Well, I've resisted for some time posting an entry about the catastrophe that is befalling the economy until now, but this seems like as good a place to start as any.

My sister sent me a link to a nice little explanation of the subprime lending mess that seems to have been the trigger for an unprecedented unwinding of unimaginable imbalances that stretch to the far corners of the financial globe. While it is laugh-out-loud funny, it is also tragic in it's literal accuracy.

I started unloading equity investments over a year ago as dark clouds gathered on the economic horizon, all the while feeling queezy in the face of the pervasive investing advice that one never alter asset allocation due to changing perceptions of an evolving economic landscape.

I no longer pay attention to such self-serving investment industry platitudes.

I asked a local grizzled ex-Wall Street investment industry veteran who's advice I might trust in times like these. "Look in a mirror", he advised. There is rampant and breathtaking incompetency, if not malevolent intention, on display across industry and government entities, and their pronouncements and urgings have no credibility.

It appears that reactive policy is being directed to protect the players who have caused the global economic crisis at the expense of our currency and future solvency. Savers (what few there are) and fixed-income retirees are being punished with negative after-inflation returns as a result of interest rate slashing, in the hope that they can be prodded back into the sleazy rancid casino that equity and credit markets have become.

Dollars by the billions are being materialized out of thin air by the Treasury in a desperate but probably futile effort to entice hapless consumers to continue borrowing via their precious credit cards and snug their noose of indebtedness just a bit more, lest consumption deteriorate and crater corporate profits.

It is an ugly mess. For a while I thought I might be excessivly negative as I read incredulously about how the stage was being set for a generational lowering of the U.S standard of living (whether we have too many folks 'enjoying' too high a standard of living is a subject for another day). Having seen how surely the unwinding has begun, and the apparent magnitude of the damage yet to be wrought, it is like the mother of all train wrecks, and it is impossible to avert one's gaze. If anything, I now have to guard against misplaced optimism.

Just today I read three items that paint a horrifying picture of an economy teetering at the edge of the abyss. They range from mainstream NY Times Op-Ed to the more fringe gloom-and-doom and one in between.

It took a long time for people who should have known better to even acknowledge that a recession was looming. What I notice in recent days is the many references to Something Worse.

A recession may be the least of our worries.



Girl burning worhtless currency to stay warm - photo © AdsD der Friedrich-Ebert-Stiftung

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