Excerpts from Kunstler's forecast are below. The whole column is at the link.
Kunstler: Forecast 2018 — What Could Go Wrong?
Russia can only benefit from steering clear of war, though its recent offer to act as an intermediary between Kim and Trump was a smart move. (Maybe they remember how Teddy Roosevelt negotiated a peace settlement in the Russo-Japanese War of 1907.) They have little to lose and prestige to gain. Despite what you hear about the unholy thuggery of Vladimir Putin, it seems to me that what he wants most of all for his country is to attain the condition of a politically and economically normal nation — after the 75-year-long misadventure with communism. I suspect Putin and others in Russia would have liked the country to become more fully Europeanized in tone and style than it has been allowed to be, with NATO playing war games on Russia’s border, and US monkeyshines in Ukraine, and sanctions against it for really no good reason. So, Russia has been shoved back into its cubbyhole as a nation not quite of Europe, with sinister Byzantine overtones and ancient exotic Mongol influences.
This quasi-isolation has some benefits for Russia, for one, the imperative to develop businesses and industries for import-replacement, that is, for becoming more self-sufficient. Russia has a lot to work worth, with the world’s highest oil production, lots of ores and minerals, untold hydropower, and endless timber. It can make its own stuff, and Russian citizens are free to try starting businesses. The country may even benefit from climate change with expanded croplands. Russia is already approaching food self-sufficiency after the long catastrophe of soviet farm collectivization.
Meanwhile, Europe desperately needs Russia’s oil and natural gas, so they must know that using NATO troops and armor to make threats is a hollow gesture. Notice that Russia is stockpiling gold reserves, where the USA is just selling the stuff off. (China is stockpiling, too. Like mad.) When other currencies implode, there is reason to believe the world will be introduced to a gold-backed Ruble and Yuan, “money” backed by money. They’ll be able to buy stuff they need. Will we? Will a gold-backed currency shove aside the US dollar as world reserve currency? The precursor to that will be China’s effort to establish oil trade in its Yuan.
Europe has stumbled along economically for several years on Mario Draghi’s promise to “do whatever it takes” to keep the EU’s member nations from falling into the black hole of debt deflation, namely, buying every bond that the sovereign governments and corporations issue. That kept the game going, but the structural imbalances in EU banking are now so extreme that it is hard to see a way out besides an EU crackup. The Merkel-led immigration-and-refugee policy looked like a bad bet from the get-go and is liable to get worse when the whatever-it-takes liquidity dries up and the EU member countries fall into recession (or depression) and there’s no more money to pay for all those refugee settlement centers and the social services that have been provided. There won’t be enough gainful employment for Germans, Belgians, Frenchmen, and Swedes, let alone for immigrants and refugees.
[...]
As it happens, higher education is approaching its own state of implosion, since college has become, most of all, a money-grubbing racket tuned to the flow of exorbitant student loans for exorbitant college costs. Higher Ed’s fate is tied to the financial sector, especially the bond market, since college loans are lately being bundled into janky bonds just like the NINJA mortgages of 2007 were. The entire US college industry has been in a hypertrophic blow-off for decades, and the gross expansion of facilities, programs, and costs has developedan inverse relationship to the value of a college education. I predict that a shocking number of small four-year colleges will go out of business this year. Students who had not completed their degree requirements will just be shit out of luck.
[Note: See the Wikipedia category Educational institutions by year of disestablishment. E.g., St. Gregory's University.--P.Z.]
Concluding Thoughts
2018 will be a tumultuous year of shake-outs and loss. The watchword for the year should be “lean.” Individuals will be shoved into leaner modes of living. Companies will suffer despite the new lower tax. Financial rewards will be lean. Nations will have to seriously start planning to get by on less, to downscale, and jettison programs that don’t jibe with the mandates of reality. 2018 is the year that the world comes un-stuck from the past ten years of pretending that it’s possible to get something for nothing. For 2018, it’s full speed ahead into the long emergency.
Showing posts with label international finance. Show all posts
Showing posts with label international finance. Show all posts
Monday, January 01, 2018
Monday, May 08, 2017
Kunstler: Paris Afterparty.
Kunstler: Paris Afterparty.
First mistake: Emmanuel Macron’s handlers played Beethoven’s “Ode to Joy” instead of the French national anthem at the winner’s election rally. Well, at least they didn’t play “Deutschland Über Alles.” The tensions in the Euroland situation remain: the 20 percent-plus youth unemployment, the papered-over insolvency of the European banks, and the implacable contraction of economic activity, especially at the southern rim of the EU.
The clash of civilizations brought on by the EU’s self-induced refugee glut still hangs over the continent like a hijab. That there was no Islamic terror violence around the election should not be reassuring. The interests of the jihadists probably lie in the continued squishiness of the status quo, with its sentimental multiculture fantasies — can’t we all just get along? — so En Marche was their best bet. LePen might have pushed back hard. Macron looks to bathe France’s Islamic antagonists in a nutrient-medium of Hollandaise lite.
The sclerosis of Europe is assured for now. But events are in charge, not elected officials so much, and Europe’s economic fate may be determined by forces far away and beyond its power to control, namely in China, where the phony-baloney banking system is likely to be the first to implode in a global daisy-chain of financial uncontrolled demolition. Much of that depends on the continuing stability of currencies.
The trouble is they are all pegged to fatally unrealistic expectations of economic expansion. Without it, the repayment of interest on monumental outstanding debt becomes an impossibility. And the game of issuing more new debt to pay the interest on the old debt completely falls apart. Once again, the dynamic relationship between real capital creation and the quandaries of the oil industry lurks behind these failures of economy. In a crisis of debt repayment, governments will not know what else to do except “print” more money, and this time they are liable to destroy faith in the value of “money” the world over.
I put “money” in quotation marks because the dollars, euros, yuan, and yen are only worth what people believe them to be, subject to measurement against increasingly fictional indexes of value, such as interest rates, stock and bond markets, government-issued employment and GDP stats, and other benchmarks so egregiously gamed by the issuing authorities that Ole Karl Marx’s hoary warning finally comes to pass and everything solid melts into air.
For the record, I’m not in favor of political chaos and economic anarchy, but that seems to be the only route that Deep Staters ‘round the world want to go down. The convenient protocols of finance in the industrial era which allowed routine borrowing from the future to get today’s enterprise up and running have lost their mojo. The short and practical theory of history applies to this: things happen because they seem like a good idea at the time.
Revolving credit seemed like a good idea through the 20th century, and it sure worked to build an economic matrix based on cheap energy, which is, alas, no more. What remains is the wishful pretense that the old familiar protocols can still work their magic. The disappointment will be epic, and the result next time may be political figures even worse than LePen and Trump. Consider, though, that what you take for the drumbeat of nationalism is actually just a stair-step down on a much-longer journey out of the globally financialized economy. Because the ultimate destination down this stairway is a form of local autarky that the current mandarins of the status quo can’t even imagine.
That journey has already begun, though neither the public nor its elected leaders, have begun to apprehend it. The first spark of recognition will come in the months ahead when the current cover story on markets, “money,” and growth falls away and political leaders can only stand by in wonder and nausea that the world has the impertinence to change without their permission.
First mistake: Emmanuel Macron’s handlers played Beethoven’s “Ode to Joy” instead of the French national anthem at the winner’s election rally. Well, at least they didn’t play “Deutschland Über Alles.” The tensions in the Euroland situation remain: the 20 percent-plus youth unemployment, the papered-over insolvency of the European banks, and the implacable contraction of economic activity, especially at the southern rim of the EU.
The clash of civilizations brought on by the EU’s self-induced refugee glut still hangs over the continent like a hijab. That there was no Islamic terror violence around the election should not be reassuring. The interests of the jihadists probably lie in the continued squishiness of the status quo, with its sentimental multiculture fantasies — can’t we all just get along? — so En Marche was their best bet. LePen might have pushed back hard. Macron looks to bathe France’s Islamic antagonists in a nutrient-medium of Hollandaise lite.
The sclerosis of Europe is assured for now. But events are in charge, not elected officials so much, and Europe’s economic fate may be determined by forces far away and beyond its power to control, namely in China, where the phony-baloney banking system is likely to be the first to implode in a global daisy-chain of financial uncontrolled demolition. Much of that depends on the continuing stability of currencies.
