The Great Irish Bank Collapse Sweepstakes - and they're off!

Well, it's not the end of the world, but it's going to feel like it for quite a while. The US government bail-out plan was voted down by Congress a few hours ago. If the plan had been passed, it would have given the illusion that things were going to be OK. (Things would not have been OK.)

Now, we won't even have the comforting illusion.

An an Irishman with my fortune (eleven euro) in an Irish bank account, I have a keen interest in the future of the Irish banking system. The main question seems to me to be, in what order will they fail? I reckon it's going to be a photo-finish for first place between Anglo Irish Bank and Irish Life and Permanent. (Though will dark horse Irish Nationwide Building Society make a late surge for the line?) After that, who knows. But they're all banjaxed.

Every Irish bank is massively over-exposed to Irish and UK residential and commercial property, and to Irish developers who can no longer service their vast loans. The Irish banks have been keeping their developers afloat artificially for the past year, in the hope things would miraculously turn around. Things haven't, they won't for years, and soon all the bad debts will have to appear on the books, dragging both banks and developers under. If the Germans and Swiss find the books of the Irish banks too revolting, and can't bring themselves to purchase the wreckage, then the Irish government (with some very irritated help from the European Central Bank) will have to recapitalise the entire banking sector. All this will have to be done during a global financial crisis. It's going to be comically awful, like having to change your tyre in the middle of a demolition derby.

I lived through the Irish property boom of the past decade with ever-mounting incredulity. It really was the most extraordinary case of mass delusion since everybody drank Kool-Aid in Jonestown. And if you want cast-iron evidence that I'm not pretending to be wise after the fact, here I am on Irish television, in May of 2007, saying exactly that, to the stony silence of the studio audience, all of whom had just bought an investment property the day before, and would be buying another one the day after.

(Oh yeah. banks and hedge funds and other financial institutions will also be imploding across America and around the world after this, but I'm so bored with the USA, I thought I'd talk about Ireland for a change... Ah heck, one more US prediction: good, old-fashioned, retro, Depression-era bank runs in America, starting tomorrow.)

Waving a magic wand at a car crash

So there's a bailout plan. Whoop-de-do.

It addresses a symptom - the liquidity crisis.

It doesn't solve the problem. The banks are insolvent.

Eat my naked shorts

I know some of you drop in here sometimes for guidance on the future of the world economy. (Hiya Ben, hiya Henry... Hey! Alan! Good to see ya.) You'll notice I have been keeping quiet lately, as the whole thing blows up. This is because I don't want to spook the markets. One incautiously chosen word from me right now, and we could all be learning to skin rabbits.

However, I laughed my ass off last week at the US Fed/Treasury announcement that they had a trillion dollar plan that would save the world, and I laughed even harder when global stock markets leaped 10% in response. What we have here is a huge omelette trodden into the carpet. The fact that a man has burst into the room and announced that he is going to turn the omelette back into twelve fresh eggs does not mean he is, in fact, going to do it.

The mainstream media coverage of the financial crisis continues to be wretched. Most newspapers failed to note that half of the 10% rally last week wasn't driven by suddenly happy investors buying stocks they wanted, it was driven by desperate hedge funds forced to buy the very stocks they specifically didn't want, or risk going to jail. (Because, to get technical, they had to cover their short positions, the day after naked shorts were banned overnight. Does anyone really want an explanation of that? Doesn't it sound much more fun if you don't know?)

No wonder those shorted stocks (banks, financials) all fell on Monday by as much as they rose on Friday, as the hedge funds, having done their legal duty and dodged jailtime, dumped them all again. This market is a joke.

Sheesh, if I start talking about this I'll talk all night. (And I've a novel to finish writing, so... back to my book.)

(Oh, and the very nice photo of eggshells was taken by Linda Alstead, whose website mixes cooking and photography - together at last! She used a Canon PowerShot G3 1/2s f/8.0 at 23.0mm, photo-fans... this means you, Phil, I know you love it when I talk dirty...)

Let's Nationalise All the Mortgages in America Overnight, And See What Happens

More financial fun. From today's Financial Times:

"The US government on Sunday seized control of the troubled Fannie Mae and Freddie Mac mortgage groups in what could become the world’s biggest financial bail-out."

I've just one comment on this, for now. The US government doesn't really know what it is doing, its public statements are confused, contradictory, and not nearly as reassuring as it thinks, and this action will have huge unintended consequences, some pretty disastrous, for the American financial and housing markets. (With whiplash effects as far away as China.)

