Via the Seattle PI:
The stress tests are done
Surprise — many banks are fine
Now, go buy that bridgeH/T Corrente
May 062009
May 062009
Investors and funds are filing motions left and right to stop the transfer of any assets to Chrysler… at least until the company ponies up $6.9 billion in assets to cover their debt obligations.
This thing is already a mess!
The gurus in Washington say that the Chrysler bankruptcy is prepackaged, and it’s going to be fast and easy. Yeah, right. Beware hubris. Like the previous administration thought that the Iraq war was going to be fast and easy.
I practice bankruptcy law, said a friend of mine, and is there a courtroom anywhere in this land that’s big enough to hold all the players in a Chrysler bankruptcy? It’s the first ‘big’ automobile bankruptcy in the U.S. since Studebaker in 1933. There’s no recipe book for doing this. The judge in the case might just have to book Madison Square Garden to have enough space for all the participants. And everyone is entitled to their day in court. Considering the tens of billions of dollars in play, I expect we’ll see many days in court, up to and including the U.S. Supreme Court. That should take only a few years.
Yet the stocks of real estate investment trusts (REITs), which are popular among income-oriented retail investors, are still trading at high enough levels that discount a ‘garden-variety’ recession in commercial real estate.
REITs were designed to invest in portfolios of rental properties, and generally pay no corporate income taxes if they distribute at least 90% of their profits as dividends to their shareholders.
“REITs thrive in an environment of steadily rising property values and rents. But in this ice age for commercial real estate, the REIT business model will cease to function properly; a REIT’s tax-free status doesn’t allow it to retain much excess capital during lean times. Since REITs pay out all their earnings, they cannot grow without taking on more debt. During the boom, a REIT strategy encompassing growth, leverage, and acquisitions was a virtuous cycle that led to juicy dividends and soaring stocks; in this bust, it’s morphed into a vicious cycle of dividend cuts, dilutive equity offerings, debt offerings at double-digit interest rates and bankruptcies.
“The REITs that levered up and grew too fast at the peak will go to zero in bankruptcy. Others could fall into the low single digits by year-end as the market anticipates that creditors will take title to many properties in 2009 and 2010. These developments would push the value of the REIT Index dramatically lower.
May 052009
The Evaporating Collateral Of The United States
at Zero Hedge
In a Bloomberg article today, Federal Reserve Vice Chairman Donald Kohn said that the central bank’s emergency lending programs aren’t creating a significant risk for U.S. taxpayers and went on to clarify that the major sense of security is prompted by the quality of the collateral pledged against these loans. To quote Kohn:
“We are not taking significant credit risk that might end up being absorbed by the taxpayer. For almost all the loans made by the Federal Reserve, we look first to sound borrowers for repayment and then to underlying collateral.”
From the Financial Times:
Emerging economies such as China and Russia are calling for alternatives to the dollar as a reserve currency. The trigger is the Federal Reserve’s liberal policy of expanding the money supply to prop up America’s banking system and its over-indebted households. Because the magnitude of the bad assets within the banking system and the excess leverage of its households are potentially huge, the Fed may be forced into printing dollars massively, which would eventually trigger high inflation or even hyper-inflation and cause great damage to countries that hold dollar assets in their foreign exchange reserves.
The chatter over alternatives to the dollar mainly reflects the unhappiness with US monetary policy among the emerging economies that have amassed nearly $10,000bn (€7,552bn, £6,721bn) in foreign exchange reserves, mostly in dollar assets. Any other country with America’s problems would need the Paris Club of creditor nations to negotiate with its lenders on its monetary and fiscal policies to protect their interests. But the US situation is unique: it borrows in its own currency, and the dollar is the world’s dominant reserve currency. The US can disregard its creditors’ concerns for the time being without worrying about a dollar collapse.