The trouble is they are all pegged to fatally unrealistic expectations of economic expansion. Without it, the repayment of interest on monumental outstanding debt becomes an impossibility. And the game of issuing more new debt to pay the interest on the old debt completely falls apart. Once again, the dynamic relationship between real capital creation and the quandaries of the oil industry lurks behind these failures of economy. In a crisis of debt repayment, governments will not know what else to do except “print” more money, and this time they are liable to destroy faith in the value of “money” the world over.
I put “money” in quotation marks because the dollars, euros, yuan, and yen are only worth what people believe them to be, subject to measurement against increasingly fictional indexes of value, such as interest rates, stock and bond markets, government-issued employment and GDP stats, and other benchmarks so egregiously gamed by the issuing authorities that Ole Karl Marx’s hoary warning finally comes to pass and everything solid melts into air.
For the record, I’m not in favor of political chaos and economic anarchy, but that seems to be the only route that Deep Staters ‘round the world want to go down. The convenient protocols of finance in the industrial era which allowed routine borrowing from the future to get today’s enterprise up and running have lost their mojo. The short and practical theory of history applies to this: things happen because they seem like a good idea at the time.
Revolving credit seemed like a good idea through the 20th century, and it sure worked to build an economic matrix based on cheap energy, which is, alas, no more. What remains is the wishful pretense that the old familiar protocols can still work their magic. The disappointment will be epic, and the result next time may be political figures even worse than LePen and Trump. Consider, though, that what you take for the drumbeat of nationalism is actually just a stair-step down on a much-longer journey out of the globally financialized economy. Because the ultimate destination down this stairway is a form of local autarky that the current mandarins of the status quo can’t even imagine.
That journey has already begun, though neither the public nor its elected leaders, have begun to apprehend it. The first spark of recognition will come in the months ahead when the current cover story on markets, “money,” and growth falls away and political leaders can only stand by in wonder and nausea that the world has the impertinence to change without their permission.
Monday, April 24, 2017
Kunstler: Ready, Set, Splat.
Kunstler: Ready, Set, Splat.
As I write, the French stock market (the CAC 40), is doing a grand jeté (up 4.5 percent!) in celebration of Emmanuel Macron’s assumed slaying of the dragon Le Pen. But that was just the first round under the interesting French election system. Consider that two other candidates who were eliminated, Monsieurs Fillon and Mélenchon, got nearly 40 percent of the vote. Are we so sure about where their voters go in the second and final round two weeks from now?
I suspect that most Americans — even the ones who follow Rachel Maddow — are about as interested in French politics as differential calculus. Macron, 36, is a blank slate. He was finance minister under current president François Hollande, of the Socialist Party, but declared during the election campaign that he’s not a socialist, he only wanted to be of service to his country, and this time he ran under his own party, En Marche! He appears to represent the continuation of business-as-usual with the European Union, which seems to put him on the wrong side of history at this crucial moment — if you suppose, as I do, that the EU is so riddled with hopeless financial contradictions and centrifugal political tensions that it is unlikely to persist.
Yet, understandably, people are reluctant to change the system they’re living under. Le Pen wants to blow the EU up, especially the bureaucracy lodged in Brussels that has become a self-serving and self perpetuating monster. Blowing up the EU would necessarily, it seems, mean the end of the European Central Bank, and with it the scams and Ponzi schemes that have provided an appearance of normality, despite an official 10.5 percent unemployment rate in France and a constant chain of public massacres by resident Jihadistas of one sort or another, some of them perpetrated by radical refugees allowed in under EU policy.
Macron might serve the interests of the American Deep State, which is determined to drive a wedge between Europe and the Chinese-Russian-Iranian “silk road” economic bloc that would consolidate trade in the Eastern Hemisphere. The US wants “the West” to remain what it had been for seventy years: the dominant posse. Even if the underlying conditions remained the same, this might not be possible.
But those underlying conditions are changing, and in ways that much of the political maneuvering across the West cannot alter, or even comprehend, for instance, the inability of these mature industrial economies to grow anymore. That is largely a function of the end of affordable energy. Unfortunately, the absence of growth portends not stagnation but collapse as society fails to generate enough new wealth to pay its debts.
Now, we’ve seen a pretty impressive demonstration of advanced nations playing financial games to cover up this corrosive condition. But the dishonesty at work is pretty obvious, and the problem with dishonesty in financial affairs is that it represents unreality. The accrued momentum in colossal sums of money flowing this way and that way has allowed unreality to reign in international finance for a while. But that is now flying apart. The ultimate reality, politicians and economists will soon discover, is that you can’t create your own reality.
So whatever you think now about the French election, or the fate of the EU, is liable to change as the great debt crack-up our time finally gets underway and suddenly every nation has to scramble desperately to keep its shit together. That magic moment may be at hand this week as the US congress returns from Easter recess to face its budget and debt ceiling dilemmas. If the credit-worthiness of this country takes a wrong turn, it will upset the global currency system. In fact, it will rip a hole in financial time-and-space into which the presumed value of all sorts of things represented on paper and computer drives will disappear, never to be seen again.
As I write, the French stock market (the CAC 40), is doing a grand jeté (up 4.5 percent!) in celebration of Emmanuel Macron’s assumed slaying of the dragon Le Pen. But that was just the first round under the interesting French election system. Consider that two other candidates who were eliminated, Monsieurs Fillon and Mélenchon, got nearly 40 percent of the vote. Are we so sure about where their voters go in the second and final round two weeks from now?
I suspect that most Americans — even the ones who follow Rachel Maddow — are about as interested in French politics as differential calculus. Macron, 36, is a blank slate. He was finance minister under current president François Hollande, of the Socialist Party, but declared during the election campaign that he’s not a socialist, he only wanted to be of service to his country, and this time he ran under his own party, En Marche! He appears to represent the continuation of business-as-usual with the European Union, which seems to put him on the wrong side of history at this crucial moment — if you suppose, as I do, that the EU is so riddled with hopeless financial contradictions and centrifugal political tensions that it is unlikely to persist.
Yet, understandably, people are reluctant to change the system they’re living under. Le Pen wants to blow the EU up, especially the bureaucracy lodged in Brussels that has become a self-serving and self perpetuating monster. Blowing up the EU would necessarily, it seems, mean the end of the European Central Bank, and with it the scams and Ponzi schemes that have provided an appearance of normality, despite an official 10.5 percent unemployment rate in France and a constant chain of public massacres by resident Jihadistas of one sort or another, some of them perpetrated by radical refugees allowed in under EU policy.
Macron might serve the interests of the American Deep State, which is determined to drive a wedge between Europe and the Chinese-Russian-Iranian “silk road” economic bloc that would consolidate trade in the Eastern Hemisphere. The US wants “the West” to remain what it had been for seventy years: the dominant posse. Even if the underlying conditions remained the same, this might not be possible.
But those underlying conditions are changing, and in ways that much of the political maneuvering across the West cannot alter, or even comprehend, for instance, the inability of these mature industrial economies to grow anymore. That is largely a function of the end of affordable energy. Unfortunately, the absence of growth portends not stagnation but collapse as society fails to generate enough new wealth to pay its debts.
Now, we’ve seen a pretty impressive demonstration of advanced nations playing financial games to cover up this corrosive condition. But the dishonesty at work is pretty obvious, and the problem with dishonesty in financial affairs is that it represents unreality. The accrued momentum in colossal sums of money flowing this way and that way has allowed unreality to reign in international finance for a while. But that is now flying apart. The ultimate reality, politicians and economists will soon discover, is that you can’t create your own reality.
So whatever you think now about the French election, or the fate of the EU, is liable to change as the great debt crack-up our time finally gets underway and suddenly every nation has to scramble desperately to keep its shit together. That magic moment may be at hand this week as the US congress returns from Easter recess to face its budget and debt ceiling dilemmas. If the credit-worthiness of this country takes a wrong turn, it will upset the global currency system. In fact, it will rip a hole in financial time-and-space into which the presumed value of all sorts of things represented on paper and computer drives will disappear, never to be seen again.
Monday, February 13, 2017
Kunstler: Made For Each Other.
Kunstler's grumbling about trans rights mars an otherwise very good column.--P.Z.
Kunstler: Made For Each Other.