The rules are being torn up, but they're not being replaced with anything coherent.

More banks and other financial institutions will fail in the aftermath of this (and not just the ones left holding huge, worthless chunks of Fannie Mae and Freddie Mac).

So, um... Bloomberg for McCain's VP slot?

Well, Obama didn't listen to me. Maybe McCain will.

By November the US election will be about the economy. Several more huge financial institutions will have gone under, been sold for monkey-nuts, or bailed out by the Fed. The housing market will not have recovered. The credit crunch will not have ended. No domestic US business will be expanding, investing, or hiring. (Bar bankruptcy specialists. And Wal-Mart, as the middle classes go downmarket). No one will care about the foreign policy credentials of Obama's running mate.

McCain has admitted he knows nothing about economics. So pick Bloomberg, he won New York as a Republican for God's sake...

Of course, he won't.

Writers shouldn't have opinions about anything, least of all politics, so I won't express a preference in this race. I like both McCain and Obama a great deal, as human beings. They are both remarkable, in their very different ways. But, from a satirist's point of view, I think a McCain presidency has more going for it. I would dearly love to see an economics novice, in his seventies, who can't even remember how many houses he owns, dealing with the worst economic crisis, and housing market meltdown, in US history. McCain said it best, in the Wall Street Journal in November 2005: “I’m going to be honest: I know a lot less about economics than I do about military and foreign policy issues. I still need to be educated.”

And if he gets to be President in November 2008, boy will he be educated.

As the Wall Street Journal said of him (at the end of that same in-depth interview on his economic policies):

"I come away believing that if I'm ever in a knife fight or in a foxhole, there is no one I'd rather have next to me than John McCain. Whether he's someone who should be steering the rudders of the American economy is a different issue altogether."

Bloomberg for Vice President?

I'll warn you in advance, this is the least informed blog posting I've ever made. I just feel like making a wild, long-odds bet, is all...

I've been watching the mighty brain of the US media pull a muscle try to guess who Obama's going to pick to run as his running chum. Biden? Hmmm. I'd be amazed. Bayh? Nah. Kaine? Well, maybe, but I doubt it. It's too flagged: Kaine looks like a nice guy who's doing Obama a favour, by drawing the press off the scent.

This whole thing, "I'm thinking... I'm checking them out... I'm deciding soon... I've decided! The day before I announce it!"  feels like a circus to entertain the media. I wouldn't be surprised if Obama had decided months ago, last year even.

So I put my novelist's hat on, imagined I was Obama and thought it through. And I was strangely drawn to Michael Bloomberg, for a bunch of reasons. He's a former Republican (can't get more bi-partisan than that). He's rock solid on economics (can't get more important than that). He has run a big company (Bloomberg), and a big chunk of American real estate (New York), both very, very successfully.

And in 2001, in the most Republican borough of New York (Staten Island), he sucked up 75% of the vote. Holy guacamole. That means he can hoover up Democrats and Republicans together like almost no politician ever.

If I was Obama, I'd pick Bloomberg and I would pound the economy as the only issue in this campaign. Forget Iraq, forget foreign policy, forget the outside world. Keep it firmly focused on the economy, and use Bloomberg to take McCain apart.

But that would just be me, I guess.

Séamus Brennan, 1948 - 2008

(Photo: Michael D. Higgins, Julian Gough, and the late Séamus Brennan, at the NUIG Alumni Awards Gala Banquet, on March 1st 2008. Photo by Aengus McMahon.)

The funeral of Séamus Brennan, the Fianna Fáil politician and former government minister, was held yesterday. Given that there's hardly a page of Jude: Level 1 that doesn't feature a prominent member of Fianna Fáil inciting vast crowds into a homicidal xenophobic frenzy, taking bribes from property developers, or using an illegally held firearm to try and kill a defenceless orphan, it's only fair to say that Séamus Brennan was one of the good guys. He stood up to Charlie Haughey when that was a dangerous thing to do, and he tried to clean up a corrupt and scandal-banjaxed Fianna Fáil when the task seemed impossible.