Richardson and Roubini Call for Bank Resolution, Diss Stress Tests
at Naked Capitalism
- May 1: May Day protesters clashed with riot police in Turkey, Greece and Germany while French unions led their biggest ever Labor Day demonstrations amid growing public anger in Europe at unemployment and the handling of global economic crisis (Guardian)
- Unemployment is on the rise across the continent. The European Commission expects an unemployment rate of 8.75% in the EU27 and 9.25% in the eurozone in 2009. In the Euro area, the unemployment rate was 8.5% in February 2009, 1.3% higher than a year earlier (OECD)
- Labor unions in the EU are scandalized that the governments are handing money to banks when workers’ pay is stagnant. Moreover, bailing out banks could mean drawing funds from social welfare programs (Euractiv)
May 042009
Some of the wage cuts, like the givebacks by Chrysler workers, are the price of federal aid. Others, like the tentative agreement on a salary cut here at The Times, are the result of discussions between employers and their union employees. Still others reflect the brute fact of a weak labor market: workers don’t dare protest when their wages are cut, because they don’t think they can find other jobs.
Whatever the specifics, however, falling wages are a symptom of a sick economy. And they’re a symptom that can make the economy even sicker.
First things first: anecdotes about falling wages are proliferating, but how broad is the phenomenon? The answer is, very.
These remarks were delivered to a meeting of the Texas Lyceum in Austin on April 3, at a debate between University of Texas professor James Galbraith, an Observer contributing writer, and former Majority Leader Richard Armey, chief instigator of the recent Astroturf “tea party” protests. Armey had begun his remarks by noting that his rule in life was “never trust anyone from Austin or Boston,” and proceeded to declare his allegiance to the “Austrian School” of economics, a libertarian view that regards public intervention in private markets as socialism.
James K. Galbraith | May 01, 2009 | Commentary
- Commentary
- Causes of the Crisis
‘Conceived By Someone Who Never Worked in a Real Job’
Financial Armageddon has long highlighted the disconnect between Main Street and Wall Street. Even now, after an extraordinary number of banks and brokers have failed or are still being bailed out, and thousands of financial industry workers have lost their jobs (excluding those at the top, who should have been the first to go) or had bonuses and salaries slashed, there are still plenty of clueless “experts” running around — including those who have the power to invest other people’s money — who claim to see all manner of “green shoots” sprouting up throughout the economy. While I could be wrong when it comes to my admittedly pessimistic views about where the bottom is (and when we might reach that point), even a cursory glance at what is happening around the country makes me feel reasonably confident that we aren’t there yet. To cite just one example, I refer to the following post from Clusterstock, entitled “About That GDP Inventory Decline…”
An executive who works for a massive global industrial company observes that the much-celebrated decline in inventories in the GDP numbers should not be taken as a sign that GDP is suddenly about to start accelerating:
I watched with some amusement as analysts decided that reduced Inventories in the GDP data boded well for future GDP figures. While, all else equal, certainly lower would be better, the fact is we are slashing inventories (and trying to do so even more) because there are no orders. None. We do take “orders” (non-binding, no cash down payment) which are what is optimistically shared with the Street but binding orders with cash down payments do not exist today, haven’t for over 8 months now. When one lands it is company news and because a government entity somewhere backed it. And trust me, if we aren’t getting orders neither are the next 5 guys.
I suppose either the analysts – and the market, which has been juicing our stock (thanks for that) – are correct and the orders are about to start rolling in, or they are going to be somewhat disappointed later this year when our backlog starts to run dry. I hope they’re right. But I assure you the absolute last thing that’s going to happen is for us to start *growing* inventories without the orders - that strategy can only possibly be conceived in a cubicle somewhere, occupied by someone that never worked in a real job. [MP here: don't you just love that last bit?]
May 032009
It’s time to set the record straight
We acknowledge that we have felt like salmon swimming upstream. And, we constantly preach that everyone should keep an open mind and about the dangers of being perma-bears at the low (not our intention!) – but it’s time to set the record straight.
Big money investors have been on the sidelines
We have talked to so many bewildered clients about the massive equity market rally from the March lows that we’ve lost count. Few, if any (especially in the hedge fund community) seem to be celebrating the fact that the S&P 500 has rallied 30%, which tells us that big-money investors have been on the sidelines through this entire move. From our lens – and you can see this clearly from the twice-monthly NYSE data – the buying power for this market has actually come from severe short-covering as the bears head for the hills.
