Anyone who has read this blog for very long knows I'm a real Chicken Little when it comes to the economy. Beginning with George Bush's 2002 reckless and excessive tax cuts I've worried out-loud -- and getting louder by the month -- that this trickle-down Pied Piper was leading us and the world off a fiscal cliff.

Well, the cliff is now before us and, frankly, it's too late to do a damn thing about it but sit back and watch the ugly show that's about to play itself out. (Memo to Dick Cheney: Hey, Dick, seems deficits DO matter after all -- you numbskull.)

It's been a lonely six year vigil for us naysayers out here. But suddenly our little group of worry-beaders is getting crowded.

Fortis Bank predicts US Financial market meltdown within weeks
(Fortis is a large bank and insurer in the Netherlands and Belgium.)

28th of June, 9:10
BRUSSELS/AMSTERDAM - Fortis expects a complete collapse of the US financial markets within a few days to weeks. That explains, according to Fortis, the series of interventions of last Thursday to retrieve € 8 billion.

“We have been saved just in time. The situation in the US is much worse than we thought”, says Fortis chairman Maurice Lippens. Fortis expects bankruptcies amongst 6000 American banks which have a small coverage currently. But also Citigroup, General Motors, there is starting a complete meltdown in the US”

And,

Royal Bank of Scotland Warns of Global Crash
Financial Times of London

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

“A very nasty period is soon to be upon us - be prepared,” said Bob Janjuah, the bank’s credit strategist.

A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

“The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets,” he said.”

And,

Barclays: "US central bank accused of unleashing an inflation shock that will rock financial markets.

Ambrose Evans-Pritchard
Business Editor, Financial Times

"Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall “below zero”.

“We’re in a nasty environment,” said Tim Bond, the bank’s chief equity strategist. “There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.”

“This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility,” said Mr Bond.

The bank said the full damage from the global banking crisis would take another year to unfold.

Meanwhile those who decided it was a good idea to run everything that runs on oil, continue to believe that the answer to our current problems is to simply drill for more oil. And, as they have been every inch of the ways -- they are wrong about that.. dead wrong:

Simmons says market forces driving crude to $600

Press/Journal/ UK. 1 July 2008: The chairman of energy investment-banking firm Simmons and Company International has predicted that oil prices could double or more within a few years.

Matt Simmons said that in his view oil was “dirt cheap at $140 a barrel”, and with supplies having peaked and demand growing prices were bound to go higher.

He said: “It is not beyond the pale of imagination to see oil at $300, $400, $500 or even $600 a barrel within a relatively short time, much less than 20 years. It is not speculators who are driving oil prices. It’s simply about supply and demand.”

So, what's it all mean to you and I? I have no idea. This is uncharted territory. Over the next five years we may see what happened to communism in 90s happen to capitalism. If so it will be the fault of those who allowed the gap between rich and working poor expand into a yawning chasm. On one side live the once upwardly mobile middle class, now mired in debt and crushed by inflation.

On the far side live a smaller group -- the super-wealthy -- who benefited from the shift in taxation and other preferential fiscal and policy changes. These folks, in living in their McMansions, don't care about the housing crisis plaguing the millions on the other side.

Nor do they give a fig about deteriorating commercial air travel, as they have their, separate and unequal, jet fleets.

This rich minority also has the best medical care their money can buy, while those on the other side are left to meager graces of charitable medical organizations -- if they're lucky.

What we are witnessing develop is one of those historic social divides we used to read about in history classes. You know, the kind of "let-em eat cake" thinking that lead to the French Revolution and a couple of centuries later, the Bolshevik revolution in Russia.

And what about the collapse of Communism nearly 20-years ago? Why would the collapse of a non-capitalist system have any relevance to what we are seeing unraveling here today? Because both systems, begun as egalitarian breakthroughs, devolved into two classes, separated by wealth and privilege.

Right wingers like to give Ronald Reagan credit for destroying Soviet communism. But that fat was in the fire already. By the time Reagan came to office those living on the Soviet side of that wall increasingly chaffed at their declining conditions as the elite lived well. As hard-working Soviet citizens stood daily in long lines for food, the elite had their own well-stocked grocery stores. As citizens used run-down public transport, the elite whizzed by in limousines. As two generations of families crowded into cramped apartments, the elite spent their holidays at their country dachas.

The worse things got for the Russian people, the better they got for the well-connected party elite and those they did business with.  But most of all ordinary Russians were deeply offended and outraged by a clearly bifurcated legal system that allowed the well-connected to skirt -- or entirely avoid -- the law, while the same legal system fell like a sledgehammer on ordinary Russians.

By the late 1980s the Russian people, and those occupied by Russia, had had it right up the here with the system. So much had been taken from them and given to the communist elites that they no longer had anything left to lose. So, Reagan or no Reagan, the Soviet Union's days were numbered. The truth is that the Soviet Union's undoing was its own doing. All Reagan did was grease those skids and hasten the inevitable.


Ironically historians will record that it was another supply-side Republican who greased the skids under capitalism as we've known it. Like Moscow elites before him, George W. Bush and the neo-con ideologues he installed in high office, pursued policies that enriched themselves and the already rich who supported them. They lavished upon them over-generous tax cuts, government contracts and by gutting the regulatory machinery that had at least tried to keep the destructive appetites of these hyper-capitalists in check.

And unchecked those capitalists did what such bears do in the woods --and they did it all over working Americans. Home ownership has become a nightmare for millions. Easy consumer credit became indentured servitude. Automakers were allowed by Washington to sell cars and trucks with embarrassingly bad gas millage because they were more profitable. Those cars and trucks are now just another lodestone around the necks of struggling ordinary Americans. (Were they dumb to buy them in the first place? Yes. But dumb is why laws regulating self-destructive human behavior are necessary. After all, if everyone obeyed the speed limit there would be no need for highway cops.)

The neo-cons saw regulation by government as an evil. So they let private for-profit health care companies decide which American citizens can get medical insurance and which cannot. Predictably those who need health coverage the most have become the ones who can't get it --some 50 million, and counting. (Gee, who would-a thunk it?)

The neo-cons saw recognition of global warming, not as a threat to the human species, but a threat to corporate bottom lines. So they let companies use the air as a cheap garbage disposal system for gaseous industrial waste. Of course you will never find one of these polluting power plants or factories anywhere near upper-class communities. Instead poor communities get to host them instead.


So far they've gotten away with it. But all that's kept most Americans on board with all this nonsense has been the promise that, if they worked hard and obeyed the rules they too could achieve a significant piece of the action. But that promise became transparently hollow as, over the past decade, middle class jobs moved offshore in search of cheaper people.

Today, like the Soviet people two decades ago, Americans are becoming increasingly fed up. With each passing month now average Americans take stock and notice they have less and less to lose. Most have not yet reached the point where they have nothing to lose. But, if what we see developing comes to pass that could change and change fast. As average Americans come to realize they have less to lose and little hope for a reverse of fortune, it will become increasingly perilous for those living comfortably on the far side of the wealth chasm. After all, they have plenty  to lose.