that you simply happened to be a member of the lucky sperm club? The fact that you were born here, or in Europe, rather than in Bangalore, has far and away the most impact on why your life rocks --- for now (rocking being a relative term). But as the market implosion of 2000, 2008, and now 2011 demonstrate, things built on luck and pipe dreams and folly, eventually get arbitraged away by that funny little thing called mean reversion (no pun intended). And the reversion your about to experience will be mean, cruel, and ruthless. Oh it seems like a grand occurence now, but when someone pens The History of the World - Condensed in say, the year 2235, your existence and the mean reversion you experienced will be but a blip. Perhaps a couple of pages at most. See, mean reversion happens all the time in a historical and statistical sense. Its nothing new, rare, or strange. You got laid 3 times this month? Odds are, unless you are Brad Pitt, you probably won't get laid again till New Year's Eve. You made $2.5 million in 2007? Odds are you will not see that kind of jack again, well -ever. You are a 3rd generation industrial tycoon heir? Well, in a few of generations, there's a fair chance your descendents will be working at Wal-Mart. That's just the way random shit happens.

Here Come the Robots

In "The Graduate", Dustin Hoffman is advised by an older family friend to get into "plastics". If they ever re-made that film, they'd maybe say get into "robots". Mexican laborers may seem cheap compared to American workers, and Chindian workers may look like a bargain compared to Mexicans. But Everyone is expensive compared to robots. Robots don't unionize, get sick, need 401k's, or insurance. They don't get pregnant or cancer. And perhaps most importantly for FoxConn (they make all the iphones and related gadgetry), Robots don't jump ot of windows (unless directed too). See, Foxconn recently had to install nets around their buildings. Turns out too many employees were jumping out the window during their shift. After a bogus PR campaign that included the CEO walking around the factory floor, giving 20% pay hikes across the board, and a bunch of hand-shakes, some genius at FoxConn decided enough was enough. Let's just bring in the robots. So the company announced their intention to have a million robots working for them within 3 years. They omitted their 5 and 10 plans out of fear that the nets may not have been strong strong enough to support all their workers jumping out simultaneously. And if Chinese workers are screwed, then you are REALLY screwed. Here you are, preparing to do battle over the rest of your life to better prepare yourself for the New Normal/Economic Blitzkrieg that is surely coming; that is, the lowering of your Standard of Living as that of the Chindians rises meteorically. Your plan was to minimize the pain and hope to meet all those other guys somewhere in the middle. Only, Robots change all that. With Robots, there is no middle. Just an abyss. You're gonna hit terminal velocity soon. The thud will be horrific.

Of Napkins and Sweet n Lo

Dining at a relatively upper scale restaurant, one frequented by trendy zip code retirees and stay at home moms in Land Rovers, I've been noticing something: They all head out with a wad of napkins and artificial sweetener. Hell, I'd expect this this at the Taco Bell. Taco Bell napkins and my ass were well acquainted in college. But that was college. And that was Taco Bell. This is the golden age. This is a French restaurant. These people are driving Lexus'. A recent poll said 64% of all Americans do not have enough saved for a $1,000 emergency. If that's not third world, I dont know what is. This reminds me of the moment in 2002 I realized we had a housing bubble. $2 million dollar homes had beat up Mazda trucks and rusty Corollas in the driveway. That didnt "fit". And people in trendy zip codes hoarding napkins doesnt "fit" either.

A Global Economic Hit (Part the First)

"By the way, I took care of that thing for ya . . . "

Pete (the Killer), Goodfellas (1990)

The S&P has downgraded U.S. treasuries for the first time in history, but it is also probably the first time in history one of the principal owners of the S&P is one of the largest supporters of a presidential candidate running against the current president.  Harold McGraw is a principal of McGraw-Hill, which owns Standard & Poor.

And so the numbers come crashing and crashing downward, and it really leaves you to wonder.  What if there were no "economies" and "markets" churning in computer servers with green and (mostly) red digital numbers.  There would still be a bunch of people with a demand and a bunch of other people with the ability to meet that demand with supply.  Is this not an economy?  What grand bargain did our governments strike to take away this self-evident truth, that we are, in essence, the economy?

This question led me to ask further questions about government debt.  I have been in awe at the recent feverish, insane hysteria of austerity.  It reaches everything.  You would think money is a bad thing the way the media has hoi polloi barking like a rabid dog at anything even remotely resembling debt.  What has hoi polloi so set off?  And why?

Certainly, the way hoi polloi laps up the ideas it needs to think directly from the media, whatever it is telling us should be telling in revealing what has put us in the unenviable position of being victims of all of these failing numbers, and this strange "economy" that exists apart from us, yet inexplicably holds us all indebted to it.

The author of Confessions of an Economic Hit Man writes recently that what he had done for the U.S. decades ago has now evolved and transformed into a hit on all of us.  He talks recently about how that growth model is now being used by global corporations to enslave even Americans.  But that is far too complicated for our purposes here.  Our question is what happened to our economy?  You know, you and me making and serving and selling, and used-to-be, getting paid.

The reason why the hoi polloi are calling for the dismantling of their governments is because the corporatists want to take over the work, the economic muscle and financial remuneration, from these governments.  John Maynard Keynes knew that governments play a role -- and are meant to play a role -- in the economy.  The modern state must maintain a government, and inevitably that government becomes one of the biggest players in the economy.  On the global scale, these governments wield an extraordinary amount of power, not only themselves, but their relations to corporations contractually, as they hire contractors to perform for the government, and regulatory.

Worse, when the corporatists get into trouble, they have the governments bail them out, and hoi polloi pays for the bailouts.  That is why these governments are all so massively in debt.  Defense spending?  Corporatists.  War financing?  Corporatists.  Banking and financial speculation?  Corporatists.  Infastructure or human services?  That doesn't make the corporatists any money, so you can forget it.

You see, the corporatists have hoi polloi calling for their own enslavement.  It was a brilliant plan, a global economic hit on hoi polloi.  And the killers even made their prey like it.