Few market-makers share enthusiasm of most economists
We don’t really share the view that the recovery, if and when it comes, will be sustained. We understand the historical record that even in the face of monumental fiscal and monetary easing, it takes a good four years for the economy to work through the aftershocks of a collapse in credit and asset values. While most economists are now waving the pom-poms, we find very few marketmakers who share their enthusiasm.
By and large, this rally has been a clear technical event
Gaps get filled rapidly and the primary source of buying power seems to be coming from a huge short-squeeze, and perhaps some pension fund rebalancing, which always seems to happen after the market makes a new low. To be sure, there is always the chance that the dry powder (money on the sidelines) is put to work and investors chase this rally. And nothing says that the S&P 500 cannot go as high as the 200-day moving average of 970 over the near term. We have seen these kinds of rallies in the past There were four of these kinds of rallies from 1929 to 1932; a half-dozen in the 19-year-old Japanese bear phase; and no fewer than 40,000 rally points in the Nasdaq that were fun to play in the 2000-2003 bear market – but the fundamental downtrend was obviously still intact.
Stock market not good at predicting inflection points
The stock market bottomed for good in the spring of 2003 because at that time, we were on the cusp of a 4%+ real GDP growth rate over the ensuing four quarters. The reason the rally of late 2001 to early 2002 failed was because the market realized the recovery would be delayed. Let’s just say that a 21% rally in the S&P 500 from Sept 2001 to January 2002 was not a bounce that was pricing in a 1.5% GDP growth rate for the ensuing four quarters, which is what we ended up with.
We can look at the situation in reverse. Did the 20% slide in the S&P 500 in the summer accurately predict the 4-1/2% GDP growth trend we were going to see the following year? No. And even in this cycle, the equity market was peaking just as the recession started in the fourth quarter of 2007. So, this notion that the equity market is telling us anything meaningful about the economic outlook, as Larry Kudlow would have us believe, is open for debate. The stock market’s track record is just about as good as the economics community at predicting the inflection points in the business cycle – and that’s not very good.
The market, as a whole, cannot be considered cheap
While there are some good blue-chip companies trading at low multiples, the market as a whole can hardly be considered cheap. That may have been the case two months ago, but no longer. As for the earnings landscape, it has become fashionable to talk about how the vast majority of companies are beating estimates in their 1Q results, but the bar was set extremely low to begin with after that epic 4Q operating and reported loss on S&P 500 EPS. In the meantime, earnings forecasts are being trimmed steadily for the balance of the year. In fact, forward P/E multiple of 15x operating and 30x on reported EPS are not that compelling. So, we do not have a strong valuation argument. We do not have a strong earnings argument. The seasonals (“sell in May”) are about to become less compelling too.
New lows in S&P won’t happen as soon as we thought
We would, at the same time, acknowledge that if the terms of engagement have changed, the Obama economics team and the Fed have made it exceedingly difficult for the shorts to make money in this market. Tail risks, notably in terms of the banking system, have been removed. This, in turn, does mean that even if we break to new lows in the S&P 500, it probably will not happen as soon as we had thought.
Government will do whatever it takes
At the March 9 lows, there was a real feeling of possible bankruptcy in the financial system. But it is now abundantly clear the government will not allow any big financial institution to fail. The end of mark-to-market accounting rules and the super-steep yield curve have returned most of the banks to profitability. Uncle Sam can be relied on to remain the capital provider of last resort, even for those banks that do not pass the coming stress test (which has been delayed, in part because the government wants to assess how to deal with the fallout of those particular institutions). More and more taxpayer money is being thrown at the credit crisis, and now we hear that $50 billion will be allocated toward easing debt-service strains among those households that took on second mortgages during the housing bubble. And, until recently when the green shoots started to appear, there was growing talk of yet another fiscal blockbuster coming down the pike to underpin the economy.
