Don't put that bearskin away just yet

Obama says we've turned the corner.

Maybe he's right. The stock market certainly thinks so. The TSX Composite's above break-even for calendar year 2009, something I would have dismissed as highly improbable two months ago. Hong Kong's Hang Seng was up 1002 points yesterday: over seven percent. It, too, is now ahead of where it stood on January 1.  Relax, folks, we all had a nasty scare but it appears to be ov...

...what's that, you say?

Consumer credit deliquencies are at their highest level ever?

The corporate default rate is the worst Moody's has seen since at least the Second World War?

The trust that funds American Social Security is forecast to be bankrupt by the end of next year?

Chris Martensen has a rather trenchant commentary on this last point. "Oh, Social Security's fine," some analysts say, "so long as the Treasury repays its debts." Leaving aside what exactly the Treasury could pay those debts with (Monopoly money?)...the idea that the Treasury could somehow owe itself money is ludicrous. It reminds me of something somebody at my head office once told me, when I asked him why we were losing 96 points on a particular ad item. "Oh, don't worry, Ken," he said, "we'll make it up on volume."

So will stocks come back down to earth? Ian Gordon extrapolates Kondratiev wave theory and says yes. Actually, he says "hell, yes." All the way to 1,000, he says. 

That I have trouble believing. I've predicted DOW 4000 by next year, but I can't see it going much lower than that. There's no reason the market has to be a perfect mirror of itself 80 years ago....is there?

We do need to remember that in 1930, America was the world's largest creditor and it was swimming in natural resources. Now, it's got a crushing debt...that might be a literally crushing debt. It relies on a host of countries for its oil, some of which don't like it much. And it increasingly relies on places half a world away to manufacture all manner of consumer goods.

In this, it has nobody to blame but itself. The 1970s oil shock should have sent a clear message to the American government about the need to get off the foreign oil teat. (Actually, it did: Carter was making some inroads on this, but Reagan came to power beholden to Big Oil, and so alternatives were hastily abandoned.)

As for the epidemic of globalization, that's the direct consequence of the worship of the almighty dollar at the altar of short term profit. The more conspiracy-minded among us will suggest that corporations, not governments, run the world. That may or may not be the case. I'd suggest it makes no difference when governments are unwilling or unable to stand up to corporations.

Anyway, all this means collapse. I no longer expect a quick one. Far too much energy is being expended trying to treat the symptoms rather than solve the problem. No, it'll be a slow fizzle. I can only hope that something other than Kondratiev's predicted war will lift us out of the dark...eventually.