Don’t be fooled by the idiotic exertions of the Red team and the Blue team. They’re just playing a game of “Capture the Flag” on the deck of the Titanic. The ship is the techno-industrial economy. It’s going down because it has taken on too much water (debt), and the bilge pump (the oil industry) is losing its mojo.
Neither faction understands what is happening, though they each have an elaborate delusional narrative to spin in the absence of any credible plan for adapting the life of our nation to the precipitating realities. The Blues and Reds are mirrors of each other’s illusions, and rage follows when illusions die, so watch out. Both factions are ready to blow up the country before they come to terms with what is coming down.
What’s coming down is the fruit of the gross mismanagement of our society since it became clear in the 1970s that we couldn’t keep living the way we do indefinitely — that is, in a 24/7 blue-light-special demolition derby. It’s amazing what you can accomplish with accounting fraud, but in the end it is an affront to reality, and reality has a way of dealing with punks like us. Reality has a magic trick of its own: it can make the mirage of false prosperity evaporate.
That’s exactly what’s going to happen and it will happen because finance is the least grounded, most abstract, of the many systems we depend on. It runs on the sheer faith that parties can trust each other to meet obligations. When that conceit crumbles, and banks can’t trust other banks, credit relations seize up, money vanishes, and stuff stops working. You can’t get any cash out of the ATM. The trucker with a load of avocados won’t make delivery to the supermarket because he knows he won’t be paid. The avocado grower will have to watch the rest of his crop rot. The supermarket shelves empty out. And you won’t have any guacamole.
There are too many fault lines in the mighty edifice of our accounting fraud for the global banking system to keep limping along, to keep pretending it can meet its obligations. These fault lines run through the bond markets, the stock markets, the banks themselves at all levels, the government offices that pretend to regulate spending, the offices that affect to report economic data, the offices that neglect to regulate criminal misconduct, the corporate boards and C-suites, the insurance companies, the pension funds, the guarantors of mortgages, car loans, and college loans, and the ratings agencies. The pervasive accounting fraud bleeds a criminal ethic into formerly legitimate enterprises like medicine and higher education, which become mere rackets, extracting maximum profits while skimping on delivery of the goods.
All this is going to overwhelm Trump soon, and he will flounder trying to deal with a gargantuan mess. It will surely derail his wish to make America great again — a la 1962, with factories humming, and highways yet to build, and adventures in outer space, and a comforting sense of superiority over all the sad old battered empires abroad. I maintain it could get so bad so fast that Trump will be removed by a cadre of generals and intelligence officers who can’t stand to watch someone acting like Captain Queeg in the pilot house.
That itself might be salutary, since only some kind of extreme shock is likely to roust the Blue and Red factions from their trenches of dumb narrative. If the Democratic Party had put one-fiftieth of the effort it squanders on transgender bathroom privileges into policy for mitigating our tragic misinvestments in suburban sprawl, we might have gotten a head-start toward a plausible future. Instead, the Democratic Party has turned into a brats-only nursery school, with the kiddies fighting over who gets to play with the Legos. The Republican Party is Norma Desmond’s house in Sunset Boulevard, starring Donald Trump as Max the Butler, working extra-hard to keep the illusions of yesteryear going.
All of this nonsense is a distraction from the task at hand: figuring out how to live in the post techno-industrial world. That world is not going to operate the ways we’re used to. It will crush our assumptions and expectations. Lying about everything won’t be an option. We won’t have the extra resources to cover up our dishonesty. Our money better be sound or it will be laughed at, and then you’ll starve or freeze to death. You’d better hope the rule of law endures and work on keeping it alive where you live. And nobody will get special brownie points for the glory of sexual confusion. [Both emphases mine.--P.Z.]
I look for the financial fireworks to start around March – April, as the irresolvable debt ceiling debate in congress grinds into a bitter stalemate, and it becomes obvious that there will be no voucher for the great infrastructure spending orgy that Trump’s MAGA is based on. Elections in France and the Netherlands have the potential to shake apart the European Union, and with that the footing of European banks. Pretty soon, everybody in all parties and factions will be asking: “Where did the glittering promises of Modernity go…?” As we slip-side into the first stages of a world made by hand.
Kunstler: Made For Each Other.
Don’t be fooled by the idiotic exertions of the Red team and the Blue team. They’re just playing a game of “Capture the Flag” on the deck of the Titanic. The ship is the techno-industrial economy. It’s going down because it has taken on too much water (debt), and the bilge pump (the oil industry) is losing its mojo.
Neither faction understands what is happening, though they each have an elaborate delusional narrative to spin in the absence of any credible plan for adapting the life of our nation to the precipitating realities. The Blues and Reds are mirrors of each other’s illusions, and rage follows when illusions die, so watch out. Both factions are ready to blow up the country before they come to terms with what is coming down.
What’s coming down is the fruit of the gross mismanagement of our society since it became clear in the 1970s that we couldn’t keep living the way we do indefinitely — that is, in a 24/7 blue-light-special demolition derby. It’s amazing what you can accomplish with accounting fraud, but in the end it is an affront to reality, and reality has a way of dealing with punks like us. Reality has a magic trick of its own: it can make the mirage of false prosperity evaporate.
That’s exactly what’s going to happen and it will happen because finance is the least grounded, most abstract, of the many systems we depend on. It runs on the sheer faith that parties can trust each other to meet obligations. When that conceit crumbles, and banks can’t trust other banks, credit relations seize up, money vanishes, and stuff stops working. You can’t get any cash out of the ATM. The trucker with a load of avocados won’t make delivery to the supermarket because he knows he won’t be paid. The avocado grower will have to watch the rest of his crop rot. The supermarket shelves empty out. And you won’t have any guacamole.
There are too many fault lines in the mighty edifice of our accounting fraud for the global banking system to keep limping along, to keep pretending it can meet its obligations. These fault lines run through the bond markets, the stock markets, the banks themselves at all levels, the government offices that pretend to regulate spending, the offices that affect to report economic data, the offices that neglect to regulate criminal misconduct, the corporate boards and C-suites, the insurance companies, the pension funds, the guarantors of mortgages, car loans, and college loans, and the ratings agencies. The pervasive accounting fraud bleeds a criminal ethic into formerly legitimate enterprises like medicine and higher education, which become mere rackets, extracting maximum profits while skimping on delivery of the goods.
All this is going to overwhelm Trump soon, and he will flounder trying to deal with a gargantuan mess. It will surely derail his wish to make America great again — a la 1962, with factories humming, and highways yet to build, and adventures in outer space, and a comforting sense of superiority over all the sad old battered empires abroad. I maintain it could get so bad so fast that Trump will be removed by a cadre of generals and intelligence officers who can’t stand to watch someone acting like Captain Queeg in the pilot house.
That itself might be salutary, since only some kind of extreme shock is likely to roust the Blue and Red factions from their trenches of dumb narrative. If the Democratic Party had put one-fiftieth of the effort it squanders on transgender bathroom privileges into policy for mitigating our tragic misinvestments in suburban sprawl, we might have gotten a head-start toward a plausible future. Instead, the Democratic Party has turned into a brats-only nursery school, with the kiddies fighting over who gets to play with the Legos. The Republican Party is Norma Desmond’s house in Sunset Boulevard, starring Donald Trump as Max the Butler, working extra-hard to keep the illusions of yesteryear going.
All of this nonsense is a distraction from the task at hand: figuring out how to live in the post techno-industrial world. That world is not going to operate the ways we’re used to. It will crush our assumptions and expectations. Lying about everything won’t be an option. We won’t have the extra resources to cover up our dishonesty. Our money better be sound or it will be laughed at, and then you’ll starve or freeze to death. You’d better hope the rule of law endures and work on keeping it alive where you live. And nobody will get special brownie points for the glory of sexual confusion. [Both emphases mine.--P.Z.]
I look for the financial fireworks to start around March – April, as the irresolvable debt ceiling debate in congress grinds into a bitter stalemate, and it becomes obvious that there will be no voucher for the great infrastructure spending orgy that Trump’s MAGA is based on. Elections in France and the Netherlands have the potential to shake apart the European Union, and with that the footing of European banks. Pretty soon, everybody in all parties and factions will be asking: “Where did the glittering promises of Modernity go…?” As we slip-side into the first stages of a world made by hand.