I met Séamus Brennan, for the first and only time, earlier this year. We were both receiving awards from NUIG (or University College Galway, as it was when we were there, back in the early Middle Ages). My award was for my contribution of the term "Ardcrony ballocks" to Irish literature. His was for his contribution to Irish politics, which was considerable. As Ireland's Minister for Transport in the early 1990s, he had broken the (state-owned) Aer Lingus monopoly on flights to Britain, and thus freed a tiny and struggling Irish airline called Ryanair to survive, then thrive. (The young, and the non-Irish, cursing at the 3 euros they've just paid for a small bottle of water on their 1 euro Ryanair flight, will not be aware that air travel out of Ireland, until Séamus Brennan's reforms, was far, far too expensive for 90% of the Irish population. Which was the only reason there was anyone left in Ireland by the early 1990s... My generation had to emigrate by bus.) Later, he was a highly regarded Minister for Social and Family Affairs. When I met him, this year, he was Minster for Arts, Sport and Tourism (the ever-mutating ministry which appears in Jude: Level 1, thinly disguised as the Ministry for Beef, Culture, and the Islands).

The NUIG Alumni Awards ceremony was a black tie affair, Gala Ball and all, and my noble punk spirit was seething after the third round of photographs, "Stand there", "Sit there", "Hold the award a little higher."

I said to Séamus Brennan (who was patiently cooperating, changing seats when asked, standing up, sitting down), you must get awfully sick of these events, I'd imagine this must be astoundingly boring for you. No, actually, he said. Politicians are always handing these things out, but we never get to keep one. In fact, I think this is the first award I've ever received. And it's a great feeling, it's a great honour.

He was so pleased, and humble, and as a result dignified, that I felt like a spoilt little shitehawk for not accepting the award more graciously. So I amended my attitude, and my mood improved enormously, and I had a great night, with my beloved and my family, feasting and dancing and generally knocking seven kinds of crack out of it.

I also talked quite a bit that night with Séamus Brennan, and with the blessed Michael D. Higgins, another former Minister for the Arts, and former recipient of an NUIG Alumni Award (and a former lecturer of mine, in sociology, who used to put the Labour Party's noble redistributionist policies into action by buying me coffee and buns in the canteen after lectures, when I was seventeen and staaaarving). We talked about everything from Beckett to Braveheart, and Séamus Brennan came across as a gentle, thoughtful man, at peace with himself. The shoptalk of two Ministers for the Arts gives a very entertaining insight into the peculiar mix of glamour and grind in the job. At one point, Séamus passed on Mel Gibson's best wishes (from a party the week before) to Michael D. (Michael D. Higgins had, as Minister, helped Mel shoot Braveheart here in Ireland by loaning him, among other things, the Irish Army.) I also heard some very entertaining stories about paperwork and three-foot-high piles of receipts (which reflected very well on Mel Gibson, and less well on some of our much smaller, native Irish film makers.) A mighty night.

Séamus Brennan was diagnosed with cancer a year ago, so he must have known he was dying that night. (Or dying a little faster than the rest of us, as Beckett would probably point out.) He still managed to bring something to the party.

I liked him a lot. May he rest in peace.

My new essay (on economics as religion), in Prospect magazine

I've roughly fifty subjects I'd like to blog on. Football! Monolines! Street parties! The Irish housing bubble! Popstar poetry! The mysterious Blau Blau Blau movement! How to write for the new attention span! My new life with Will Self's pig! Too many possibilities. Can't decide.

Tell me if any of the above interest you, and it might help me focus on one of the blighters, and get it done.

Meanwhile I have an article, on economics as a religion, in the new issue of Prospect (the wonderful London-based magazine of ideas). The issue also features a round-table discussion of the current global financial crisis. Several of my favourite thinkers on economic matters take part, including the philosophical hedge fund manager George Soros, and the very wise and grave chief economics commentator of the Financial Times, Martin Wolf. After they have thoroughly depressed and demoralised the readership with the awfulness of it all, I provide the light entertainment, in a two-page afterword, "The Sacred Mystery of Capital".

A sample paragraph or three:

"... But religions evolve, and recent events show that capitalism has begun to evolve less in the manner of the Galapagos finches (whose beaks adjusted over millennia to suit the berries of their individual island), and more in the manner of the Incredible Hulk. Incredible Hulk capitalism can expand the muscle of its credit so swiftly that its clothing of real world assets cannot stretch fast enough to contain it. Expansion, explosion, collapse—Incredible Hulk capitalism sprawls, stunned and shrunken again, in the rags of its assets.