Green shoots can turn into a dandelion or a beanstalk
We are more impressed with solid roots than we are with green shoots. The economy and the capital markets are being held together by tape and glue, in our view. Private sector activity is contracting and will continue to lose its share of GDP as the government’s influence rises on a secular basis. Tax rates will inevitably rise, as they are already doing at the state and local government level. The public sector is now involved in the mortgage market, the insurance sector, the banking industry, and of course, the automotive business.
Economy transforming into an early 1980s European model
As economists, strategists, analysts, and the media, focus on the noise – which is what green shoots really are: a blip in a fundamental downtrend – a dramatic transformation of the economy toward a 1970s/early 1980s European model is unfolding. That post-Mitterrand, pre-Thatcher model, if memory serves us correctly, was one of low-potential real GDP growth rates, low-fair-value P/E multiples, low rates of return on capital and a sclerotic economic system. Economy is not in free-fall but is hardly stabilizing.
Now let’s get to the economy and those fabled green shoots
There is no doubt that the economy is no longer in free-fall, but it is hardly stabilizing, even if the data have improved from deeply negative trends at the turn of the year. There are pundits claiming that because initial jobless claims have managed to come off their recent highs, the end of the recession is in sight. That is a fairy tale, in our opinion.
Slack still being built up in the labor market
Given the looming wave of auto sector layoffs, we expect claims to break to above 700,000 this summer, which would be a new record. So, jobless claims do not appear to have peaked yet. In fact, the relentless surge in continuing claims signals that an ever-increasing amount of slack is being built up in the labor market. There has never been a peaking out in gross claims without there being a confirmation from a similar turn in the continuing jobless claim data. Moreover, initial jobless claims have topped the 600,000 threshold now for 13 weeks in a row, and that is the real story.
To suggest that claims have stabilized above 600,000 and that this is a good thing is ridiculous. It would mean that by this time next year, the unemployment rate could potentially reach 15%. The reason is because employment losses do not end until claims actually break below 400,000. No recession ever ended until claims broke below 600,000, and on average, recessions only end once claims drop below 500,000 (when the last recession ended in November 2001, as an example, claims were 450,000).
Job losses will not end until the end of the year
Employment is one of the four critical ingredients that go into the recession call, not jobless claims, and at over 600,000 on claims, we lose payrolls at a monthly rate of around 600,000. That is hardly what we would call a stable economic backdrop. We do not see job losses ending before the end of the year. Industrial production and real manufacturing/trade sales are two other components that go into the NBER recession-determination model, and our forecast suggests that they too will not bottom conclusively until 2010.
Real organic personal income decrease is unprecedented
What really caught our eye is the fourth horseman of the recession call – real organic personal income. This metric peaked in October 2007 and was early in predicting the official onset of the recession, which began in December of that year. This measure of household income – it nets out government benefits – slipped 0.5% in March and has declined for five months in a row (and six of the past seven). Over that stretch, it declined at over a 6% annual rate, which is unprecedented (the data series go back to 1954).
Expect consumer spending to lag because of lost income
Since August of last year, the consumer sector has lost $266 billion of organic income (in nominal dollars at an annual rate) as job losses mounted, hours worked cut back, and full-time positions shifted to part-time. This lost income – not to mention $20 trillion of evaporated net worth – will likely bring long lags in dampening consumer discretionary spending. We realize that one of the bright spots in the 1Q GDP report was the +2.2% print on real consumer spending. But let’s face facts: The bounce was concentrated in January after a record 30% plunge in retail sales (at an annual rate) in the final three months of 2008. We already know that sales were down in both February and March and that the statistical handoff with respect to consumer spending is negative as we head into the second quarter.