Monday, January 02, 2017
Kunstler: Forecast 2017: The Wheels Finally Come Off.
Kunstler's prediction column for 2017 is so lengthy I'll post only an excerpt or two here. It might take a few days to unpack this column. All emphases mine.
Kunstler: Forecast 2017: The Wheels Finally Come Off.
American Notes
Apart from all the ill-feeling about the election, one constant ‘out there’ since November 8 is the Ayn Randian rapture that infects the money scene. Wall Street and big business believe that the country has passed through a magic portal into a new age of heroic businessmen-warriors (Trump, Rex T, Mnuchin, Wilbur Ross, et. al.) who will go forth creating untold wealth from super-savvy deal-making that un-does all the self-defeating malarkey of the detested Deep State technocratic regulation regime of recent years. The main signs in the sky, they say, are the virile near-penetration of the Dow Jones 20,000-point maidenhead and the rocket ride of Ole King Dollar to supremacy of the global currency-space.
I hate to pound sleet on this manic parade, but, to put it gently, mob psychology is outrunning both experience and reality. Let’s offer a few hypotheses regarding this supposed coming Trumptopian nirvana.
The current narrative weaves an expectation that manufacturing industry will return to the USA complete with all the 1962-vintage societal benefits of great-paying blue collar jobs, plus an orgy of infrastructure-building. I think both ideas are flawed, even allowing for good intentions. For one thing, most of the factories are either standing in ruin or scraped off the landscape. So, it’s not like we’re going to reactivate some mothballed sleeping giant of productive capacity. New state-of-the-art factories would require an Everest of private capital investment that is simply impossible to manifest in a system that is already leveraged up to its eyeballs. Even if we tried to accomplish it via some kind of main force government central planning and financing — going full-Soviet — there is no conceivable way to raise (borrow) the “money” without altogether destroying the value of our money (inflation), and the banking system with it.
If by some magic any new industrial capacity were built, much of the work in it would be performed by robotics, not brawny men in blue shirts, and certainly not at the equivalent of the old United Auto Workers $35-an-hour assembly line wage. We have not faced the fact that the manufacturing fiesta based on fossil fuels was a one-time thing due to special historical circumstances and will not be repeated. The future of manufacturing in America is frighteningly modest. We’ll actually be lucky if we can make a few vital necessities by means of hydro-electric or direct water power, and that will be about the extent of it. Some of you may recognize this as the World Made By Hand scenario. I’ll stick by that.
Similarly for “infrastructure” spending touted by the forces of Trump as the coming panacea for economic malaise. I suspect most people assume this means a trillion-dollar stimulus spend on highways and their accessories. Well, that also assumes that we expect another fifty years of Happy Motoring and suburban living. Fuggeddabowdit. We’re in the twilight of motoring anyway you cut it, despite all the chatter about electric cars and “driverless” cars. We won’t have the electric capacity to switch over the Happy Motoring fleet from gasoline. The oil industry itself is already headed for collapse on its sinking energy-return-on-investment. And our problems with money and debt are so severe that the motoring paradigm is more prone to fail on the basis of car loan scarcity and unworthy borrowers before the fueling issues even kick in. Every year, fewer Americans can afford to buy any kind of car — the way they’re used to buying them, on installment loans. The industry has gone the limit to help them — seven-year loans for used cars! — but they have no more room to maneuver. The car financing system is broken. Bear in mind the original suburbanization of America back in the 20th century — along with its accessory automobiles — must be regarded as the greatest misallocation of resources in the history of the world. So, a rebuild of all this stuff would represent more and possibly even greater malinvestment. We could have applied our post-WW2 treasure to building beautiful walkable towns and cities with some capacity for adaptive re-use, but we blew it in order to enjoy life in a one-time demolition derby. Life is tragic. Societies make poor choices sometimes, and then there are consequences.
We also might have been in better shape now if, beginning twenty years ago, we began a major rebuild of our railway infrastructure. But we blew that off, too, and shortly it will be very difficult to get around this geographically large country by any mechanical means. It may be too late now to do anything about that for the financing reasons already touched on — and which I will elaborate on next. The bottom line is that President Donald Trump will be overwhelmed by a sea of financial troubles from the very get-go, and here’s why.
Designated Bag-Holder
The American people have been punked by their own government and their central bank, the Federal Reserve, for years and the jig is now up. In 2017 both will lose their authority and legitimacy, a very grave matter for the survival of this republic.
Insiders surely have seen this coming for a long time. The people running this so-called Deep State of overblown and overgrown institutions probably acted at first with the good intentions of keeping the national lifestyle afloat. But in the end (now approaching) they stooped to too much duplicity and deceit in the desperate attempt to not just preserve the system, but to protect their own reputations and personal perquisites. And now there ought to be some question with the election of 2016 that they have engineered all of this system fragility to blow up on Mr. Trump’s watch, so they can blame him for it. It was going to blow up anyway. But had Hillary Clinton won the election, at least the right gang would have had to take the blame — the people in charge for the past twenty years. Instead, Donald Trump has been elected Designated Bag-Holder.
...
The Oil Quandary
The reports of Peak Oil’s death are exaggerated, to borrow a gag from Mr. Twain. It’s just been playing out in ways that many of us didn’t quite anticipate and it is still at the heart of our economic predicament — which is that you can’t rationalize an annual debt growth rate of 8 percent if your actual economic growth rate is under 4 percent (paraphrasing Chris Martenson at Peak Prosperity.com).
We haven’t run out of oil, but we have run out of oil that is rationally economical to pull out of the ground. The so-called “shale oil miracle” extended the oil age a few years by debt-financed legerdemain. Yes, we drove US oil production way up, almost back up to the 1970 peak production level around 10 million barrels-a-day (b/d). The trouble was that the companies producing it didn’t make a red cent in the process. They just ran up a huge amount of debt to pursue the shale project. The pursuit was on wholeheartedly beginning around 2006, because 1) the Peak Oil story was scaring folks, including folks in the oil industry, and 2) the market price of crude oil soared after 2004 and shale looked like a possibly winning venture — especially since conventional exploration in recent years was turning up almost nothing of significance.
Kunstler: Forecast 2017: The Wheels Finally Come Off.
American Notes
Apart from all the ill-feeling about the election, one constant ‘out there’ since November 8 is the Ayn Randian rapture that infects the money scene. Wall Street and big business believe that the country has passed through a magic portal into a new age of heroic businessmen-warriors (Trump, Rex T, Mnuchin, Wilbur Ross, et. al.) who will go forth creating untold wealth from super-savvy deal-making that un-does all the self-defeating malarkey of the detested Deep State technocratic regulation regime of recent years. The main signs in the sky, they say, are the virile near-penetration of the Dow Jones 20,000-point maidenhead and the rocket ride of Ole King Dollar to supremacy of the global currency-space.
I hate to pound sleet on this manic parade, but, to put it gently, mob psychology is outrunning both experience and reality. Let’s offer a few hypotheses regarding this supposed coming Trumptopian nirvana.
The current narrative weaves an expectation that manufacturing industry will return to the USA complete with all the 1962-vintage societal benefits of great-paying blue collar jobs, plus an orgy of infrastructure-building. I think both ideas are flawed, even allowing for good intentions. For one thing, most of the factories are either standing in ruin or scraped off the landscape. So, it’s not like we’re going to reactivate some mothballed sleeping giant of productive capacity. New state-of-the-art factories would require an Everest of private capital investment that is simply impossible to manifest in a system that is already leveraged up to its eyeballs. Even if we tried to accomplish it via some kind of main force government central planning and financing — going full-Soviet — there is no conceivable way to raise (borrow) the “money” without altogether destroying the value of our money (inflation), and the banking system with it.
If by some magic any new industrial capacity were built, much of the work in it would be performed by robotics, not brawny men in blue shirts, and certainly not at the equivalent of the old United Auto Workers $35-an-hour assembly line wage. We have not faced the fact that the manufacturing fiesta based on fossil fuels was a one-time thing due to special historical circumstances and will not be repeated. The future of manufacturing in America is frighteningly modest. We’ll actually be lucky if we can make a few vital necessities by means of hydro-electric or direct water power, and that will be about the extent of it. Some of you may recognize this as the World Made By Hand scenario. I’ll stick by that.