Or, returning to our religious analogy, if capitalism was a religion, it would now be a delightfully demented pseudo-scientific cult. Incredible Hulk capitalism is to the capitalism of Adam Smith what Scientology is to the Christianity of Christ. Both modern high finance and Scientology use the language and tools of science to ends that are religious, not scientific. Both meet a need, a yearning which the old forms of religion and capitalism no longer meet. The need for a mysterious power greater than us, in which we can believe. It must be powerful—but it must also be mysterious. And mystery has been vanishing from the world ever faster, ever since Galileo.

We know what the stars are made of, and can compute their course through the heavens for the next 10,000 years. We can explain the storms and floods that were once evidence of the wrath of God. But as the advance of science has removed the divine mystery from much of life, the advance of free market capitalism has put it back. Only modern economics can now provide forces that we don’t understand. And we need that in our lives."

The whole thing is here, if you're interested.
 

Ireland, Ice Cream, and Democracy

I was very pleased to see that Gideon Rachman, chief foreign affairs columnist of the Financial Times, firmly backs my proposal to unify Europe. (By holding the Lisbon Treaty referendum again, but this time promising Ireland's voters an ice cream if they vote yes.)

Some of those commenting on his fine piece, "An Ice Cream For Ireland", miss the point, and blather on about democracy and subsidiarity and corporate tax rates. I was obliged to join in and steer this important debate back onto the right path, pointing out:

"Yes, this talk of protocols and democracy and referendums and addendums is all very well, but let’s get down to the nitty gritty, or at least the tutti frutti. What flavour of icecream would win over the most Irish voters?

Nothing too exotic, you don’t want Ireland’s voters to feel foreign values are being foisted on them (so pistachio is out). Vanilla would be the Eurocrats’ obvious, offend-nobody choice. But, on reflection, I would vote no to vanilla. Too bland an offering is also suspicious.

My gut feeling is strawberry."

Several people, instantly grasping the simple genius of the idea, made useful suggestions. My  favourite being from David Wilkins:

"May I suggest that the ice cream given to each Irish voter should take the form of a ‘99′? That would remind the Irish that they are voting not just for themselves but also for the 99% of EU citizens who have been denied a vote on the Lisbon treaty. The whole process is, after all, distinctly flakey."

And Shevvers suggested:

"A pint of Guinness would work better than ice cream."

Which is a strong and original idea, but would be open, I fear, to legal challenge after the vote, from the remorseful and hungover voters.

It is not too late to vote for your favourite flavour over on Gideon's blog. Now that's democracy... 

(The fine photos of the leaders of Ireland's three largest political parties, in case you're wondering, are borrowed from Kieran Murphy, of Murphys Ice Cream, who has a wonderfully ice cream-obsessed website, called Ice Cream Ireland. Although, er, he doesn't know they're borrowed yet. It's a bit late to be ringing him in Dingle, at half two in the morning, to ask permission to use these, but I'll ask him tomorrow, honest. I know, it would have been great to get Brian Cowan, but he's not really an ice cream type, now, is he?)

 

(An Taoiseach Brian Cowan, being chased by an ice cream man for not buying an ice cream.) 

Mapping Economics Onto Reality

 

I was recommending this article to my friends the other day, so I may as well recommend it to you guys too. I know my economics stuff is of minority interest, but how we live is going to be severely bent out of shape for the next few years by this single fact -  the economic theories used for the past two decades did  not map onto reality, and have totally screwed up the financial system, global credit, the housing markets, et bleeding cetera.

 

George Soros, apart from running one of the most successful hedge funds of all time, making a billion in a day by knocking sterling out of the EMS,  and then using the money to prop up democracy around the world,  is a terrific and original thinker on matters economic. (He's greatly influenced me. Those who know me may have have noticed that over the past few years the quality of my economic thinking, and of my predictions, has improved a great deal. A fair bit of that is down to reading Soros.)

 

Here's a juicy and clear-sighted quote from the article, in Wednesday's Financial Times, if you're too lazy to click:

 

"About 40 per cent of the 6m subprime loans outstanding will default in the next two years. The defaults of option-adjustable-rate mortgages and other mortgages subject to rate reset will be of the same order of magnitude but occur over a longer period. With single family home sales running at an annual rate of 600,000, foreclosures will overwhelm the market and cause prices to overshoot on the downside. This will swell the number of homeowners with negative equity who may be tempted to turn in their keys. The fall in house prices will become practically bottomless until the government intervenes. Cutting foreclosures should be a priority but the measures so far are public relations exercises."

