Johann Hari (UK Independent) shows us the miracle desert city of Dubai, United Arab Emirates, through the eyes of broke expatriates, broken slave laborers and a citizenry trained to look away.

Karen Andrews can't speak. Every time she starts to tell her story, she puts her head down and crumples. She is slim and angular and has the faded radiance of the once-rich, even though her clothes are as creased as her forehead. I find her in the car park of one of Dubai's finest international hotels, where she is living, in her Range Rover. She has been sleeping here for months, thanks to the kindness of the Bangladeshi car park attendants who don't have the heart to move her on.

Don't miss this rare view behind the thin false front of the oil-rich Middle East. Read it here.

Inflation, probably heavy inflation (or even the vaguely defined hyper variety) has become the only plausible end-stage for the huge buildup of debt which has been accumulating in the U.S. since the late 1960s. To anyone willing to face reality, it has been clear for many years that such enormous and deeply embedded debts both domestic and foreign could never be repaid at their original (constant dollar) value. Drawing this conclusion has never required deep knowledge or obscure reasoning. There simply isn’t enough real wealth in the world to make good on all the promises we have been making to each other for the past 40 years.

Why do I refer to “promises we have been making to each other”? Because the overvalued stock market and housing market turn out to be the hidden repository of the inflation which one would otherwise have expected to see out in the real world of consumer market baskets.

Since the 1980s, when individuals first began receiving counsel to move their savings into financial products of various kinds, the public has largely obeyed the advice of investment advisors to buy and hold. The well-meaning advisors and the obedient small investors mostly could not have known that moving everyone into stocks was not quite the same as putting a few saavy people into that tenuous medium of exchange, for stocks and other investment instruments are a kind of money. Now, in retrospect, it is suddenly easy to see that, along with real estate, stocks are the currency in which U.S. inflation has been hiding all these years. As a society we bought and bought, and then we prudently held and held, until enormous paper wealth had accumulated within deeds and stock certificates which, had they not been so widely owned, could have been exchanged for many dollars and thus brought real wealth to their owners.

This is something like the story of a vast forest from which one might freely remove ten, a hundred, even ten thousand trees a year without disturbing its ancient health. But a million trees taken from any forest is quite another matter, and soon leads to the destruction of a misunderstood resource.

There are only a few possible scenarios in financial collapse. The inevitable crisis of confidence could have struck the U.S. in two different forms: deflation and inflation.

Deflation refers to out-of-control shrinkage in the supply of money. This can happen when people lose confidence in their economic future. The natural reaction when one anticipates an era of want is to save money. Saving money, without increasing income, requires less spending. This was the most obvious manifestation of the Great Depression of the 1930s. The remedy, in brief, as first pioneered by Meynard Keynes, is government spending. Later this was expanded to encompass control of interest rates in response to direct monitoring of the money supply.

In the years since the New Deal, the U.S. system of Keynesian and monetary policy regulation of the economy has been tested and employed and explored so many times that by now it has become practically impossible to imagine an episode of deflation which could in and of itself destroy our system. Once the pain of deflation rises to publicly noticeable levels, sufficient liquidity can always be created to counter, for example, chain-of-default scenarios, which are manifestations of any serious deflation episode.

Because government spending is such a well-known and easily understood remedy for deflation, it has never been plausible, at least during the past 20 years, that the U.S. Federal Reserve and the U.S. Treasury were going to allow the U.S. financial system to fall apart for the lack of a few, uh, trillion dollars. It is just too easy to create money in a hurry. There is some Congressional approval necessary to allow the Fed and the Treasury to create huge new quantities of money, but our elected representatives are not famous for having steel backbones. They simply do not have the combination of intrinsic power and professional gumption to say no to the creation of the ever-popular free money.

Here I am not implying that injecting massive liquidity into failing markets is necessarily the wrong policy for this or any other administration. I do not know enough economic history to make that call. What I do know is that creating more money looks like an irresistibly easy and pain-free way to counter deflation, and that our politicians are never going to be able to resist such a course of action. Therefore the deflation problem, as scary and serious as it has been and is, was never been a plausible scenario for economic destruction.

But the remedy of creating vast amounts of new money eventually leads to the other side of the financial collapse syndrome: inflation. In contrast to some obvious cures for DEflation, stopping INflation is horribly difficult and painful. You have to clamp down on spending of every kind, raise interest rates, deny raises, and (for those old enough to remember), fire the air traffic controllers.

I repeat this one more time, to make sure it comes across clearly: because deflation is easy to counter, I believe the outcome was always going to be inflation, whatever any given politician told you in the past or tells you now.

Simultaneously, it is important to realize that inflation, as painful and disturbing as it truly is, nevertheless has some very attractive short-term advantages. Once inflation has taken hold, all those old, apparently never-payable dollar-denominated debts suddenly become ridiculously easy to pay off with the new, cheaper dollars which even ordinary people are suddenly able to get their hands on.