Similarly for “infrastructure” spending touted by the forces of Trump as the coming panacea for economic malaise. I suspect most people assume this means a trillion-dollar stimulus spend on highways and their accessories. Well, that also assumes that we expect another fifty years of Happy Motoring and suburban living. Fuggeddabowdit. We’re in the twilight of motoring anyway you cut it, despite all the chatter about electric cars and “driverless” cars. We won’t have the electric capacity to switch over the Happy Motoring fleet from gasoline. The oil industry itself is already headed for collapse on its sinking energy-return-on-investment. And our problems with money and debt are so severe that the motoring paradigm is more prone to fail on the basis of car loan scarcity and unworthy borrowers before the fueling issues even kick in. Every year, fewer Americans can afford to buy any kind of car — the way they’re used to buying them, on installment loans. The industry has gone the limit to help them — seven-year loans for used cars! — but they have no more room to maneuver. The car financing system is broken. Bear in mind the original suburbanization of America back in the 20th century — along with its accessory automobiles — must be regarded as the greatest misallocation of resources in the history of the world. So, a rebuild of all this stuff would represent more and possibly even greater malinvestment. We could have applied our post-WW2 treasure to building beautiful walkable towns and cities with some capacity for adaptive re-use, but we blew it in order to enjoy life in a one-time demolition derby. Life is tragic. Societies make poor choices sometimes, and then there are consequences.
We also might have been in better shape now if, beginning twenty years ago, we began a major rebuild of our railway infrastructure. But we blew that off, too, and shortly it will be very difficult to get around this geographically large country by any mechanical means. It may be too late now to do anything about that for the financing reasons already touched on — and which I will elaborate on next. The bottom line is that President Donald Trump will be overwhelmed by a sea of financial troubles from the very get-go, and here’s why.
Designated Bag-Holder
The American people have been punked by their own government and their central bank, the Federal Reserve, for years and the jig is now up. In 2017 both will lose their authority and legitimacy, a very grave matter for the survival of this republic.
Insiders surely have seen this coming for a long time. The people running this so-called Deep State of overblown and overgrown institutions probably acted at first with the good intentions of keeping the national lifestyle afloat. But in the end (now approaching) they stooped to too much duplicity and deceit in the desperate attempt to not just preserve the system, but to protect their own reputations and personal perquisites. And now there ought to be some question with the election of 2016 that they have engineered all of this system fragility to blow up on Mr. Trump’s watch, so they can blame him for it. It was going to blow up anyway. But had Hillary Clinton won the election, at least the right gang would have had to take the blame — the people in charge for the past twenty years. Instead, Donald Trump has been elected Designated Bag-Holder.
...
The Oil Quandary
The reports of Peak Oil’s death are exaggerated, to borrow a gag from Mr. Twain. It’s just been playing out in ways that many of us didn’t quite anticipate and it is still at the heart of our economic predicament — which is that you can’t rationalize an annual debt growth rate of 8 percent if your actual economic growth rate is under 4 percent (paraphrasing Chris Martenson at Peak Prosperity.com).
We haven’t run out of oil, but we have run out of oil that is rationally economical to pull out of the ground. The so-called “shale oil miracle” extended the oil age a few years by debt-financed legerdemain. Yes, we drove US oil production way up, almost back up to the 1970 peak production level around 10 million barrels-a-day (b/d). The trouble was that the companies producing it didn’t make a red cent in the process. They just ran up a huge amount of debt to pursue the shale project. The pursuit was on wholeheartedly beginning around 2006, because 1) the Peak Oil story was scaring folks, including folks in the oil industry, and 2) the market price of crude oil soared after 2004 and shale looked like a possibly winning venture — especially since conventional exploration in recent years was turning up almost nothing of significance.
Monday, December 12, 2016
Kunstler: Trumpxuberance… Until It’s Not
Note: Kunstler's main site is under a distributed-denial-of-service attack. Today's column is posted at his Patreon page.
At this time of year, only the hardest, coldest heart can fail to show good will to fellow man. That said, the silvery orb of Donald Trump’s post-election honeymoon may set sooner than expected as Ms. Yellin prepares to hoist her interest rate petard this week. Even a modest up-bump in the Fed Funds Rate is liable to prang the orgy of corporate share buybacks fueling the eight-year bull market that many formerly sane observers think is a permanent feature of the human condition. The bond market bull also seemed to last a lifetime and that’s gone south now, too.
Poor Trump’s mammoth ego has led him by the snout into a deadfall trap. The Trumpublican voters and cheerleaders expect another Morning in America miracle. Sorry, been there, done that, that was then, this is now. Conditions were quite different in 1981. For one thing, a brutal decade after the 1970 all-time US oil production peak, the Alaska North Slope fields came into full flow, along with the North Sea and Siberian fields.
The Alaska bonanza did not boost US production back to 1970 levels, but it did take the leverage away from OPEC, and it stuffed the elevated price-per-barrel back down to levels that an industrial economy could tolerate. The rest of the Reagan miracle was accomplished with debt. The case was similar for Mrs. Thatcher over in the UK. She was not an economic magician, just the beneficiary of a brief oil boom that made Britain a net energy exporter for two decades, providing an illusion of permanent prosperity and cover for the financialization of the economy. Now, with the North Sea oil playing out, all that’s left is the banking necromancy in Threadneedle Street.
Reagan also came in at the height of Fed Chair Paul Volker’s war on inflation, when the interest rate on the ten-year US treasury bond topped at 15 percent in September of 1981. Imagine paying 18 percent interest rates on your mortgage! How was that a good thing? Well, it wasn’t, not at all, it was a very bad thing for a while — but for Lucky Ronnie Reagan it meant interest rates had nowhere to go but down. And because bond prices correlate opposite to rates, the value of bonds had nowhere to go but up, which they did for 30-odd years until right now. And all that time, the world bond market couldn’t get enough of them — also till now, when big holders like China and Saudi Arabia are puking them back out.
When Reagan stepped in the national debt was only (only!) about half a trillion dollars. It will be over $20 trillion when Trump hangs his golden logo on the White House portico. Oh, by the way, consider that a trillion dollars is a thousand billion dollars and a billion dollars is a thousand million dollars. Just so you know. Reagan had room for plenty of government finance monkey business. Trump has no room. Bush One, Clinton, Bush Two and Obama dug the deadfall debt trap for poor Donald and the election shoved him right into it. He thinks he’s on an upper floor of his enchanted tower; he’s actually down in a pit.
Trump thinks he’s going to rebuild highways and bridges for another century of Happy Motoring — to make America like it was in 1962 forever. Fuggeddabowdit. The bond market is poised for collapse as I write, and Trump’s money people (that is, the Goldman Sachs gang he has assembled) are talking about issuing fifty and 100 year “Build America” bonds. Their nostrils must be rimed with the frost of Medellin.
They're certainly not going to accomplish this trick by raising taxes. On who? Corporations? Ha! The One Percent? Double-Ha! Everyone else? Pitchforks and torches!
American oil companies can no longer make a buck doing their thing. Exxon-Mobil's U.S. production business lost $477 million in the third quarter, the seventh straight quarter in the red. Why? Because it costs a lot more to get the stuff out of the ground than it did ten years ago, and that high cost is bankrupting oil companies and industrial economies. That is the stealth action of Peak Oil that so many people pretend is not happening. It will ultimately destroy the banking system.
The disappointment issuing from this dire set of circumstances is apt to be epic as Trump flounders and the furious tweets of futility waft out of the hole he’s trapped in. Christmas will be over, and with it the hopes of a retail reprieve. Gasoline may remain cheap, but the little people won’t be able to buy the cars to run it in. Or buy much of anything else. Not even tattoos. We’ll soon discover the temperamental difference between Donald J. Trump and Franklin Delano Roosevelt.
“Markets shrugged off the Brexit vote in a couple of days. They shrugged off Donald Trump’s election in a single day. They shrugged off the Italian referendum result in a couple of hours. Heck, in this mood they would shrug off an alien invasion of planet Earth.”
— Albert Edwards, Société Générale
At this time of year, only the hardest, coldest heart can fail to show good will to fellow man. That said, the silvery orb of Donald Trump’s post-election honeymoon may set sooner than expected as Ms. Yellin prepares to hoist her interest rate petard this week. Even a modest up-bump in the Fed Funds Rate is liable to prang the orgy of corporate share buybacks fueling the eight-year bull market that many formerly sane observers think is a permanent feature of the human condition. The bond market bull also seemed to last a lifetime and that’s gone south now, too.
