FacebookTwitterGoogle+RedditEmail

Hell to Pay

Warren Buffett is the closest we have to a clean-up hitter in the US economy. He would chuckle at the description, but there is more than madness to it. Berkshire Hathaway, the company he built with his partner Charlie Munder, has defied palpitations of the US equity markets for reasons that became clearer yesterday.

Buffett, who warned years ago that securitized debt represented “weapons of mass financial destruction”, is offering to reinsure $800 billion underwritten by three insurers (MBIA, the Ambac Financial Group, and FGIC) of municipal debt that undergirds the American empire. The New York Times noted today on A1, ” the financial burdens of three insurance companies have become a threat to the financial system.”

Equity markets reacted positively to Buffett’s appearance at the plate, more like, deus ex machina. I take a more nuanced view.

There are a couple of ways to view Buffett’s move, which carefully excluded debt related to the mortgage crisis.

In annual letters to shareholders, he comes across wise, prudent, and an optimist. Buffett believes in America, even if profits in his portfolio increasingly flow from international markets. In this light, his offer is a vote of confidence that there is significant opportunity for Berkshire Hathaway shareholders in the credit crisis.

On the other hand, Buffett may be more worried than he has ever been in his investing life.

He is not given to the blank-check, nonsensical patter of top federal officials from President Bush to Hank Paulson and Ben Bernanke: that the economy is essentially sound, that the credit crisis is “contained” ad nauseam.

Buffett may have decided that the threat from frozen credit markets to Berkshire Hathaway shareholders is so severe that he had to step to the plate.

I have no evidence what Mr. Buffett is thinking. But from the financial news, there are certain inescapable conclusions to draw. US equity markets have been reflecting general public discontent with government mixed with insecurity about the economy in a way that increasingly resembles mass bipolar disorder. Indexes fluctuate manically yet remain relatively high despite an avalanche of bad news-for instance, yesterday’s news that blue-chip AIG risk analysts failed shareholders.

It can’t get much worse than that. Or, can it?

Perhaps senior citizen Buffett is less a clean-up hitter than like an agile free safety, the last defender on a football team worn out by steroid abuse.

The credit crisis is carrying the ball, running to the end zone that NYU economist Nouriel Roubini calls “systemic financial risk”.

The modern era has never experienced a time when markets for municipal mortgage debt seize up. If the insurance companies that underwrite protections for that debt can no longer meet their capital requirements, or they can’t pay out claims, if municipalities can’t borrow to fund operations and deficits burgeoning from the precipitous decline of real estate markets, the US economy will undergo a contraction. A contraction as catastrophic, perhaps, as the one that followed Calvin Coolidge and his somber assertion that “the business of America is business.”

If Mr. Buffettt sees opportunity in backing $800 billion in debt, who am I to say different? We are at different pay grades. But even from the perch he keeps purposefully modest, I doubt Mr. Buffett sees what I see from Miami, the epicenter of the housing bust.

It hasn’t made me rich, but it has made me wise enough to know there is hell to pay for the cheating, lying and demagoguery that passes for stewardship of the economy, Warren Buffettt or not. Hundreds of billions are vanishing in a crisis triggered by the hubris and arrogance of the Growth Machine, US consumers and voters who owe more than they can pay back, because they couldn’t have cared less and no one was around to tell them, an ounce of prevention is worth a pound of cure.

ALAN FARAGO of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at alanfarago@yahoo.com.

 

 

 

 

More articles by:

Alan Farago is president of Friends of the Everglades and can be reached at afarago@bellsouth.net

Weekend Edition
January 18, 2019
Friday - Sunday
Melvin Goodman
Star Wars Revisited: One More Nightmare From Trump
John Davis
“Weather Terrorism:” a National Emergency
Jeffrey St. Clair
Roaming Charges: Sometimes an Establishment Hack is Just What You Need
Louisa Willcox
Sky Bears, Earth Bears: Finding and Losing True North
Robert Fisk
Bernie Sanders, Israel and the Middle East
Robert Fantina
Pompeo, the U.S. and Iran
David Rosen
The Biden Band-Aid: Will Democrats Contain the Insurgency?
Nick Pemberton
Human Trafficking Should Be Illegal
Steve Early - Suzanne Gordon
Did Donald Get The Memo? Trump’s VA Secretary Denounces ‘Veteran as Victim’ Stereotyping
Andrew Levine
The Tulsi Gabbard Factor
John W. Whitehead
The Danger Within: Border Patrol is Turning America into a Constitution-Free Zone
Dana E. Abizaid
Kafka’s Grave: a Pilgrimage in Prague
Rebecca Lee
Punishment Through Humiliation: Justice For Sexual Assault Survivors
Dahr Jamail
A Planet in Crisis: The Heat’s On Us
John Feffer
Trump Punts on Syria: The Forever War is Far From Over
Dave Lindorff
Shut Down the War Machine!
Mark Ashwill
The Metamorphosis of International Students Into Honorary US Nationalists: a View from Viet Nam
Ramzy Baroud
The Moral Travesty of Israel Seeking Arab, Iranian Money for its Alleged Nakba
Ron Jacobs
Allen Ginsberg Takes a Trip
Jake Johnston
Haiti by the Numbers
Binoy Kampmark
No-Confidence Survivor: Theresa May and Brexit
Victor Grossman
Red Flowers for Rosa and Karl
Cesar Chelala
President Donald Trump’s “Magical Realism”
Christopher Brauchli
An Education in Fraud
Paul Bentley
The Death Penalty for Canada’s Foreign Policy?
David Swanson
Top 10 Reasons Not to Love NATO
Louis Proyect
Breaking the Left’s Gay Taboo
Kani Xulam
A Saudi Teen and Freedom’s Shining Moment
Ralph Nader
Bar Barr or Regret this Dictatorial Attorney General
Jessicah Pierre
A Dream Deferred: MLK’s Dream of Economic Justice is Far From Reality
Edward J. Martin
Glossip v. Gross, the Eighth Amendment and the Torture Court of the United States
Chuck Collins
Shutdown Expands the Ranks of the “Underwater Nation”
Paul Edwards
War Whores
Alycee Lane
Trump’s Federal Government Shutdown and Unpaid Dishwashers
Martha Rosenberg
New Questions About Ritual Slaughter as Belgium Bans the Practice
Wim Laven
The Annual Whitewashing of Martin Luther King Jr.
Nicky Reid
Panarchy as Full Spectrum Intersectionality
Jill Richardson
Hollywood’s Fat Shaming is Getting Old
Nyla Ali Khan
A Woman’s Wide Sphere of Influence Within Folklore and Social Practices
Richard Klin
Dial Israel: Amos Oz, 1939-2018
Graham Peebles
A Global Battle of Values and Ideals
David Rovics
Of Triggers and Bullets
Elliot Sperber
Eddie Spaghetti’s Alphabet
January 17, 2019
Stan Cox
That Green Growth at the Heart of the Green New Deal? It’s Malignant
David Schultz
Trump vs the Constitution: Why He Cannot Invoke the Emergencies Act to Build a Wall
FacebookTwitterGoogle+RedditEmail