The rest of the article is here.

 

In fact, if you liked that, you should read his interesting overview of the background to the crisis, going back sixty years... 

 

And if you're up for a bit of really meaty economic philosophy, there's a good 1994 paper on reflexivity by Soros here...

 

Did I mention I'm reading in Prague next week? Oh, I'll blog about that tomorrow.

Up the Workers

 

"A financial sector that generates vast rewards for insiders and repeated crises for hundreds of millions of innocent bystanders is, I would argue, politically unacceptable in the long run."

And that's Martin Wolf, associate editor and chief economics commentator at the Financial Times (and author of the very fine  Why Globalization Works), writing today. God knows what the Socialist Workers' Party is saying.

Oh, wait, they're saying this:

"The sophistication of the financial system had encouraged the major banks to engage in increasingly speculative activities. (...) So a crisis developing in the financial system has the potential not only to hit capitalists’ investments – it can hit workers’ consumption."

(The entire SWP analysis of the financial crisis is here.) 

(The entire FT analysis is here.)

It's a measure of the almost comical enormity of the financial sector screw-up that the banks have managed to provoke the Financial Times and the Socialist Workers' Party into writing practically the same article attacking them.

Reviving The Markets (With A Hair Of The Dog That Bit Them)

 

This is truly the World Cup Final of international financial meltdowns! America, staring defeat in the face, brings on super-sub Ben Bernanke, Chairman of the Federal Reserve! He's on the pitch! He's scored a hattrick! Can he win the game???

 
Well, the US Federal Reserve panicked. Ben Bernanke cut interest rates by .75% an hour before the US markets opened.

Yes, to change metaphors, Ben wields the mightiest hammer in the world, and he has just struck the problem a decisive blow.

Trouble is, the problem is not a nail. No, it won't work. Markets will be heading south again within the week. He can only cut a few more times. Markets that need to fall can fall every day God made.

To change metaphor yet again (you can tell I'm a novelist, huh?), US markets have been permanently drunk for nearly two decades.  Every time they were in danger of sobering up, the Fed poured more liquidity down their throats, to save them from a savage hangover.

That just put off the hangover, and ensured it would be worse when it came. Ben is pouring alcohol down the throat of a strong man who has finally passed out from alcohol poisoning.

Monoline Meltdown

 

Look, I've got to talk about what's happening in the financial markets or I'll burst. Feel free to ignore it, I know  almost none of you care, but I'm incredibly excited. And if you ARE into economic meltdowns,  this is going to be the World Cup Final of economic meltdowns, and Brazil are about to walk out onto the pitch...

Well, anyway, for the few of you still reading... You might remember, I made a big, fat general prediction back in February 2007. I said, in this blog:

"At some point in the next five years (but my gut feeling is much sooner, within the next two years) there will be almost simultaneous collapses in the valuations of many unrelated asset classes across much of the world."

I also said:

"By definition, an unexpected collapse will be unexpected. It's impossible to predict the trigger, and foolish to predict the timing. But if it pops, the feedback loop which pumped it up will reverse and act to deflate it. There will be a horrible drying up of liquidity, a credit crunch, and a fairly general asset crash."

Bear in mind, this was six months before August 2007, when the current credit crisis started.

I also said, (as I outlined the historical process that leads to these things):

"Step one: A great idea. You can hedge risk by buying a derivative: for example, if you own General Motors bonds, you can insure against the risk that General Motors will go bust by buying a credit default derivative for those bonds. The derivative will pay out if General Motors goes bust. Voila! You now have no risk. Ultimately, either the bonds will pay up, or the derivative will pay up."

That was the theory for the past insane decade, and a very sweet and charming theory it was. But it was bullshit, and here's why...

Somebody has to be on the other end of that bet. Someone has to sell you that credit default derivative (let's call it an insurance policy). And if the bond does default, if General Motors does go bust... That someone who sold you the insurance has to have the money to pay you. And if that someone has mispriced the risk... has sold everybody around the world cheap, cheap, cheap insurance, firmly believing the policies will never have to pay up... And suddenly has to pay up... The money isn't there. The premiums were not enough to cover the risk.

The ultra-cheap insurance made everybody (banks, companies, hedge funds, private equity firms, individual investors, your mamma) happy to take on too much risk. Taking on too much risk, they eventually collapse. Collapsing, they trigger the insurance. Which bankrupts the insurance companies.

