Tuesday, July 07, 2015

Kunstler: Welcome to BlackSwansVille

July 6, 2015

Welcome to Blackswansville

While the folks clogging the US tattoo parlors may not have noticed, things are beginning to look a little World War one-ish out there. Except the current blossoming world conflict is being fought not with massed troops and tanks but with interest rates and repayment schedules. Germany now dawdles in reply to the gauntlet slammed down Sunday in the Greek referendum (hell) “no” vote. Germany’s immediate strategy, it appears, is to apply some good old fashioned Teutonic todesfurcht — let the Greeks simmer in their own juices for a few days while depositors suck the dwindling cash reserves from the banks and the grocery store shelves empty out. Then what?

Nobody knows. And anything can happen.

One thing we ought to know: both sides in the current skirmish are fighting reality. The Germans foolishly insist that the Greek’s meet their debt obligations. The German’s are just pissing into the wind on that one, a hazardous business for a nation of beer drinkers. The Greeks insist on living the 20th century deluxe industrial age lifestyle, complete with 24/7 electricity, cheap groceries, cushy office jobs, early retirement, and plenty of walking-around money. They’ll be lucky if they land back in the 1800s, comfort-wise.

The Greeks may not recognize this, but they are in the vanguard of a movement that is wrenching the techno-industrial nations back to much older, more local, and simpler living arrangements. The Euro, by contrast, represents the trend that is over: centralization and bigness. The big questions are whether the latter still has enough mojo left to drag out the transition process, and for how long, and how painfully.

World affairs suffer from the disease of terminal excessive complexity. To make matters worse, much of the late-phase complexity operates in the service of accounting fraud of one kind or another. The world’s banking system is mired in the unreality of so many unmeetable obligations, cooked books, three-card-monte swap gimmicks, interest rate euchres, secret arbitrages, market manipulation monkeyshines, and countless other cons, swindles, and hornswoggles that all the auditors ever born could not produce a coherent record of what has been wreaked in the life of this universe (or several parallel universes). Remember Long Term Capital Management? That’s what the world has become.

What happens in the case of untenable complexity is that it tends to unravel fast and furiously. That’s exactly why avalanches and earthquakes happen all at once, not stretched out over a six week period. The global financial scene not so different. It’s just another matrix of linked mutually-supporting relationships that can implode if a few members weaken.

One question worth reflecting on is whether the implosion is actually well underway on-the-ground in real economies, with just the scrim of illusion to make the surface appear intact. That surely seems to be the case in the USA, where the so-called economy has already avalanched into a rubble heap of part-time scut jobs, defaulted college loans, underwater mortgages, and groaning pension funds — with an overlay of pointless and endless motoring.

Over in Euroland, the Greek “no” also implies that every other sovereign nation wallowing in deep financial shit will demand a haircut (and a disinfectant shower). Italy, Spain, Portugal, Ireland, and even France cannot possibly meet their debt obligations. Their citizens are being taunted with currency controls, too, and they have every bit as much potential to go ape-y as the Greeks. Notice you haven’t heard much from their leaders and financial ministers in recent weeks. They are all standing on the sidelines watching the Greeks go through the wringer — but you can be sure they are all making plans of their own.

The failure of the European experiment will be extremely demoralizing to the hopeful citizens of that continent, who emerged from the bloodbath of the early 20th century to become the world’s premier peaceful tourist theme park. I don’t know that they necessarily have to go back to fighting each other on battlefields with things that blow up and destroy human flesh, but they surely have to decentralize and re-fashion some kind of simpler, local way-of-life if they expect to remain civilized.

It’ll happen everywhere. The Japanese are next, of course, and they may be the most fortunate, since they retain more than a few shreds of memory for exactly that mode of life: the Tokugawa shogunate (the Edo period, 1600 – 1853), a manner of high pre-industrial economy and culture that might have persisted indefinitely had not Commodore Perry come knocking on their door, so to speak, in his “black ships.”

Ukraine is about halfway back to being medieval with excellent potential to overshoot even that. The Euroland PIIG(F) nations don’t have the energy resources to extend Modernity, even if the banking system wasn’t terminally ill, and then on top of that they have the ethno-demographic quandary of creeping Muslimization — plus the additional flotillas of desperate boat people arriving daily.

America, count your blessings. Tattoos, obesity, drug use, and shiftlessness are all basically behavioral choices. You don’t need a finance minister or a central banker to overcome those problems.

Monday, July 06, 2015

Kunstler: Featured Eyesore of the Month

Kunstler's running late with his weekly column, but below is a link to his featured eyesore of the month, namely a failed appending of a modern condo to a traditional church.

Kunstler: Featured Eyesore of the Month

7 July update: In a comment below, Hattie implies the church is ugly, and not made ugly with the addition of the condo tower. How so? I ask.

Neither Jeb Nor Hillary!

Thursday, July 02, 2015

Wednesday, July 01, 2015

Hullabaloo at Harper's Magazine

Here.