Poor Trump’s mammoth ego has led him by the snout into a deadfall trap. The Trumpublican voters and cheerleaders expect another Morning in America miracle. Sorry, been there, done that, that was then, this is now. Conditions were quite different in 1981. For one thing, a brutal decade after the 1970 all-time US oil production peak, the Alaska North Slope fields came into full flow, along with the North Sea and Siberian fields.
The Alaska bonanza did not boost US production back to 1970 levels, but it did take the leverage away from OPEC, and it stuffed the elevated price-per-barrel back down to levels that an industrial economy could tolerate. The rest of the Reagan miracle was accomplished with debt. The case was similar for Mrs. Thatcher over in the UK. She was not an economic magician, just the beneficiary of a brief oil boom that made Britain a net energy exporter for two decades, providing an illusion of permanent prosperity and cover for the financialization of the economy. Now, with the North Sea oil playing out, all that’s left is the banking necromancy in Threadneedle Street.
Reagan also came in at the height of Fed Chair Paul Volker’s war on inflation, when the interest rate on the ten-year US treasury bond topped at 15 percent in September of 1981. Imagine paying 18 percent interest rates on your mortgage! How was that a good thing? Well, it wasn’t, not at all, it was a very bad thing for a while — but for Lucky Ronnie Reagan it meant interest rates had nowhere to go but down. And because bond prices correlate opposite to rates, the value of bonds had nowhere to go but up, which they did for 30-odd years until right now. And all that time, the world bond market couldn’t get enough of them — also till now, when big holders like China and Saudi Arabia are puking them back out.
When Reagan stepped in the national debt was only (only!) about half a trillion dollars. It will be over $20 trillion when Trump hangs his golden logo on the White House portico. Oh, by the way, consider that a trillion dollars is a thousand billion dollars and a billion dollars is a thousand million dollars. Just so you know. Reagan had room for plenty of government finance monkey business. Trump has no room. Bush One, Clinton, Bush Two and Obama dug the deadfall debt trap for poor Donald and the election shoved him right into it. He thinks he’s on an upper floor of his enchanted tower; he’s actually down in a pit.
Trump thinks he’s going to rebuild highways and bridges for another century of Happy Motoring — to make America like it was in 1962 forever. Fuggeddabowdit. The bond market is poised for collapse as I write, and Trump’s money people (that is, the Goldman Sachs gang he has assembled) are talking about issuing fifty and 100 year “Build America” bonds. Their nostrils must be rimed with the frost of Medellin.
They're certainly not going to accomplish this trick by raising taxes. On who? Corporations? Ha! The One Percent? Double-Ha! Everyone else? Pitchforks and torches!
American oil companies can no longer make a buck doing their thing. Exxon-Mobil's U.S. production business lost $477 million in the third quarter, the seventh straight quarter in the red. Why? Because it costs a lot more to get the stuff out of the ground than it did ten years ago, and that high cost is bankrupting oil companies and industrial economies. That is the stealth action of Peak Oil that so many people pretend is not happening. It will ultimately destroy the banking system.
The disappointment issuing from this dire set of circumstances is apt to be epic as Trump flounders and the furious tweets of futility waft out of the hole he’s trapped in. Christmas will be over, and with it the hopes of a retail reprieve. Gasoline may remain cheap, but the little people won’t be able to buy the cars to run it in. Or buy much of anything else. Not even tattoos. We’ll soon discover the temperamental difference between Donald J. Trump and Franklin Delano Roosevelt.
Monday, October 03, 2016
Kunstler: Sizing Up the Endgame.
Kunstler announces he'll vote for Hillary, but he's not with her, and never will be with her.
Kunstler: Sizing Up the Endgame.
All Hillary had to do last week was show up and stand at a podium for ninety minutes without swooning while Donald Trump barked and grunted his way through the half-assed press conference we like to call a “debate.” It was all I could do to keep watching the nauseating spectacle. It made you want to reach out and whap your TV upside its head, or maybe just shoot the fucker, like Elvis used to do.
The torment of who or what to vote for has become unbearable. I’d considered casting mine for Johnson / Weld, until Gary Johnson demonstrated that the front end of his brain is missing. Aleppo? Wasn’t he one of the Marx Brothers? I sense that Jill Stein of the Green Party is more Social Justice Warrior than EcoWarrior, and the last thing I want is for the rest of America to become one big college campus rife with trigger warnings and micro-aggression persecutions. Vote for Trump? Not if you chained me to the back bumper of a Toyota Landcruiser and dragged me over six miles of broken light bulbs. Hillary? Make that nine miles, and throw down some carpet tacks.
But wait a minute…! Here’s something to consider: a proposition put out by David McAlvany on his podcast last week: To Understand Election 2016 You Have to See 2020. (The new podcast is posted on Wednesdays, so to listen after Oct 5 you’ll have to click back a week.) The idea is that the winner of the presidential election is sure to be the biggest loser because the global economy is in the process of tanking, Long Emergency style, and the global finance system is going down with it. Whoever presides over this fiasco from the White House is going to be a bigger bag-holder than old Herbert Hoover in 1929.
The salutary part of the story is that such an epochal crack-up will sweep the establishment out of power. In the present case, this means discrediting the crony-capitalist, revolving-door grifters of the Wall Street / Washington axis, plus the neo-con military empire-builders bent on starting World War Three for profit, plus the economic central planners of the Federal Reserve whose desperate meddlings have nearly destroyed the necessary operations and meaning of money. And the cherries on top to get thrown out with the rest of this giant shit sundae would be the campus cultural Maoists. In short, vote for Hillary and let history flush them all out of the system.
A vote for Trump would let the aforesaid villains and bunglers off the hook because supposedly Trump represents free market business interests, and if he got elected they would be blamed for the economic and financial cataclysm which has been in motion for going on for two decades — and has accelerated mightily under the genial Obama. Whatever else you might say about free markets, had they been allowed to operate naturally, a lot of dead wood might have been cleared out of the financial forest by allowing failing institutions and companies to crash and burn. Instead, they were artificially propped up and hosed down with bailouts and other accounting frauds at all costs. The cost turns out to be the coherent workings of markets.
There can be little question that Hillary represents so much that has gone wrong in American public life under the Baby Boomer regime. The fact that she will be the oldest president ever at inauguration itself says a lot about the limitless cupidity of the Boomer political gen. They just don’t know when to stop. It’s history’s job to stop them now, nature’s way, by seating them at the banquet of consequences for all their poisonous cookery and quackery.
Watching these lamebrain debates, you get the impression that the folks running things, including media stars like the debate moderators, lack the slightest clue about the gathering economic storm. They are too busy reading the false weather reports posted by the Fed and the US Bureau of Labor Statistics. Both Hillary and Trump seem to believe that we can winkle our way back to a 1962-style economy if we click our ruby slippers three times. That is not going to happen.
There are too many people on-board the planet and too few resources to keep them all going. It’s hard to say whether we might have managed the necessary contraction, say, starting back in the 1970s when the writing was on the wall and a truly honest president (one Jimmy Carter) spelled it out in plain English. We blew it, electing Ronald Reagan to enable the final feeding frenzy of the techno-industrial age.
Now it’s up to natural forces — and their galloping horsemen — to get the job done. So let us by all means throw out votes behind Hillary and let her rip so we can move on from there sooner rather than later and find new ways to remain civilized in the coming disposition of things.
Kunstler: Sizing Up the Endgame.
All Hillary had to do last week was show up and stand at a podium for ninety minutes without swooning while Donald Trump barked and grunted his way through the half-assed press conference we like to call a “debate.” It was all I could do to keep watching the nauseating spectacle. It made you want to reach out and whap your TV upside its head, or maybe just shoot the fucker, like Elvis used to do.
The torment of who or what to vote for has become unbearable. I’d considered casting mine for Johnson / Weld, until Gary Johnson demonstrated that the front end of his brain is missing. Aleppo? Wasn’t he one of the Marx Brothers? I sense that Jill Stein of the Green Party is more Social Justice Warrior than EcoWarrior, and the last thing I want is for the rest of America to become one big college campus rife with trigger warnings and micro-aggression persecutions. Vote for Trump? Not if you chained me to the back bumper of a Toyota Landcruiser and dragged me over six miles of broken light bulbs. Hillary? Make that nine miles, and throw down some carpet tacks.
