2008 Financial Review…From A Thespian Point of View!

Well Peachtree City the end of 2008 finally approaches.  So what was life’s financial lesson in the year 2008.  Well, since this is the last post for this year I thought I’d ask you to lend me an ear or in this case your third eye as I invoke some Shakespeare in my analysis of the financial collapse.  OK, OK, I wouldn’t be classified as a thespian but how would Shakespeare a literary genius when it came to tragedy with heroes like Hamlet,Macbeth, King Lear and Othello, review our current financial state.  

“Let Rome in Tiber melt, and the wide arch of the ranged empire fall!”  So said Marc Antony as he embraced Cleopatra. “Here is my space, Kingdoms are clay…” What a compelling way to look at the financial crisis of 2008. You begin by noticing that it is centered in just two countries, Britain and America. These two countries are the twin capitals of the world’s only surviving empire, an empire built on a foundation of industry, technology and trade…but lately richly redecorated in an elaborate rococo style of modern debt and finance.

But alas, the English-speaking gents had rivals. They were challenged by other Europeans and then there were the Japanese.  All learned that the same machines that produced wealth could destroy it even faster. The Germans were particularly tenacious competitors.  By 1910, their factory output was greater than that of the UK.  By 1940, they were trying to blow up England’s factories.  However, America and England tag-teamed them in a couple costly wars in the first half of the 20th century.

By 1945, The Anglo-American empire had only one challenger still standing…The USSR!  Militarily, the USSR was a real powerhouse but commercially, not even a footnote in economic history. The figures put out by the USSR showed rapid growth.  But nobody was flying to Moscow to  buy the latest fashions or babushkas nor bragged about his Volga, a Soviet auto.  Nor did people hasten to open accounts in Russian banks.  The Soviets had managed to create a rare thing - a value-subtracting economy. They took valuable raw materials out of the ground and turned them into worthless finished products.  If he had a choice, no one would buy soviet-made goods.  Every sale made the seller poorer.  Finally, the whole system imploded in 1989, leaving the Anglo-Americans masters of the universe.

This next era, 1989-2007, was unbelievably good to almost everyone.  Even former enemies rushed to stock the empire’s shelves and lend it money.  Overstretched, over-indebted and over-there…the US had military bases all over the world.  Back in the homeland, the imperial race went a little crazy.  People were spent too much money flattering themselves with delusions of mediocrity.  It seemed perfectly normal to them that they consumed while the foreigners produced and that they spent what the foreigners saved. Central banks encouraged the plebes to consume; the more they consumed, the poorer they got, but as long as they had someone else’s money to spend, nobody complained.

But then all of a sudden…..competitors had more modern factories, more savings, better-trained workers and OMG…lower costs!  Oh no, then the empire turned to a colossal conceit; that it could make its way in the world by financing things, rather than making them. Gradually, the Anglo Americans developed a value-subtracting society too…financing, borrowing, flipping, consuming - all at the expense of real production.  Russians recognized the symptoms.   The leadership was largely delusional, industrial capacity was largely archaic and dysfunctional and the working class was largely broke, busted and disgusted.

Yeah buddy…you better believe the Bolsheviks recognized the smell of that rot and boy was it ripe too!

What the Romans called “consuetudo fraudium” (habitual cheating) became business as usual.  Even the freekin Roman coin called the denarius….irregular in shape attests to clipping.  That’s a method that was used to steal its value.  Well back to…business as usual.  As I mentioned, it was part of the Soviet Union philosophy…and then it found friends in England and finally came to rest in the good ole USA.  By 2006, practically every transaction was tainted with swindle.  Banks sold each other packages of scammy debt, composed of mortgage contracts on houses sold to people who couldn’t afford them, fraudulently rated Triple A by the rating agencies, based on quack formulas invented by Nobel-prizing winning economists. This took place in a party atmosphere (You saw them on CNN) created by central bankers who had put something in the water; they spiked the entire economy by under-pricing credit and then urged consumers to drink up, by buying expensive SUVs and other luxury items using sub-prime loans. The Russians would recognize the next stage too.  After the collapse, the ruins are liquidated, picked over, and parcelled out to the politically well-connected.

“Kingdoms are of clay.  Our dungy earth alike feeds beast as man!” said Antony, before falling on his own sword.

Here is wishing you happiness, health, peace, love, joy and prosperity for 2009!  I hope my post have been entertaining as well as educational.  At least I hope it opened your eyes and helped you take control of your own financial future. 

By the way, I’d be more than happy to discuss the state of the economy while helping you to buy that new home in 2009!  Oh yeah, I’m also never to busy for any of your referrals!