Once upon a time when governments no longer served most of their citizens it was the most economically disadvantaged that could be counted on to rebel against tyranny and injustice. Times have changed, for the worse, despite the spread of democracy.

Irving Fisher wrote a paper in 1933 that analyzed the Depression, specifically, what created the bubble that resulted in a crash - what Fisher refers to as the Debt Deflation Theory. It's a chilling read and not for the faint-hearted.

When over-indebtedness stands alone, that is, does not lead to a fall in prices, in other words, when its tendency to do so is counteracted by inflationary forces (whether by accident or design), the resulting "cycle" will be far milder and far more regular. Likewise, when a deflation occurs from other debt causes and without any great volume of debt, the resulting evils are much less. It is the combination of both - the debt disease coming first, then precipitating the dollar disease - which wreaks greatest havoc.

The paper is available online through a regular contributor to Nouriel Roubini's blog, RGE Monitor. The contributor is London Banker, a former central banker and a market regulator. London Banker writes:

The credit crunch today is not destroying capital but recognising that capital was destroyed by misallocation in the years [before] of irrational exuberance. If that is so, then we are entering a spiral of debt deflation that will play out slowly for years to come.

Posted by permission of Nicholas Benton, owner/editor of the Falls Church News Press

The Next Shoe to Drop
by Nicholas Benton

The past week's 20-point drop in the market price of oil is primarily attributable to forceful declarations by key Democrats in Congress, including Sen. Jim Webb of Virginia, that they'll investigate the role of dubious speculation in driving the price to its recent peak of $147 a barrel.

Hedge funds and others working on the margins of speculation do not like to operate in sunlight. Like cockroaches scurrying when uncovered beneath a household appliance, the speculators have begun ducking for cover.

If you are looking for a correlation to explain the sudden drop in oil, you can find it there.

posted by permission of Nicholas Benton, owner/editor of the Falls Church News Press Benton anticipates today's headlines on Wachovia in his latest Op Ed.

Bernanke's Good Advice

For those who blame Sen. Chuck Schumer for the failure of the IndyMac Bank in California last weekend, alleging his identification of the bank's troubles triggered a run, what are they saying now about the prominent front page headline and story in yesterday's Washington Post baring Wachovia Bank's dirty laundry? What are they saying about the fact the FBI has now launched an investigation into IndyMac?

Those who urge us to "shoot the messenger" divert attention from the realities of the unraveling U.S. economy, including the role of predator lending in it, and are appealing to those incapable or unwilling to accept things as they actually are.

So it was with President Bush's lame attempt on national TV Tuesday to blame the nation's economic woes on "psychology." This, of course, comes from the man who sold us "weapons of mass destruction in Iraq," "we don't use torture," and other bald-faced lies.

The website, Eurointelligence has a report EU Commission cracks down on credit markets of a set of banking restrictions that seem to be rejecting moves to expand Bernacke's bailout efforts by limiting the securitization of mortgages. etc.:

FT Deutschlands leads today with a cracking news story according to which the European Commission is planning to put severe restriction on the ability by banks to participate in the global credit market.

This is a Good one, and what with the way our so called Capitalist Economy has been running for years now, I'm gonna enjoy reading this list, Really Enjoy!

Super Rich Tax Cheats Outed by Bank Clerk
Technician in Liechtenstein Turns Over Names of Americans With Secret Bank Accounts

What we could do with a few more honest disgruntled bank employee's

Talking about "stimulus plans" for the economy, for alternative energy development and the national infrastructure is, well, stimulating. Check out the following article from TruthOut -- t r u t h o u t >> Green Stimulus: Let's Try Again by Dean Baker, Truthout | Perspective, published Tuesday 27 May 2008. Good points, good suggestions -- here's an excerpt:

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These are good forms of stimuli that can increase demand while addressing immediate needs, but we should also think of the long-term. Specifically, we should find forms of stimuli that can get the economy on a more energy-efficient path.

[...snip...]

We should also begin to lay the infrastructure for an energy-efficient economy. This will mean more efficient power plants and transmission lines, increased used of trains and mass transit, and, of course, promoting alternative energy sources. [...snip...] a good stimulus package will not only provide a temporary boost to the economy, it can also help set us on this course toward an energy-efficient economy.

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What's your take?

This is an Open Thread.

Poisonous Plutocracy Pushes Economic Inequality

Joel S. Hirschhorn

The biggest political issue receiving no attention by the Democratic and Republican presidential candidates is the powerful plutocracy that has captured the government to produce rising economic inequality.

A few short articles from Reuters this morning touch upon the current health of the economy, and it's not great news.

• Buffett sees "long, deep" U.S. recession

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  BERLIN (Reuters) - The United States is already in a recession and it will be longer as well as deeper than many people expect, U.S. investor Warren Buffett said in an interview published in German magazine Der Spiegel on Saturday.

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  Buffet said that the US may not be in a recession according to the default definition of two consecutive quarters of negative growth, but the people are already feeling the effects.

  Side Note: Given this White House's propensity for changing the facts to fit the policy (and propaganda), it would be interesting to see what the ~actual~ growth and performance indicators are before saying we don't yet meet the formal definition of a recession.

• Tax rebate won't stem U.S. recession: Merrill
  

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  SINGAPORE (Reuters) - The U.S. economy is in a recession and stimulus from a government tax rebate later this quarter will only temporarily stem a fall in consumer spending, a Merrill Lynch economist said on Wednesday.

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• Tech execs plan for economic troubles
  

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  NEW YORK (Reuters) - Technology executives around the world are preparing for economic troubles to deepen.

  Many hope that their products will prove indispensable for customers and see emerging economies as sure-growth markets.

  But low- and middle-income U.S. consumers are struggling, and the relative strength of U.S. corporations may not last, executives said at the Reuters Global Technology, Media and Telecoms Summit in Tokyo, Paris and New York this week.

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The news isn't as cheery as some would like.

This is an Open Thread.

The title of James Howard Kunstler's Sunday piece in the Washington Post is an eye-opening attention-grabber: Wake Up, America. We're Driving Toward Disaster. He starts off with a major kick to the pants:

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Everywhere I go these days, talking about the global energy predicament on the college lecture circuit or at environmental conferences, I hear an increasingly shrill cry for "solutions." This is just another symptom of the delusional thinking that now grips the nation, especially among the educated and well-intentioned.

I say this because I detect in this strident plea the desperate wish to keep our "Happy Motoring" utopia running by means other than oil and its byproducts. But the truth is that no combination of solar, wind and nuclear power, ethanol, biodiesel, tar sands and used French-fry oil will allow us to power Wal-Mart, Disney World and the interstate highway system -- or even a fraction of these things -- in the future. We have to make other arrangements.

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What's he getting at? Read the article. It's two pages -- you can get a really good idea of the concept, however, if you take a look at rba's morning blurb called Bring 'em on down the road.

Here's a hint: there's a degree of psychological greenwashing going on around here. We need to truly revamp our systems if we are to achieve true advancement, understanding and mastery of our fate, which is ultimately tied to how we live, conduct business, treat our environment and each other.

It's a cradle-to-cradle sort of thinking.

Mishima's Saturday World News is up.

This is an Open Thread.