As almost everyone now understands, we are currently living with a significant (but not yet catastrophic) level of deflation, which has already caused a significant number of bankruptcies and layoffs. As a result, many of the weaker debtors and the more vulnerable workers have already been wiped out.

In the coming inflationary (maybe hyper-inflationary) phase, it will be the creditors’ turn to get hurt, because their theoretical wealth is almost entirely denominated in dollars. The creditors will eventually get back most of the money the rest of the world owes them, but by the time that happens, the once-precious dollars will be worth a fraction of their original value.

This hard truth reminds us that large groups of people cannot really, literally store wealth in paper assets. And even in bars of gold one cannot actually store food, water or fuel.

In the full cycle of this crisis, both the rich and the poor will eventually fall on hard times – just what one would expect from a nation whose promises and expectations have blown up to thousands of times the value of any actual goods and services which are or will soon be available on the planet.

With one exception! In every era, the super-super-super rich always have access to extensive resources of many kinds. Whatever happens to the rest of us, we can be sure that our super-rich brethren have by now diversified their holdings into every sort of asset and currency available on the planet. Whatever sort of wealth or security turns out to be worth having at the end of this crisis, you can be sure that many of the smart super-rich will have found a way to possess it in some quantity.

The conclusion? As far as I can see, we may as well relax and enjoy ourselves! The future will come, and we can’t stop it, no matter how hard we try. As most of us now feel in our bones, the near- to medium-term future is unlikely to be pleasant. But that is life, and, as everyone knows, it does not last forever, a stubborn fact which applies to everyone, whether dirt poor, super rich, or, like most of us, somewhere in between.

Posting about someone else’s post always raises the question of how much to quote. If you reveal too little and fail to arouse sufficient curiosity, the reader will not bother to follow the link. Contrariwise, a longish quote can induce a feeling of satiety, with the same unfortunate result.

Writers of serialized novels (or TV dramas breaking for a commercial) know that the strongest inducement for an audience to follow along consists of a moment of dramatic tension, followed by a sharp break. What happens next?

Chip Ward’s stunning introduction to his own guest post at Tom’s Dispatch practically compels me to exert some care in that regard. With luck, you will be sufficiently tantalized to follow the link.

Common to sudden catastrophes is the shock of finding the world upside down. The water is suddenly on top instead of under; the rumbling earth swallows houses and spits out lava; the mud wall slides down from above… In an instant, everything is broken and nothing works. What you relied upon is gone.

The destruction of the World Trade Center towers was that kind of deep disturbance, even if it was man-made. The shock of 9/11 was so profound that we thought it would define the twenty-first century, and even now it’s hard for any event to match the immediacy, the drama, the sheer horror of that single autumn day.

In the second big shock of the young century, seven years later, Wall Street collapsed.

Read more…

Media Matters, having by now collected thousands of examples of lies and distortions perpetrated by “mainstream” journalists on the American public over the past eight years, is now in a position to expose in detail how top “journalists” — bullied, coaxed and abetted by editors, news directors and boards of directors — seriously deceived U.S. voters and compromised their own principles to support the Neocon policies of George W. Bush and his coterie of zombies, vampires and assorted psychopathic killers.

Now that ordinary citizens are no longer shadowed by the subtle but unrelenting threat of being dubbed an “enemy combatant,” thrown down a hole somewhere in Guantanamo Bay and forgotten, we may hope this fine example of speaking plain truth to conglomerate media power is only the first in a long series of retrospective articles. If the essays to come are half as good as this one, we will at least have something to feel satisfied about while scrabbling for food and gasoline over the next few years.

Kudos to Jamison Foser for his unstoppable determination to document media distortions during the darkest days of the Bush 43 administration.

A great moment in US history.


As we stoically await collapse, could it be that the “nation conceived in liberty” has quietly fulfilled its purpose?

Here’s a terrific piece dissecting the phony filibuster problem in the Senate. This is very insightful stuff.

The two most important things the 110th Congress refused to do (ceasing to fund illegal wars, and impeaching war criminals) did not require passing legislation, so filibusters and vetoes were not relevant. But the Democrats in Congress, and the Republicans, and the media, and the White House all pretended that wars could only be ended by legislation, so the excuses for not passing legislation loomed large. The veto excuse is now gone. The filibuster excuse could be gone this week if Senator Harry Reid wanted it gone…

Do yerself a favor and read the rest here.

Warning: Shamelessly naive sentimentality ahead.
Every time I see Barack Obama “being the President” I feel good inside, as if I had just taken a sip of fine quality warmed-up brandy. With Obama in the White House, it’s all okay. If anybody can help, he’s the one to do it. And if he can’t help – definitely a possibility – no one else could have either.


Thank you, Mr. President.