But wait a minute…! Here’s something to consider: a proposition put out by David McAlvany on his podcast last week: To Understand Election 2016 You Have to See 2020. (The new podcast is posted on Wednesdays, so to listen after Oct 5 you’ll have to click back a week.) The idea is that the winner of the presidential election is sure to be the biggest loser because the global economy is in the process of tanking, Long Emergency style, and the global finance system is going down with it. Whoever presides over this fiasco from the White House is going to be a bigger bag-holder than old Herbert Hoover in 1929.
The salutary part of the story is that such an epochal crack-up will sweep the establishment out of power. In the present case, this means discrediting the crony-capitalist, revolving-door grifters of the Wall Street / Washington axis, plus the neo-con military empire-builders bent on starting World War Three for profit, plus the economic central planners of the Federal Reserve whose desperate meddlings have nearly destroyed the necessary operations and meaning of money. And the cherries on top to get thrown out with the rest of this giant shit sundae would be the campus cultural Maoists. In short, vote for Hillary and let history flush them all out of the system.
A vote for Trump would let the aforesaid villains and bunglers off the hook because supposedly Trump represents free market business interests, and if he got elected they would be blamed for the economic and financial cataclysm which has been in motion for going on for two decades — and has accelerated mightily under the genial Obama. Whatever else you might say about free markets, had they been allowed to operate naturally, a lot of dead wood might have been cleared out of the financial forest by allowing failing institutions and companies to crash and burn. Instead, they were artificially propped up and hosed down with bailouts and other accounting frauds at all costs. The cost turns out to be the coherent workings of markets.
There can be little question that Hillary represents so much that has gone wrong in American public life under the Baby Boomer regime. The fact that she will be the oldest president ever at inauguration itself says a lot about the limitless cupidity of the Boomer political gen. They just don’t know when to stop. It’s history’s job to stop them now, nature’s way, by seating them at the banquet of consequences for all their poisonous cookery and quackery.
Watching these lamebrain debates, you get the impression that the folks running things, including media stars like the debate moderators, lack the slightest clue about the gathering economic storm. They are too busy reading the false weather reports posted by the Fed and the US Bureau of Labor Statistics. Both Hillary and Trump seem to believe that we can winkle our way back to a 1962-style economy if we click our ruby slippers three times. That is not going to happen.
There are too many people on-board the planet and too few resources to keep them all going. It’s hard to say whether we might have managed the necessary contraction, say, starting back in the 1970s when the writing was on the wall and a truly honest president (one Jimmy Carter) spelled it out in plain English. We blew it, electing Ronald Reagan to enable the final feeding frenzy of the techno-industrial age.
Now it’s up to natural forces — and their galloping horsemen — to get the job done. So let us by all means throw out votes behind Hillary and let her rip so we can move on from there sooner rather than later and find new ways to remain civilized in the coming disposition of things.
Monday, August 15, 2016
Kunstler: Burning Down the House
Kunstler: Burning Down the House.
There’s a new feature to the Anything-Goes-and-Nothing-Matters economy: Nothing-Adds-Up. The magicians who pretend to measure the growth of GDP (Gross Domestic Product — the monetary value of all the finished goods and services) came up with a second quarter “adjusted” figure of 1.2 percent. That would have to be construed by anyone acquainted with basic econ stats as perfectly dismal. And yet the Bureau of Labor Statistics put out a sparkly Nonfarm Payroll Report of 255,000 for July, way above the forecast 180,000.
There were so many ways to game the jobs number — between people forced to work more than one shit job and the notorious “birth/death model” used to just make up any old number for political purposes — that no one can take this information seriously. Anyway, the GDP number was instantly forgotten and the jobs number launched the stock markets to previously uncharted record altitude.
It’s that time of the year for the hedge fund boys, with their testosterone flowing, to start burning down their house rentals in the Hamptons. And it’s also the time of year for an ever more stressed financial system to go down in flames. And, of course, it’s a presidential election season. Even for one allergic to conspiracy theories, it’s not farfetched to imagine a coordinated effort by central banks — under government direction — to generate Money-Out-Of-Thin-Air (QE) for the purpose of allowing “liquidity” flows to end up in US equity and bond markets in order to paint a false picture of “recovery” so as to insure the election of Hillary Clinton. I think that is exactly behind the recent money-printing activities by the Japanese and European Central Banks, and the Bank of England.
Why would it end up in US markets? For bonds, because the Euro and Japanese bond sovereign yields are in sub-zero territory and the BOE just cut its prime rate lower than the US Federal Reserve’s prime rate; and for stocks, because the value of the other three currencies is sliding down and the dollar has been rising — so, dump your falling currency for the rising dollar and jam it into rising US stocks. It’ll work until it doesn’t.
Why do this for Hillary? Because she represents the continuity of all the current rackets being used to prop up belief in the foundering business model of western civilization. If she doesn’t get into the White House there may be no backstopping of the insolvent banks and bankrupt governments and a TILT message will appear in the sky. That TILT message is likely to appear anyway because, remember, the authorities are only pretending that they can manage events. In fact, all of their “management” strategies and shenanigans only insure the further distortion of the basic operating system, which is already so far out of whack from twenty years of previous management efforts that nothing in banking and markets really works anymore.
Companies don’t make money, despite rising share prices. No one in his right mind buys bonds with negative yields — that promise to pay back less over time — so governments have to pretend to buy them. (In fact, they don’t so much “buy” them as simply extinguish them by playing three-card-monte with national treasuries.) And, of course, the masses of people in all these nations — including the patsy USA — sink ever deeper into penury every month.
The release of tension is being felt in the ground game of politics where outsider candidates here and abroad are rising on a tide of rage and resentment. The fecklessness and stupidity of the elites has been epic, sacrificing everything to maintain the illusion of normality. Nothing is normal and “the people” are finally onto it. Sadly, it looks as if both politics and finance are veering toward crack-up simultaneously. The daisy-chained Too-Big-To-Fail banks are already choking on the suicide bolus of derivatives. The equity markets are one algo accident away from cratering. The bond markets are a sick joke. And Hillary may win the booby prize of presiding over the smoldering wreckage of it all. When it happens, she will have no idea what to do.
Monday, June 27, 2016
Kunstler: "Death to All Zombies!"
Kunstler: Death to All Zombies!
Wait a minute. They’re already dead. Brexit just reveals that not everybody’s brains have been eaten. A viral contagion now threatens the zombified institutions of daily life, especially the workings of politics and finance. Just as zombies exist only in the collective imagination, so do these two principal activities of society operate mainly on trust, an ephemeral product of the hive-mind.
When things fall apart in stressed complex systems, they tend to fall apart fast. It’s called phase change. Too many things in 21st century life have depended on sheer trust that the people-in-charge know what they are doing. That trust has subsisted on the doling out of money-from-nothing: debt, reckless bond issuance. TARP, QEs, bailouts, bail-ins, Operation Twists, Ponzi schemes… the whole sad-ass armamentarium of banking necromancy. The politicians let it get out of hand. Things that can’t go on don’t, and now they won’t.
The politics of Great Britain are now falling apart landslide-style. Since just about everybody in or near power can be blamed for the national predicament, there’s nobody to turn to, at least not yet. The Labour party just acted out The Caine Mutiny, starring Jeremy Corbyn as Captain Queeg. The Tory Cameron gave three months notice without any plausible replacement in view. Now Cameron’s people are hinting in the media that they can just drag their feet on Brexit, that is, not do anything to enable it from actually happening for a while. Of course, that’s what the monkeyshines of banking and finance have done: postponed the inevitable reckoning with the realities of our time: growing resource scarcity, population overshoot, climate change, ecological holocaust, and the diminishing returns of technology.
Britain illustrates the problem nicely: how to produce “wealth” without producing wealth. It’s called “the City,” their name for the little district of London that is their Wall Street. In the absence of producing real things, the City became the driver of the UK’s economy, a ghastly parasitical organism that functioned as the central transfer station for the world’s swindles and frauds, churning the West’s dwindling residual capital into a slurry of fees, commissions, arbitrages, rigged casino bets, and rip-offs. In the process, it enabled the European Central Bank (ECB) to run the con-job that the European Union (EU) became, with the fatal distortions of credit that have put its members into a ditch and sent the private European banks off a cliff, Thelma and Louise style.