The government does not create income; it redistributes it
We mentioned tape and glue above because the only component of household income that is rising is government transfers (mostly jobless benefits), which rose 0.9% in March and by more than 12% on a year-over-year basis. The government share of personal income at 16.3% is higher today than at any other time in the past six decades (and that covers the LBJ Great Society social benefit transfer of the 1960s). But keep in mind that the government does not create income – it distributes income by borrowing from today’s bondholders and tomorrow’s taxpayer. Not until we begin to see real incomes rise without the crutch of Uncle Sam’s checkbook will it be safe to call for the end of the recession. And again, we see this as more a 2010 story than a 2009 story, although very clearly the markets are suggesting the latter (insofar as they are signaling anything about the economic outlook).
The worst is over
In any event, the economy has certainly passed its worst point of the cycle even if we do not yet see the bottom that many others do at this time. And it may very well be that we overstayed our bearish call on the equity market and that the lows were turned in on March 9. Many pundits who have been around far longer seem to believe that, and they could be right. But there is no sense crying over spilled milk, even after a 30% run-up in the S&P 500 and a 100 basis point surge in the 10-year note yield from the lows. It just broke above its 200-day moving average, and there is nothing but empty space on the chart to 3.8% – that is an observation, not a forecast, by the way.
Lessons learned from the Great Depression
With all that in mind, we thought it would be instructive to look back to the experience of the 1930s. A credit collapse, asset deflation and massive decline in economic activity were finally stopped in their tracks by massive doses of fiscal and monetary stimulus. The S&P 500 bottomed in the summer of 1932 and the trough in GDP occurred shortly thereafter. But if history is any indication, the depression did not end for another nine years. Even after the massive relief efforts and government intervention from the New Deal, we closed the 1930s with a 15% unemployment rate and consumer prices deflating at a 2% annual rate.
Focus on SIRP — safety and yield at a reasonable price
Because the attention now has shifted to the green shoots, as was likely the case after the 1932 low as well, we highly recommend that investors focus on the big picture, which is that the aftershocks of a credit collapse and an asset deflation of this magnitude last for years, even with public sector support. Now go back to that June 1932 low in the S&P 500 (below 5) and the initial surge was breathtaking – the market roared ahead by 75% in just the first three months. But guess what? For buy-and-hold investors, by the end of 1941, the S&P 500 was at the same level as in the fall of 1932. Nine years of nothing, unless you are the most astute trader around.
Folks who chased the rally after the market broke out of the gate woefully underperformed those who stuck with their focus on generating cash flows from the fixed-income market. The yield on long Treasuries fell from 3.8% to 2.5% (Fall of 1932 to the end of 1941) while Baa corporates did even better – rallying from 7.1% to 4.4%. So from this point forward, unless you are comfortable that you have the discipline as to when to get out, the lesson of the last post-credit crunch/asset deflation/depression seven decades ago is to retain your focus on SIRP – safety and yield at a reasonable price. Passive buy-and-hold strategies are destined to fail, in our view.
A topic not much talked about with a correspondingly similar problem I have noticed in accounting:
SKILL LOSS AT BANKING: http://www.nakedcapitalism.com/
Banking has suffered a not-sufficiently-acknowledged loss of know-how on the lending side. Back in the stone ages when I got an MBA, there were a few fellow students from big commercial banks like Chase (and no former investment banking analysts, the two year posts for college graduates) and they had all gone through credit training. But by the mid 1980s, the big end of town was fascinated with automated models and expert systems. American Express was considered the sophisticate of the crowd, allegedly with the most finely tuned program.
Fast forward 20 plus years, and the credit card issuers formerly seen as most savvy, Amex and Capital One, now are sporting credit losses not markedly different than their peers. FICO based mortgage lending has proven to be a train wreck.
The problem is that there isn’t a good substitute for knowledge of the borrower and his community. Does he understand what he is getting into? How stable is his employer? What are the prospects for the local economy? Those are important considerations, and they require judgment. That may still in the end be used as an input to a more structured decision process. but overly automating borrower assessment has resulted in information loss. It’s hardly a surprise that the quality of decisions deteriorated.
