Sunday, November 29, 2009
Scooby Dooby Dubai
Is this it? Is the trainwreck of Western Civilization happening right now? Is the massive global phenomenon of unsustainable government liabilities about to hit the fan? They're now talking about 'sovereign debt', the debts that nations owe, as being as shaky as mortgage paper was two years ago. Those man-made luxury islands, glittering jewels in the crown of Dubai, turn out to be just as tacky and worthless as the $700,000 badly-build shack in the desert around Lancaster, CA that they sold using a negative amortization no doc loan.
Lets face it, Dubai was always a swindle anyway. A beach resort where its a felony to wear a bikini? Where alcohol is illegal except in the hideously expensive hotels? Yeah baby, throw on your best burkha and we can stroll by the edge of a stagnant inland sea, the tarballs squishing between our burning toes as the Arabian sun beats down mercilessly. If you like we can take $60 and buy a warm lemonade and two straws and stand by the edge of the untreated sewage outflow next to the beach and watch the glow of the Iranian nuclear program rising just across the water. Hey book me in there! Lucky for us they had the foresight to build thousands of hotel rooms in this tourist paradise. Lucky for them they had all these bankers who were making so much money selling shacks in Lancaster to welfare recipients and speculators who were looking around for a savvy investment and who looked on a piece of Dubai as a seat on the bus to Moneytown!
Moneytown is starting to look a whole lot like downtown Dubai City these days. A few buildings still gleam proudly but they tower over the ruins of a massive mirage, built for Global Capitalism but now crushed by Global Statism. It was a vision of shaped islands becoming the gleaming jewels of a city that rises as a new, modern, clean-edged cosmopolitan metropolis out of the bare desert, creating a trillion dollars of value where there were only a few shacks before. Now that only works in a world where wealth is expanding, in a Middle East of safety and prosperity with a real robust economy. The whole thing was wrong because the idiots started believing that they were something other than a pack of petty merchants living off the royalties from their oil wells. They greedily ran the price of oil to $150 a barrel to pay for their vanity projects and toppled the first domino.
The next domino was the shack in Lancaster. That went from being a bundled derivative to a toxic asset in one news cycle. The blowback from that caused the election of an American government very much farther to the left than any other had previously been. An anti-business government, an anti-military government, a government run by people who think globalization is evil and better controlled by the United Nations than by individual nations all vying for advantage and locking out the deserving Third World Poor. The first action by that government was to dip into the already deficit-laden treasury and vote a trillion-dollar handout to its political cronies in the name of economic stimulus. Other governments around the world, many in worse shape than the United States, followed suit. Not one single government has scaled back any of the social programs and transfers that are at the heart of the current crises. Nations like Greece and Spain are hovering on the edge of default.
I live in California. Our budget is $60 billion. Our tax receipts are $36 billion and falling as rising taxes cripple the economy. Oba-mao is clucking about 'Carbon Reductions', a euphemism for an energy tax that will add dramatic costs to everything. The US Congress, in the hands of leftist dummies whose ignorance and stupidity on economic matters is horrifying, is talking about a value-added tax on everything; neither bode well for the future tax receipts of the state. The taxes from the HealthScare Bill start immediately upon passage, the Bush Tax Cuts will be allowed to expire. Meanwhile, our local commies have just emerged from their brilliant $24 billion deficit budget session and have announced, "we're through making cuts!" The Democrats have a two-thirds majority in each chamber of the legislature and a Governator who is trapped between the gun and abortion fanatics in the Republican Party who hate his Hollywood guts, and the Dem super majorities and a public union sector that dominates the state through its dues-paid political slush funds; a Governator whose meek calls for sanity are routinely ignored.
If they're 'through making cuts' that means that the local yokels aren't through raising taxes. There is an official 13% unemployment rate in the state but that's hogwash. Incomes and the amount of work available in industries like film or construction are way down. Restaurants and service industries are paring employees fast as their receipts fall. The Public Employee Unions have carved out phat pension plans for their members and elected a raft of Dems to make sure they get every penny but CALPERS (the name of the union pension fund) lost heavily in the derivatives crash and currently holds a portfolio stuffed with those rock-solid California bonds.
The pension fund is as bankrupt as the state.
Maybe the Dubai collapse wont touch off a global landslide. Maybe its just another part of the landslide started by $150 a barrel oil two years ago, who can tell? Maybe California will find enough money to pay the pensions of its public employees. Maybe Health Scare taxes wont break the bank. Maybe everything is going to be OK and the people in charge are plotting a wise and safe course through the treacherous economic waters. But look at the photo at the head of this article. Usually I do some kind of Photoshoppery to add some new meaning to the photos I use but I have used this excellent photo untouched because it more or less says it all. These are the critters who hold our fate in their clammy paws. Look into the two faces in this photo and behold the approaching avalanche.