The Perfect Storm
In the perfect storm, several mutually supportive events must occur before what started as a batch of thunderstorms coming off the coast of Africa turns into an enormous energy pit capable of expenditure of 10,000 nuclear bombs in its 2-week existence.
Our U.S. Economy has reach the eye of what is a perfect storm of a credit crisis cum mortgage foreclosures, faltering manufacturers (GM, Ford, their tier 1 suppliers and major airlines bankrupt), energy prices soaring (oil & natural gas), embedded inflation in consumer staples (corn-based products) and long-term foreign and domestic policies mistakes coming home to roost.
No one is totally to blame. It takes years upon years of mismanagement, fingerpointing and apathy to get to this critical landfall. Liberals blaming Conservatives. Conservatives blaming Liberals. Independents blaming both. Blame, blame and more blame. The thunderstorms swirl into a tropical depression.
The outer bands of storm hit
Friday, So Cal’s IndyMac Bank was the latest causality as it became the 2nd largest bank failure in FDIC’s 75-year history. Bear Stearnes, a respected investment bank, considered the 5th largest in America, was taken under by competitor JPMorganChase back in March. It is reported CitiGroup, once known as Citibank, which was bailed out less than 2 decades ago by ‘fuzzy definition’ of the word ‘default’, is expected to post losses for the 3rd straight quarter. CitiGroup is the largest bank by assets in the United States. Lehman Brothers has been in line to be the next take under candidate by the remaining giants of the likes of Goldman Sachs, the gold standard of investment banking.
The Federal Reserve has thrown out ‘free market’ Capitalism to save these entities, as it now is backstopping Fannie Mae and Freddie Mac, the largest quasi-governmental entities on Earth. 50% of Americans pay mortgages (in some way) to these two colussus of their industries. It has opened lines of credit to major investment banks because they are too big to fail.
The eyewall is well-formed.
Countrywide Financial was also a major contributor (largest non-bank lender in the nation) to this current cat 5 hurricane spreading out ominously at wildfire rate around Wall Street.
But why is this all happening at once? Why is the storm swirling in our backyards?
In the next post (or two) I will try to reason out the predicaments that have put us behind the eight ball of a tornatic-spinning monster.
It goes back historically around 65 years (no crap) and the decisions made and shifts in America’s design, ideology and focus, has likely put us in a less-than-ideal future standing. If we refuse to make hard choices, sacrifices and turn around the way we are going, then the U.S. will make Rome seem like a model for stability. The destruction is real.
Stay tuned…
I’m looking forward to your further analysis as you have used a perfect metaphor for the coming situation.
As usual your perception is sharp and your conclusions pragmatic.
Comment by carol webb — July 22, 2008 @ 6:21 pm |