Meredith Whitney has pointed to this issue, but it has received surprisingly little attention:
Since the early 1990s, key bank products, mortgages and credit card lending were rapidly consolidated nationally. Banking went from “knowing your customer” or local lending, to relying on what have proven to be unreliable FICO credit scores and centralised underwriting. The government should now motivate local lenders (many of which have clean balance sheets) to re-widen their product offering to include credit cards and encourage the mega banks to provide servicing and processing facilities to banks that sold off these capabilities years ago.
Getting better customer input is crucial whether the powers that be are successful in putting in the reforms needed for private securitization to revive (the inaction on this front speaks volumes) or whether the end game is more on balance sheet lending by banks. The Financial Times’ John Dizard in April 2008 said that the Fed expected to see a considerable reversion to more credit intermediation by banks, but wasn”t taking the commensurate steps:
Think of the main US banks and dealers, along with their regulators, as the Iraqi government – though without the same unity, purpose or long-term planning. The cash positions and liquidity of both are better now. The Iraqi government is not squandering its money on food for the ration system, medicine, electric plant or water treatment.
The US banks and dealers are through the first quarter, and are backstopped by a Federal Reserve that has gone from vestal virgin to camp follower. Some of the accountants would have appended the above quote from Matthew’s gospel to their opinions on the banks’ and brokers’ quarterly earnings statement, but it did not fit the guidelines of SFAS 157, the accounting standard.
It is not fair to say the Fed does not have a plan. It does. The plan is for the banking system to recapitalise for a new on-balance sheet world by raising a minimum of $200bn in a short period of time, not longer than two quarters. That way, there is no credit crunch, according to the model.
We seem to be on to Plan B, which is to have the Fed step in to pretty much every credit market (adding commercial mortgage securities to the TALF is the latest wrinkle). If there ever is an exit, it would involve either a bigger role for traditional banks or considerable fixes to the securitization model, but we aren’t hearing any noise on either front.
I’d be curious if readers can point to milestones in this devolution. Some have suggested that the consumer lending skill loss took hold in the 2003 period onward, but Whitney pegs it as a 1990s phenomenon, and I saw some elements of behavior change even earlier than that. Any input here would be very useful.
Silverton Bank, N.A., of Atlanta was closed Friday by the Office of the Comptroller of the Currency, according to the Federal Deposit Insurance Corporation, making it the 30th bank failure of the year and the 55th since the beginning of the recession. FDIC said it created a bridge bank, Silverton Bridge Bank, N.A., to take over operations. The bank did not take deposits from the public or make retail loans, but was a commercial bank that had 1,400 client banks in 44 states. At the time of the closure, Silverton Bank had about $4.1 billion in assets and $3.3 billion in deposits.
This week, the Sears Tower in Chicago collapsed, London was swallowed by the Thames and Atlanta was taken over by wild beasts on a television show called Life After People. Ordinarily the History Channel, which aired it, uses old footage and photographs to bring the past to life. But last year the network decided to envision, with the help of time-lapse photography and computer graphics, what would happen to the world if, from some unspecified cause, every last human being died. Over the course of two hours, highways disappeared under meadows, collapsing cities turned into verdant hillocks and automobiles crumbled into dust.
It was macabre but riveting. Life After People became the most-watched programme in the history of the History Channel. Hence this season’s 10-part follow-up, which has just begun to air. It is not the only evidence of a new fascination with human extinction. Two years ago in the US, Alan Weisman’s The World Without Us became one of the top 10 non-fiction bestsellers of the year. This spring Fox bought the rights to turn it into a major film.
Mortality is an obsession as old as our culture (“Dust thou art and unto dust shalt thou return”). So is Judgment Day. Extinction, though, is a relatively recent worry. Tennyson’s “In Memoriam” still shocks us with its vision of man winding up, like other species, “blown about the desert dust, / Or seal’d within the iron hills.”