Done with Work.. For Now

The last two weeks were very busy for me. Doing a column and working on a newsletter. Now I'm trying to catch up on work at home. I still plan to write of my trip to Sacramento last summer.

Monday, June 29, 2015

Kunstler: Systemic Turmoil, Structural Reform

Overnight, I saw news that Greece is closing her banks for six days, and may exit the Eurozone, making her the first country to do so.--P.Z.


Kunstler: Systemic Turmoil, Structural Reform


“The problem with the post-2007 world is that we are not in a cyclical recovery; we are in a structural depression defined as a sustained period of below-trend growth with no end in sight. The U.S. has caught the Japanese disease. Structural depressions are not amenable to monetary solutions, they require structural solutions.”
–James Rickards

Can anyone stabilize this bitch? At daybreak, anyway, the Federal Reserve governors were all bagging Z’s in their trundle beds. Maybe after a few pumpkin lattes they’ll jump in and tell their trading shills to BTFD. The soma-like perma-trance among those who follow markets and money matters appears to be ending abruptly with the recognition that sometimes robots and humans alike run shrieking to the exit. A pity when they get to the door and discover it opens onto a cliff-edge. Look out below.

All this trouble with money comes from one meta problem: aggregate industrial growth has ended. It has stopped more in some parts of the world than others, while in the USA it has actually been contracting. The cause is simple: the end of cheap energy, oil in particular. At over $70-a-barrel the price kills economies; under $70-a-barrel the price kills oil production. The bottom line is that, in the broadest sense, the world can no longer count on getting more stuff, except waste, garbage, political unrest, and the other various effects of entropy. From now on, there is only less of everything for a global population that has not stopped growing. The folks on-board are still having sex, of course, which has a certain byproduct.

This dynamic was plain to see a decade ago, but the people who run finance and governments thought it would be a good idea to maintain the appearance of growth via the usufruct mechanisms of central banking: ZIRP, QE, market intervention, and universal accounting fraud. It’s not working so well. Debt was generated in place of the missing growth, and now there is too much of it that can’t be repaid on a coherent schedule. Many nations, parties, and entities are in trouble with debt and the prospective defaults are starting to pile up like SUVs on a fog-bound highway. Greece is just the first one fishtailing into a guard-rail.

The magic moment will come when it becomes obvious that these systemic quandaries have no solution. The system itself is programmed for implosion, in particular and most immediately the banking sector, where most of the untruth and illusion is lodged these days. As it stands exposed, the people are compelled to shake off their faith in what it represents: order, authority, trust. Institutions fail and each failure acts as a black hole, sucking air, light, and even time out of the system.

In the natural course of things, structural reform can occur, but that natural course entails some degree of disorder and loss. If Deutsche Bank or Goldman Sachs founders a lot of people will be living in their cars — a first stop perhaps to not living at all. Sooner or later, though, the survivors will all have to live differently. Structural reform means, for instance, that you can no longer count on getting food the way you were used to getting it. No more 3000-mile Caesar salads and take-out tubs of Kung Po Chicken. That will be very traumatic in the early going. Eventually in the places where it is possible to grow food on a smaller scale, it will be done. Maybe not so much in the Central Valley of California anymore, but in other places: Ohio, Michigan, even New Jersey (“the garden state”). And once grown, it will be sold by means that differ from the supermarket.

Americans think that WalMart and its brethren are here to stay. They’re mistaken. Structural reform means reorganizing many layers of commerce around town centers — Main Streets — while the disintegrating strip malls await the salvage crews. Are we ready for that? Rebuilding local economies would put a lot of people back to work doing real things. All the blabber about “job creation” for the moment is only about increasing the share price of predatory corporations and the bonuses of their mendacious executives. Will the world miss them? Can we still make some things and move them around and put them up for sale? I think so.

Are you disturbed about the pervasive racketeering in health care (so-called) and higher education. Well, those grifts are eating themselves alive. Structural reform probably means far fewer and smaller colleges and far more and smaller local clinics free of the stupendous insurance chicanery that mystifies the public while it swindles them. There will be a lot of useful work for people who want to take care of other people, and certainly fewer MRIs.

Do you fear the end of mass motoring and the suburban infrastructure that it operates in? Maybe your children and their children will be happier in walkable neighborhoods — outlandish as that sounds. There is a hell of lot of rebuilding to do. It may not involve materials like strand-board and vinyl siding, but the newer and smaller buildings will probably last a whole lot longer and look better. And a lot of hands will be needed to do the work.

Will we ever again know banking on the JP Morgan scale? Not on any horizon I can imagine. But there are other ways to establish mediums of exchange, stores of value, and pricing mechanisms. You can be sure that banking will never again occupy 40 percent of gross economic activity in this land.

Today may not be the true event horizon for our diseased status quo, but it is probably, at least, the coming attraction trailer. Try not get puked on.

Sunday, June 28, 2015