The Living Dead

"We are so fucked" is pretty much the only funny line in Scary Movie 4...and is also as good a way as any of summing up the present situation as the global political and economic clusterfuck shifts into a scary new phase. 

At times like these I'm glad that most of our money is under the bed - metaphorically speaking - but it's been tempting this week to have a bit of a punt on The Campbell's Soup Company, one of the few leading American firms to see its market capitalisation rise as Bush and Paulson's bail-out plan hit a brick wall on Monday.

Campbell's was a major beneficiary from 9-11 too, the assumption amongst investors apparently being that Americans typically respond to perceived end-of-the-world scenarios by stocking up on tinned food. 

More than anything this week, the spectacle of American lawmakers digging these kind of mental bunkers for themselves has had outside onlookers staring on in wide-eyed panic. The separation of powers that underpins the US Constitution has only served to exacerbate the failure of proper perspective we somehow already suspected them to be guilty of.

"The slippery slope to socialism," some whined as the house of cards built on interlocking debt started to collapse around them. What's in it for 'Main Street' others pondered as the wealth-generating systems of the whole world hang in the balance. 

For years now a failure to fully comprehend the world politically has characterised the generally de-stabilising effect of American leadership. But the spectacle of them misapprehending (and therefore mismanaging) the economic situation is now causing consternation amongst even those who generally support the free market value system atop which sit the crash-diet cats of Wall Street. 

If the petty ideological hobby-horses and the naked self-interest in Congress weren't bad enough, there's also the lame duck President (a 'dead duck' now, according to Democratic strategist Paul Begala) to factor in, plus a pair of presidential candidates who are already starting to hobble around discomfitingly. 

Last year Guatemala finally got itself a President with a social conscience, but as the local economy founders in 2008 he is already being threatened with a lynching by some sectors of the rural poor that formed his power base just a short while ago. 

Senator Obama might conceivably get himself an eight year stay at the White House, but if some economists are right, he ought to have waited a few more years before applying for the job, because it may well be very hard for him to make a success of it now given some of the expectations raised during the early part of his campaign. 

Professor Nouriel Roubini, AKA 'Dr Doom', reckons that the recession to come will be L-shaped not V-shaped, because of similarities he identifies with the Japanese banking collapse in the early 90s. This resulted in a decade of depression, partly because of the way the government allowed 'zombie banks' to continue to shamble around the sector, so that investor panic was never quite quelled. 

Roubini calculates that over a hundred major international financial institutions are effectively insolvent right now and that the best approach would be what he describes as 'triage' - allow the truly fucked banks to fold and then recapitalise the remainder. Simply using public money to pick up some of the toxic debt won't be enough to restore confidence, he asserts, because the banks still won't trust each other enough to restore liquidity.

It's a compelling argument, but the problem I have with it is that a row of wounded and dying banks is not quite the same thing as a row of wounded and dying soldiers - because there are interdependencies between financial institutions which make the process of triage especially tricky in current circumstances. 

"We are so fucked..."