Which wipes out everyone's insurance, which causes banks, companies, everybody, to default, collapse, implode, as they get downgraded by the ratings agencies, and investors run like rabbits for the hills.

Well it's happening, right now. There are only a few big companies who insure all the bonds issued by everyone from IBM to your local town council. They are called monolines. And, in my opinion, they have been technically insolvent (or broke, as we used to call it) for months. But the ratings agencies haven't had the guts to downgrade the monolines' ratings, for fear of the consequences. This cannot last forever: the monolines ARE broke, and they WILL go bust (unless some generous soul from outside intervenes and bails them out), and the ratings agencies cannot pretend they're OK indefinitely...

Ah, enough for tonight. (It's not like anyone reads my economics stuff anyhow.)

Great Books for Teenaged Boys: No. 2 - Why Are We In Vietnam?

OK, the great Norman Mailer, who died earlier this month: his best book, if you are a teenage boy, is Why Are We In Vietnam? (I would have put it on the list anyway, even if he hadn't just died.)

I had my notebook with me over the weekend (I was away from my computer), and I wrote
 so many notes on Why Are We In Vietnam? that it would take me another week to type them up and turn them into something that made sense. It was more a long essay than a blog entry.

But Ariel is waiting for his next book, and I can't make him wait another week. So here goes... Inna blog styleeee, fukktup, no gramma...

Norman Mailer wrote Why Are We In Vietnam? around the time I was still in the womb. It came out in 1967 and it was red-hot relevant to the big American dilemma: why the fuck are we in Vietnam?

What is it about? Well in some ways it's a shaggy dog story, or a shaggy bear story, or a shaggy war story... And that story is pretty simple: DJ and his friend, two Texan teenage boys, go on a hunting trip to Alaska with their rich fathers. They shoot animals, and they walk in the forests. DJ tells the tale in a supercharged Texas-turboblast of language.

But it's about what it's not about. And it's not about what it's about. 

The title does half the work of the book, because it changes the meaning of every sentence that follows. Vietnam is hardly mentioned. But DJ and his friend have been drafted, and are going to Vietnam after this last trip with their fathers.

Mailer has knowledge of war (he fought in the Pacific in World War Two): DJ has not. But DJ will soon have Mailer's knowledge and the gap between character and author, so soon to be closed, crackles with literary electricity. The knowledge wants to discharge.: DJ wants to know, and Mailer wants him to know. Soon the trees, the animals, the guns are trying to tell him... The book contains some of the best ever descriptions of animals, plants, trees and soil (of the world without man in it). And then man comes into it...

The book is full of sex, shit and death, and of words invoking sex shit and death even when the subject is something else. Sex shit and death are the three-in-one God of this book, and it is best to hear these words as the (almost religious) speaking-in-tongues of a possessed young man, rather than as casual and meaningless obscenities. They are not casual and they are not meaningless (though they are often obscene, if the Latin root of obscene is ob caenum, "from filth").

A book in which rich Americans shoot animals from helicopters is obviously about 1960s Vietnam in a fairly direct way. But that is not the most important aspect of the book.

This book is not a history book. This book is prophecy, and thus timeless. You could slot it into the Bible as the Book of DJ, and it would fit in fine. To give the book its original force, and to totally refresh it, just scratch or paint out the word "Vietnam" on the cover, and scrawl in the word "Iraq", if you're American or British, "Chechnya" if you're Russian, "Tibet" if you're Chinese, "Palestine" if you're Israeli, "Congo" if you're from practically any of the Democratic Republic of the Congo's neighbours, "Darfur" if you're from Sudan, "Somalia" if you're from Ethiopia...

No really, do it. Make a physical mark. Damage the book. Make it yours.

It is not a clean and tidy book. It is not a nice, easy book. It is not a post-feminist book. It is not a left-liberal book. It's not even a "good" book, in a lot of ways (though it might be a great book). It doesn't give a shit whether you like it or not. A lot of recent readers have problems with that, as they do with Norman Mailer generally. But you cannot apply health and safety legislation to a shaman. The chicken has to really die (because you're going to really die). The blood has to splatter everywhere (because your atoms, too, will be scattered, and your pattern lost). Norman Mailer's art is messy because life is messy because death is messy.

OK that's it. That's all I can think of right now. Over to you. 

