December 01, 2011

The lost decade? Since Enron, we've already been in it

We don't need worries about Japan-type deflation. This excellent AP story, for the 10th anniversary of Enron's collapse, titled "The Decade of Lost Faith," says we're already there, if you read to the bottom:
Stocks have barely moved in the decade of lost faith. On the Friday before the Enron bankruptcy, the S&P 500 closed at 1,139. Last Friday it closed 19 points above that. The incomes of many middle-class Americans haven't kept up with inflation. Home prices are still falling.
Yep, that about sums it up. But the rich who were a bit more sneaky, or had better connections than Kenny Boy Lay (though he had connections enough) Bernie Ebbers and Dennis Koslowski, made out like bandits.

Abetted by St. Alan of Greenspan's bubble-inflating, Wall Street was behind the housing shenanigans (and many others):
Wall Street was gripped by what chronicler Roger Lowenstein called a "mad, Strangelovian" logic. Not content to bundle thousands of subprime mortgages into mortgage securities, banks bundled the bundles into something called collateralized debt obligations, or CDOs. Next, they created bundles of bundles of bundles, called CDO-squared.
But, we're at the end now. Not just domestically, but from globalization. As Al Jazeera notes (although it somewhat overlook sub-Saharan Africa) globally, the world is becoming more and more urbanized. And, if there's money to be made by manipulation, developing world sovereign wealth funds will likely want to call the shots themselves.

We had a chance to make the WTO and globalization work for real people in both China and the U.S. Instead, so far, it looks like it's working for neither.

At least for right now, we appear to be about halfway through a lost generation, apologies to Hemingway, Fitzgerald and others aside.
"The big picture here is this is an unwinding of a 20-year debt bubble," said Peter Dixon, global financial economist at Commerzbank. "It's going to be painful, and it's going to be nasty. What policymakers are aiming for is a smoothing of the path."
The bigger picture is that neoliberal economics, and world leaders worshiping at its altar, will struggle to control whose past is smoothest (if they care at all).

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