The hope bubble.

In the real world "Told ya so" can be deeply satisfying - but when the original prediction was grim, the satisfaction is short lived. I sense many a "told ya so" on the horizon. More than a few on the outskirts of the national conversation (Gloomsters and other assorted realists are rarely invited to the "in" cocktail parties) have been saying for some time that America was on borrowed money, energy, and time. I have almost always agreed. Not out of deep knowledge or professional specialty - I have neither. But obvious is obvious.

Driving past 2 bedroom lean-tos in South LA that were selling for high six figures in 05 and 06 one didn't have to be a nobel laureate in economics to conclude "sum thang ain't right here". In 2005 the teeny Long Beach house my Grandparents bought for $5000 cash in the 50's was "worth" nearly a million. That, my friends, was all the knowledge one needed to see the bubble that most of our brilliant economists missed.

We've been fantasizing our predicament away for a very long time. Fueling our fantasy with other people's oil, which we bought with other people's money. The decline in the dollar almost certainly means the bill is coming due. No one in a leadership position - and I mean no one - is willing to break the news to us. In fact, the opposite is true. We are told overtly or covertly that with a few adjustments here and there, after a bad year or two, then we get to pick up right where we left off. Bush had the housing bubble. Obama, the hope bubble. The psychological mechanism is the same: Defer pain. Defer reality. Pretend you're well off because BofA will loan you a million to buy a shack. Pretend the Bush years can be erased if you vote for the "elegant" black guy who talks the talk. Turns out we can have the house and the hope...but only for a season.

Easy money is dead and gone. This review of Peter S. Goodman's PAST DUE: The End of Easy Money and the Renewal of the American Economy lays it out. There is some real hope if one believes logic will win out. I don't. I see no evidence that American leadership or American citizens are interested in logic or reality.

As for Wall Street returning to its 1999 level - good for Wall Street. The fact is Wall Street is no longer a barometer of our economic health so much as it is a barometer of our overall insanity. Breaking the 10,000 barrier in this economy is a sign that the lunatics are running the asylum and nothing else.

Billions are about to be doled out to bankers in the form of year end bonuses. In a sane nation, which has only just indebted itself for decades to save these institutions, the proper and sane reaction would be tar and feathers for the godfathers at Goldman and the rest. But we are not sane. Many of us are distracted, controlled, overfed buffoons.

When crowds clog the streets of lower Manhattan demanding all bonuses cease, when Glenn Beck fires up the masses and rains electronic hellfire on financial criminals, when townhalls are overrun by citizens furious not about some alleged "liberty" they are losing if insurance companies are forced to behave morally - but about the malfeasance and looting of all Americans by Wall Street - then I will have hope. Hope that sanity and equilibrium have a fighting chance.

Until then I'll make due with the cold satisfaction of "Told ya so."



An added note that is pertinent here: The VAT is out of the bag.