Biggest crash in world history coming up

None of my friends want to talk to me about economics, which is frustrating. Because I think we are in for an almighty wipeout in the financial markets, which has only barely begun to get going. And that is interesting, and worth a conversation.

As I have posted previously, I think a lot of exotic financial products, and a lot of very exotic investment strategies done with borrowed money, are about to fail spectacularly. As a side effect, a lot of perfectly solid markets (in stocks, bonds, property, commodities) are going to be cut in half, and a lot of institutions, to their intense surprise, are going to be wiped out.

More specifically, I predict the implosion of a very large number of hedge funds over the next year or two (and probably a lot sooner than that). Let's be more specific: I suspect that more than 25% of the hedge funds in existence today will not exist in two years time. (Oh come Julian, don't be shy, what do you REALLY think? Well, I really think at least half of them could vanish, but I'm trying to sound conservative and thoughtful here.)

And I think we'll lose more than one really, really big, globally known bank, insurer, and/or pension fund.

We may not lose them technically: governments and central banks will probably try to coordinate a rescue. But if they survive, they'll have been artificially resuscitated after having gone under.

Also, a lot of junk bonds will turn out to be junk. A shedload of private equity firms will go bust, and a stack of grossly overleveraged companies will collapse before 2010.

And residential property prices will fall through the floor in real terms over the next couple of years in a bunch of countries, including the USA and my dear and darling Ireland. (Put a figure on it... OK, from peak to trough, a fall of over 30 % in real terms. There. The trough may well take a lot more than a couple of years, mind you, and inflation may mask the fall, but in real terms I'd be surprised if it's less than 30% in Ireland's case. America, being vast and varied, I'll call a fall of over 30% on the coasts and large urban areas, before it eventually bottoms out. Again, I'm being conservative, and secretly think it could be more.)

Note that I think the real-world economy is in pretty good nick right now. But the financial world, across many asset classes, is about to have the biggest crash (in dollar terms) in the world's history. Bigger than the dotcom blowout? Yes. Will it wreck the real economy? Don't know. Haven't I predicted enough for ye? Don't be greedy.

Ah, sure, while we're at it, we'll lose at least one of the Big Three American car companies. 

Well, that has the potential to make me look very stupid indeed in 2010...

Anyone want to argue? 

Jean Baudrillard is dead

This blog is turning into an obituary column. Interesting.

Anyway,  Jean Baudrillard, the French explorer of hyper-reality, died yesterday (Tuesday March 6th, 2007), in Paris, France, aged 77. He'd been ill for ages.

Jean Baudrillard, like many Frenchmen, was a poet pretending to be a scientist.

There are two main theories of Baudrillard:

One is that he was a great and original thinker who described the modern world as it really is.

The other is that he was a tremendous French bullshitter, high on his own supply, using words which he failed to define, in a style that imitated science without understanding it, and whose work made no sense.

Both theories are correct. 

 Jean Baudrillard is famous for:

1) Inspiring the makers of The Matrix films. Baudrillard later said they didn't understand his ideas at all.

2) Writing the essay "The Gulf War did not take place".  (Almost all criticism of which has been written by people who have not read the original essay, thus proving quite a few of his points about the nature of reality, in an age saturated with far too much information to process. And yes, I have read it.).

 As I have no opinions or beliefs, I neither endorse nor reject him, nor any of his ideas, nor indeed any of my own comments on his ideas, as laid out above. But he was a big influence on Jude, and it's a pity he'll never read it now.

Arthur Schlesinger is dead

Well, Arthur Schlesinger, the great liberal American historian, has died. Heart attack in a restaurant at the age of 89, not a bad way to go. If you are interested, here's a proper, old-fashioned, sprawling, comprehensive, New York Times obituary.

And if you're only a little bit interested, here's a bite-sized chunk from it:

'In 1949, Mr. Schlesinger solidified his position as the spokesman for postwar liberalism with his book “The Vital Center: The Politics of Freedom.” Inspired by the Protestant theologian Reinhold Niebuhr, he argued that pragmatic, reform-minded liberalism, limited in scope, was the best that man could hope for politically.

“Problems will always torment us,” he wrote, “because all important problems are insoluble: that is why they are important. The good comes from the continuing struggle to try and solve them, not from the vain hope of their solution."'

Under the JFK administration , one of his jobs was to take Jackie Kennedy to the movies. What a great life.