Bernanke and company have managed to keep things going.

It's all about how you define "things", in my opinion. People and cultures have a huge ability to adapt to new situations, then their short-term memory lapses allow them to believe that the new is pretty much the way everything always was.

If this weren't so, we wouldn't, as a species, have colonized every ecological niche on the planet over the last 100,000 years. People are much better at explaining the present than they are at predicting the future. That's one of the reasons that TOD, lovable and fascinating as it is, will always be ahead of the curve, and therefore, on the fringe.

And of course, advancing wild-ass guesses on this site has no real consequence. It is at best, greatly educational, and at worst, vastly entertaining, but in Ben Bernanke's world WAG's have real consequences. I believe he is leading us to a new reality (basically, concentration of wealth in fewer hands, and diminished expectations for most of us). And in due time, the likelihood is that everyone will come to accept the new reality as the enduring "normal" state of affairs.

Hi Leanan, as Heading Out talks about, prediction sucks. However, even tho we had a nice go round with Ilargi yesterday, over at TAE they have looked at the choking of world trade and are thinking look for impact on availability towards the end of January 2009. I personally think January is going to be a blood bath for mid range retailers no matter what happens with the auto sector. How all this plays out, who knows, but I don't think it will be good. Here in Canada the delusion is beginning to slip and it seems the BTB spin doctors are preparing us for the real news. The TV interviews with the "person on the street" and the polls indicate a willingness to support any sort of government that will promise BAU. Perhaps this is how Germany felt in 1932. We will have government by decree for a few weeks here. Not that the parliamentry opposition is particularily effective, but it is an open time to pander to the unrealistic expectations of the population instead of trying to lead us to a better long term outcome. I think, to use your metaphore, they will keep the balls in the air a bit longer but leading to an even worse outcome of a government bankrupt in both ideas and money.

Given the lack of transparency in the banking/financial/investment system and the lack of transparency with respect to what Paulson has actually done so far and the still possible bankruptcy of the U.S. auto industry, the future still seems rather murky to me and could go either way. Just looking at the stock market, the S&P is bouncing around below 900 and has stayed above the bottom long enough that we don't seemed poised for things to get dramatically worse anytime soon. But these are all short term appearances. Things could still get dramatically worse or a little bit better over time.

The core of our economic system is still perched on a pretty shaky foundation and I still do not see how we will successfully compete in the global market place until things get much worse for the average worker, the people that actually produce goods and services other than financial instruments. The house of cards which is finance is also crumbling and much of this wealth will migrate elsewhere.

In the short run, the person falling from the 100 story building is fine. It is just that last little bit that really hurts. As you say, we really don't know what the effects of this will be in the long run. Keeping balls in the air in the short run does not seem all that comforting in this neck of the woods.

It's still one of the theories i have in mind that come January 20th they are just going to step back and smile, letting the balls fall where they may. for example someone posted something in yessterday's drumbeat that bush might on his way out dissolve the fdic system*.

*imho the fdic system wouldn't work anyway, it's like backing the ponzi scheme with another one. Sure fine it works when one bank fails occasionally, or a few banks every quarter. but like the bank loan system it's self, the system can tolerate the occasional loan failure because the non-failed loans pay for the losses as well as the fact that the bank gets all the property involved with the loan. this is not the case when a whole bunch fail at the same time or close enough together. Still with security theater it's the impression of safety that matters and if that is removed panic ensues.

I do think the system has proven more resilient than many expected.

You write that leanan, after what, several months? All of these discussions about type of collapse, catabolic, fast, slow - seems to me even if it takes several decades that's fast. I'd quibble over the word resilient; it seems to me the degree of interconnection is even more than I thought. Remember those Microsoft commercials of a few years back - "1 degree of separation"? I turned to my friends and said, those are companies that are all about to get rolled up and Wal-Marted. I called that zero degrees of separation and unstable.

Simmons and Hirsh yesterday talking about 9% decline rates halving production (and not including ELM) in 8 years, that struck me as way too fast for my tastes. I'm a libra and steady steady but that sent me to bed with an upset stomach.

9% Decline rate plus ELM - shall we revisit what real doomer porn looks like? We're not even going to be able to afford ammunition.

cfm in Gray, ME, suffering an attitude problem

I do think the system has proven more resilient than many expected. Helicopter Ben may be making things worse in the long run, but in the short run, he's keeping all the balls in the air.

Resilient isn't the word I'd use, as it implies detecting and responding sensibly to "damage", maybe even optimally given the damage. I'd say the system is a lot less "coherent" than people thought, which means that situations (damage) that probably ought to lead to other parts of the system detecting damage/problems and "doing the sensible thing" and folding haven't resulted in that, with them instead continuing on as if everything's ok. (An example is Woolworths in the UK: arguably it ought to have resolved things 6-12 months ago, either doing something radically different in an attempt to find a way to be profitable or folding. Instead they've carried on almost the same business model that was proving to be unprofitable.) Rather than the balls in the air metaphor I'd say the world finance people seem to be doing ok-ish at persuading all the poker players around the table that despite the fact they've seen 4 aces, 4 kings and 4 queens go onto the discard pile, each player still has a chance of extending their cards into a royal flush and thus should keep betting. (Yeah, I know you don't actually have discard piles in poker. But you get the idea.)