Charles A. Hall writes that he wants to give us his “simplistic take” on the Wall Street mess (not to exclude greed, idiocy and so on):

Using what he is best at - Charlie suggests - Draw a Hubbert curve.  Then make an “Economic growth curve” in a different color that follows along the left hand (growth) side of the Hubbert curve .  As the Hubbert curve bends over  (Peak oil was more or less in 2005) everyone in Wall Street etc., believed that growth was continuing “as it always has”, so they kept their “assets”  “growing” with speculation.

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Now economic reality is catching up with biophysical reality, which has not been growing.  This is called a financial “adjustment” to reality.  We have seen it every day for the last 10 days.  I think that this shows the power of a biophysical approach to economics to at least give us options as to how we should think about economics!

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Charles A. Hall continues by suggesting we read the attached material by Gvail Tverborg, A Swedish economist:

Banks (enclosed), a Swedish economist, may be saying the same thing in a lot more words (attached).  I have just skimmed it - says Charlie.

Gail Tverborg’s take on gasoline shortages (they are serious!) :  http://www.theoildrum.com/node/4585 - see last paragraph there.

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Further:
The Congressional switchboard is jammed. You can get through, but it takes a dedicated finger on the redial button of your phone. Operators at the Capitol say it’s been that way for a week now, as Americans across the country have been flooding their Congressional delegations with phone calls (and emails) urging them to vote “No” on the Bush/Paulson Wall Street bailout.

That today is no exception, after Democratic Party leaders (and both major party presidential candidates, John McCain and Barack Obama) bought into the plan after adding some window-dressing measures designed to make it look more palatable. This shows that ***the public is not fooled (calls are reportedly running better than 9:1 against a bailout, perhaps more like 99:1).

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People see clearly that this is a trillion-dollar giveaway to the very people who have been hollowing out and destroying the US economy for over a decade or more by convincing both parties to let them do whatever they want to get rich, free of any kind of significant oversight or regulation.

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As Nobelist economist Joseph Stiglitz has written of this outrageous rip-off, there are four problems facing the financial system, and the bailout proposal only addresses one–getting the toxic mortgages off the banks’ books and onto taxpayers’ hands. Left unsolved is the gaping hole in banks’ balance sheets in the form of loans made to people and companies which cannot be repaid, which will mean they still won’t start lending money again. Left unaddressed too is the continuing collapse of housing prices, which will inevitably lead to more bank collapses even after the bailout. Finally, Stiglitz says there is the general loss of faith in the financial system–a major crisis which the bailout will also not solve.

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Stiglitz doesn’t even address a fifth problem which is that [with] this trillion-plus-dollar boondoggle (and when you add in the bailouts of Fannie Mae, Freddie Mac, AIG, Bear Stearns, the multiple mega-bank failures and the pending auto-industry bailout, you’re already talking $1.5 trillion and counting), all of it with borrowed money - the stage is being set for a collapse in the US dollar, with consequences that will reverberate through the economy.

Consider: if the dollar collapses, as many experts say is almost inevitable with this kind of huge addition to the national debt, oil prices (which are set in dollars) will soar to compensate, the price of all the other goods that Americans import–more than half of everything we use in daily life thanks to the decimation of American manufacturing–will rise dramatically, and ultimately, in an effort to stem the bleeding, interest rates will have to be raised, thus bringing what’s left of the economy to a grinding halt.

Download the Word document: banks_spec.doc