In the word-cloud of current events, the phrase "parasitic financial system" billows up to a degree that suggests even so-called thinking persons begin to understand what's happening: that banking shenanigans are sucking the life out of advanced societies. That's why Matt Taibbi's metaphor of Goldman Sachs as "a Vampire Squid jamming its blood funnel into anything that smells like money" remains so potent years after it was minted.
Of course the pervasive accounting fraud and routine swindling that drive the banking "industry" are abetted by the phantom government "policy" of the Federal Reserve, an institution that 99.999 percent of the American public could not explain under threat of water-boarding. The bottom line is political and economic leadership that can only pretend the economy works, and the destiny of such pretense is the death of legitimacy - meaning the public's faith in the system. Sooner or later either the public will revolt against such a system, or the system will just implode and leave the public floundering in a period of dreadful chaos.
Nobody capable of thinking through these rather abstruse matters believes Fed Chairman Ben Bernanke anymore, and his demeanor in public is of a depressed person who has lost belief in himself and what he does. He announced last week's policy salvo - the long-awaited QE-3 - with absolutely no conviction. The Fed will spend $40 billion a month in money created out of thin air to buy non-performing mortgages from banks eager to dump them and interest rates on new mortgages will fall to record low levels. This will supposedly "stimulate" the housing market.
Virtually nobody else out there in blog-and-pundit land will tell you what this so-called "housing market" is, so I will. It basically refers to suburban sprawl, which I have previously defined in two ways: 1) the greatest misallocation of resources in the history of the world, and 2) a living arrangement with no future. The first proposition is obviously a function of the second. Interestingly, one of the first effects of Ben Bernanke's QE3 salvo was the inflation of oil prices to nearly $100-a-barrel, with a flow-through effect of gasoline above $4 at the pump, which only shortens the horizon of the suburban sprawl paradigm. Like the zombie banks choking on bad mortgages, sprawl is dead but doesn't know it.
Unfortunately, the suburban sprawl system was interchangeable with the wormy old political chestnut known as the American Dream. Consider that the hysterical extremism ruling Republican politics derives from terror over the death of that flimsy dream - a home of our own, behind the strip mall! They can't believe it's over, that it's lost its value, that they're stuck with the losses, and they're looking for someone to blame for it. All the rest of their blather is just the noise of dissociated anxiety - the religious idiocy, the exceptionalism fairy tale, the family values touted by closet cases, the military chauvinism.
Among the many tragic ramifications of the dynamic is that the final blowout of sprawl-building which ran roughly from the early 1990s to 2007 - and peaked, you may notice, with the final blowout of cheap oil ($11 a barrel in 1999) - became one of two intertwined activities that propped up the US economy. The other was, of course, the expansion of the financial "industry" to about 40 percent of all economic activity, largely based on fraud in mortgage issuance and the repackaging of that debt in booby-trapped bundles of MBS, CDOs, and other instruments that have been destroying banks, governments, retirement funds, and individual investment accounts like a long-running hemorrhagic fever. The results of that orgy can be seen now an over-supply of suburban buildings of all kinds (houses, strip malls, box stores) that will continue to lose value, and a banking system disabled by ruined balance sheets.
There's no remedy for this except acknowledging losses on the grand scale, writing them off, making the necessary lifestyle adjustments to the write-offs, and making a fresh start with an economy based on something other than suburban sprawl building and banking fraud. American politics can't accept this. Neither party understands the contraction underway throughout the industrial world and the very different future it portends.
Despite the pervasive fraud and incessant central bank interventions, there are routine operations of money that must go on for societies to remain stable. Checks or transactions have to be cleared, payments must be made, letters of credit must be issued to permit the exchange of goods and commodities between nations, bonds must be rolled over, markets must allow truthful asset price and interest rate discovery, currencies must hold their value. The terrible stresses being applied by central banks to avoid acknowledging systemic losses threaten to paralyze these routine operations of money. Too many things can go wrong now.
The fault lines for the moment are crackling along the margins, in foreign lands such as Egypt, Libya, Syria, Yemen. There is not a whole lot keeping this infection from spreading into Saudi Arabia. The Saud royal family leadership has passed from one king over eighty years old to another. Nobody knows what will shake out between Israel and Iran. One way or another, an awful lot of the world's oil supply is at stake in that part of the world, and if that gets stoppered or blown up all the central bank machinations ever dreamed up will not avail to save Europe, North America, China, and Japan.
My guess is that the euphoria over QE3 has already passed. The Fed actions of last week will mean nothing except the steady erosion of dollar value, higher food and fuel costs for all us muppets, and increased mistrust between crippled banks, further crippling bank activity, including the routine operations that make civilized life possible.
Therefore, uncivilized life is not out of the question.