What is the appeal of Life After People? It is fun to watch things break down and blow up on television, of course. But there was a vindictive serves-you-right tone to last year’s film: “San Francisco’s stately wooden Victorians are now only useful as timber,” says a gravelly voiced narrator as a street is consumed by flames. The same voice describes the crumbling of Manhattan: “The tunnels echo with the sound of cracking steel and cement as the streets above are sucked into the underground.” Such scenes rub mankind’s nose in the fact of its impermanence. A few stone-chiselled memorials will survive, from the pyramids to Mount Rushmore, but mould spores will devour our libraries and acid will melt our films. The History Channel view is Tennyson’s, recast in a mood not of dread but of glee.
A frequent technique is to go to places that humans have abandoned and to see what has happened to them: the island of Hashima 35 years after the Japanese coal industry abandoned it, for instance, or parts of Gary, Indiana, that have been derelict for decades. The news is mixed. If you are human, these are catastrophes. If you are an ailanthus tree, you will have a different perspective.
Last year’s film took the same approach with Pripyat, the company town built to serve the Chernobyl reactor and abandoned after the nuclear disaster in 1986. Chernobyl’s environs are now something of a nature preserve. Roe deer are back and the bird-watching is magnificent. Mr Weisman, who wrote an article on post-disaster Chernobyl for Harpers magazine in 1994, is circumspect. He thinks it will take generations to see just how habitable the landscape is. But the History Channel has no time for such qualifications.
“Incredibly,” says the narrator, “the effect of the absence of humans for 20 years has outweighed the initial damage caused by the nuclear nightmare.” A scientist looking out over the ruins reflects: “It seems pretty sad when you look now and see what’s become of this beautiful city of Pripyat, and that people will never live here again … ” Then there is a silence. In the eight seconds that it lasts, there is never a moment’s doubt that the next word will be but. “ … But there’s another side to the story, a very encouraging side, one that says that life is much more resilient than what we thought possible.”
The speculative excitement of the scientists interviewed for the film is the most unnerving thing about it. One scientist standing amid the grand judiciary buildings in Manhattan’s Foley Square notes that, without people, “nature would re-establish itself, and slowly bring us back to the green heart of what it means to be on the planet Earth.” The zoologist Ray Coppinger of Hampshire College just cackles with delight: “If the city is abandoned, rats will have to go back to making an honest living,” he says. And later: “I could picture New York City with all the buildings covered with vines, you know, hawks sailing around … It’d be lovely. It’d be absolutely lovely.”
How many people feel this way, and why? Do they only want a dramatic illustration of the process by which, left alone, some kinds of environmental damage done by man can be reversed? Mr Weisman has insisted in interviews he is a journalist, not a misanthrope or a crusader. He is speculating about our absence only as a means of “looking at our impact by extraction”. From a scientific perspective, that is sensible. But most viewers seem to want something else. They want Judgment Day. “In my opinion the Earth will be better off without humans,” writes a correspondent on a YouTube message board. “Humans are the main cause for altering the way the Earth once was.”
Maybe this sort of view is the dark unconscious of the universalism that is preached in the age of globalisation. Love of one’s own kind has gone out of fashion – we are now supposed to offer that love to a refugee in Darfur as readily as to our neighbours. Kantian ethics have replaced allegiances. But what happens to dislike for the neighbour down the street, which is equally part of the human condition? Apparently that sentiment gets universalised too – to the point where people begin not just to wish ill to their neighbours but to dream about the end of mankind.
The writer is a senior editor at The Weekly Standard. His book, Reflections on the Revolution in Europe: Immigration, Islam and the West, is published next week
It’s Time to Rethink the Problem
If there’s one thing the financial crisis has taught us, its’ that we grossly misjudged the risk we were taking on. We offer five perspectives on rethinking risk — on everything from finance to housing to social policy — in the hopes of stopping the next major meltdown before it starts.
Private Risk Is the Public’s Business
By David Moss
Risk Is Best Managed From the Bottom Up
By Nomi Prins
The Rich and Powerful Can Avoid Risk
By Robert A. Johnson
Housing Is Local, and Lending Should Be, Too
By Alyssa katz
A Strong Safety Net Encourages Healthy Risk-Taking
By Jacob S. Hacker
Read the articles at http://prospect.org/cs/articles?article=its_time_to_rethink_the_problem