Posted inPhoenix

Phoenix stumbles into an epic reshuffle

A reader passes along word of a sign seen in Phoenix: "Please God, let there be one more housing boom and this time I won't piss it all away." Yes, you would. To paraphrase Linda Hamilton in Terminator: It's what you do. It's all you do."

The bad news isn't just that Phoenix continues to lead the nation in house-price declines — down a stunning 32.7 percent for 2008. It's not just that the bubble is only 60 percent deflated nationally, by some estimates — so good luck with that spec house in Maricopa. It's that the whole Ponzi scheme is over.

Urban theorist Richard Florida calls cities like Phoenix and Las Vegas out in an influential article in the March issue of Atlantic magazine. The title: How the Crash Will Reshape America. "The boom itself neither followed nor resulted in the development of
sustainable, scalable, highly productive industries or services. It was
fueled and funded by housing, and housing was its primary product.
Whole cities and metro regions became giant Ponzi schemes." In other words, pissed away. Now it may be difficult for Phoenix to avoid being one of the biggest losers as the competitive geography shifts decisively because of the Great Disruption.

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Posted inUncategorized

The Madoff scandal: More than a Ponzi scheme

Were the damage not so great, it would be amusing to see SEC Chairman Chris Cox running around shocked, shocked, that Bernard Madoff had allegedly pulled off the biggest financial fraud in history — and the watchdog was again caught napping. Or worse. The agency ignored years of warnings about Madoff's activities, and Barron's did an article questioning his returns a decade ago. Madoff reportedly bragged about his influence in D.C., including having an in-law who worked for the SEC.

As the victims of the alleged scheme, including many charities, see their investments wiped out, Madoff is out on bond, having to wear an ankle bracelet and stay home. Had he been a minority/poor kid who stole $100 from a cash register drawer, he'd be in county lockup with hardened criminals. Meanwhile, Attorney General Michael Mukasey has recused himself from the investigation, without giving a reason. This is America in the new gilded age, where government has been essentially handed over to the wealthy and connected — and we're surprised they went wilding?

An older America learned from the frauds and follies of the 1920s, including the legendary collapse of the Samuel Insull monopoly. Regulation of securities and banks was put in place, helping to ensure the success of American business for decades through transparency, competition and fairness. That all began to unravel with the Reagan Revolution — but especially in the 1990s with deregulation pushed by Sen. Phil Gramm (R-UBS) and Clinton Treasury Secretary Robert Rubin, a kingpin from Goldman Sachs.

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Posted inUncategorized

This is Wall Street

As Republican nihilists carry out their war on working Americans, it's important to understand just how rotten is the industry they rushed to deregulate and bail out. And yes, there…
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Posted inUncategorized

To bail or not to bail?

Let’s set aside the demands of the extremists on the right, calling for more deregulation and tax cuts to address the financial crisis. It’s like trying to discuss the finer points of Plato with a small, yapping dog. Otherwise, I can understand the desire on the left and right to "punish Wall Street" by defeating the bailout plan. Unfortunately, the markets are so intertwined and inherently fragile, the first casualties are going to be on "Main Street" (a bittersweet anachronism for a nation that has mostly abandoned its main streets).

Wall Street — and increasingly overseas investors — owns Main Street.

The plan voted down yesterday was flawed but better than the original Czar Paulson contraption, which would have given the former head of Goldman Sachs unlimited access to use American treasure trying to extinguish the wildfire he and his greedy buddies started. Well, not quite — and here we get back to the unworkability of "punish Wall Street" argument. Deregulation, a casino-like attitude on Wall Street and a bubble-blowing Fed were the biggest culprits in the mess. But, so, too were the American people.

We voted in the deregulators and stood cow-like as it happened, the jobs disappearing, wages stagnating. Worse, too many of us thought we could get rich quick off real estate, like day trading before it. We bought overside houses and ran up credit-card debt we couldn’t afford. We bought SUVs to drive ever-longer distances as oil was peaking. We wanted tax cuts that gutted our schools and infrastructure. We wanted all that stuff at Wal-Mart. The casino became our ruling totem. It’s quite a remove from the generation of the Boomers’ parents that saved and waited to make purchases until it could afford them. It’s their passed-along wealth that is helping cloak the "banana republic with nukes" that we’re becoming.

So here we are. Were it not for the legacy of Franklin Roosevelt, we would already be seeing bread lines. And how many better ways could we use $700 billion…

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