The next stage of this protean global melodrama is what happens when currencies and interest rates become completely unglued from their assigned roles as patsies in financial racketeering. Sooner or later we’ll know what’s going on in the vast shadowy gloaming of “derivatives,” especially the “innovative” arrangements that affect to be “insurance” against losses in currency and interest rate “positions” — bets made on the movements of these things. When currencies rise or fall quickly, these so-called “swaps” are “triggered,” and then some hapless institution is left holding a big bag of dog-shit. A zombie is a terrible thing to behold, but a zombie holding a bag of dog-shit is like unto the end of the world.
Once this contagion starts burning, the people-in-charge won’t be able to quell it the way they did last time: by drowning it in torrents of money-from-nowhere. At least not without inducing real-deal inflation, the kind that leads to epochal ruin and more intense political upheaval: the nation-changing kind. We’re about five minutes away from that in the USA already, with the loathsome duo of Hillary and Trump putting on a Punch and Judy show for a disgusted public. If nothing else, Hillary and Trump represent the withering of political trust in America. The parties that spawned them are also whirling around the drain of credibility. They won’t survive in the form we knew them.
Who knows what comes out of this vacuum, what rough beast slouches towards Washington.
Wait a minute. They’re already dead. Brexit just reveals that not everybody’s brains have been eaten. A viral contagion now threatens the zombified institutions of daily life, especially the workings of politics and finance. Just as zombies exist only in the collective imagination, so do these two principal activities of society operate mainly on trust, an ephemeral product of the hive-mind.
When things fall apart in stressed complex systems, they tend to fall apart fast. It’s called phase change. Too many things in 21st century life have depended on sheer trust that the people-in-charge know what they are doing. That trust has subsisted on the doling out of money-from-nothing: debt, reckless bond issuance. TARP, QEs, bailouts, bail-ins, Operation Twists, Ponzi schemes… the whole sad-ass armamentarium of banking necromancy. The politicians let it get out of hand. Things that can’t go on don’t, and now they won’t.
The politics of Great Britain are now falling apart landslide-style. Since just about everybody in or near power can be blamed for the national predicament, there’s nobody to turn to, at least not yet. The Labour party just acted out The Caine Mutiny, starring Jeremy Corbyn as Captain Queeg. The Tory Cameron gave three months notice without any plausible replacement in view. Now Cameron’s people are hinting in the media that they can just drag their feet on Brexit, that is, not do anything to enable it from actually happening for a while. Of course, that’s what the monkeyshines of banking and finance have done: postponed the inevitable reckoning with the realities of our time: growing resource scarcity, population overshoot, climate change, ecological holocaust, and the diminishing returns of technology.
Britain illustrates the problem nicely: how to produce “wealth” without producing wealth. It’s called “the City,” their name for the little district of London that is their Wall Street. In the absence of producing real things, the City became the driver of the UK’s economy, a ghastly parasitical organism that functioned as the central transfer station for the world’s swindles and frauds, churning the West’s dwindling residual capital into a slurry of fees, commissions, arbitrages, rigged casino bets, and rip-offs. In the process, it enabled the European Central Bank (ECB) to run the con-job that the European Union (EU) became, with the fatal distortions of credit that have put its members into a ditch and sent the private European banks off a cliff, Thelma and Louise style.
The next stage of this protean global melodrama is what happens when currencies and interest rates become completely unglued from their assigned roles as patsies in financial racketeering. Sooner or later we’ll know what’s going on in the vast shadowy gloaming of “derivatives,” especially the “innovative” arrangements that affect to be “insurance” against losses in currency and interest rate “positions” — bets made on the movements of these things. When currencies rise or fall quickly, these so-called “swaps” are “triggered,” and then some hapless institution is left holding a big bag of dog-shit. A zombie is a terrible thing to behold, but a zombie holding a bag of dog-shit is like unto the end of the world.
Once this contagion starts burning, the people-in-charge won’t be able to quell it the way they did last time: by drowning it in torrents of money-from-nowhere. At least not without inducing real-deal inflation, the kind that leads to epochal ruin and more intense political upheaval: the nation-changing kind. We’re about five minutes away from that in the USA already, with the loathsome duo of Hillary and Trump putting on a Punch and Judy show for a disgusted public. If nothing else, Hillary and Trump represent the withering of political trust in America. The parties that spawned them are also whirling around the drain of credibility. They won’t survive in the form we knew them.
Who knows what comes out of this vacuum, what rough beast slouches towards Washington.
Monday, February 01, 2016
Kunstler: "Ground Control to Captain Zhou Xiaochuan."
Kunstler: "Ground Control to Captain Zhou Xiaochuan."
Why would anybody suppose that the Peoples Bank of China might want to tell the truth about anything that was within their power to lie about? Especially the soundness of any loan portfolio vested unto the grasp of its tentacles? Of course, most of what China has done in speeding toward the wall of financial crack-up, it learned from watching US bankers slime their way into Too Big To Fail nirvana — most particularly the array of swindles, dodges, and frauds constructed in the half-light of shadow banking to hedge the sudden, catastrophic appearance of reality-based price discovery.
When so many loans end up networked as collateral in some kind of bet against previous bets against other previous bets, you can be sure that cascading contagion will follow. And so that is exactly what’s happening as China’s rocket ride into Modernity falls back to earth. Like most historical fiascos, it seemed like a good idea at the time: take a nation of about a billion people living in the equivalent of the Twelfth Century, introduce the magic of money printing, spend a gazillion of it on CAT and Kubota earth-moving machines, build the biggest cement industry the world has ever seen, purchase whole factory set-ups, and flood the rest of the world with stuff. Then the trouble starts when you try to defeat the business cycles associated with over-production and saturated markets.
Poor China and poor us. Escape velocity has failed. Which raises the question: escape from what, exactly? Answer: the implacable limits of life on earth. The metaphor for all this, of course, is the old journey-into-space idea, which still persists in the salesmanship of Elon Musk, the ragged remnants of NASA, and even the nightmares of Stephen Hawking. Get off this messed-up home planet and light out of the territories, say Mars. Of course, this is a vain and stupid idea, since we already have a planet engineered to perfection for all the life systems associated with the human project. We just can’t respect its limits.
So now, that dynamic duo, Nature and Reality, the actual owners of the planet, have showed up to read the riot act to the renters throwing a wild party. The fourth and perhaps ultimate financial crisis of the last twenty years begins to express itself in terms that only the raptors and vultures can see from on high. George Soros, Kyle Bass, and the other flocking shadow banking scavengers prepare to short the living shit out of the old Middle Kingdom. The immortal words of G.W. Bush ring in their ears: “This sucker is going down,” and they are sure to win big by betting on the obvious. Trouble is, this sucker could go down so much further than they imagined, that whatever fortunes they gain from its descent will be foiled by the destruction of the very economic system needed for them to enjoy their gains.
For instance, when banking systems go down, governments usually follow, and when governments go down, societies often unravel. It doesn’t take a great effort of imagination to see China’s one party politburo leadership machine lose the respect of its governed masses, and then its control of events, followed by a Great Struggle among the regions and factions to restore some kind of order. And when the smoke clears there will a whole lot of nearly worthless concrete and steel, and a vast loss of notional wealth, and China will be lucky to land back in some approximation of the Twelfth Century.
It must be interesting for China to watch the horrifying disintegration of America’s political party structure currently on view, with the mad bull called Trump rampaging across the land and the designated inevitable Mz It’s-My-Turn hijacking her collective for the greater glory of Goldman Sachs. The last time China got the vapors politically — the so-called Cultural Revolution of the 1960s — the country went batshit crazy. Surely some of the ruling party remembers that with requisite terror.
Or maybe this is China and the USA’s Thelma and Louise moment. Pedal to the metal, they drive into the abyss of history holding hands. Remember, audiences loved that!
Why would anybody suppose that the Peoples Bank of China might want to tell the truth about anything that was within their power to lie about? Especially the soundness of any loan portfolio vested unto the grasp of its tentacles? Of course, most of what China has done in speeding toward the wall of financial crack-up, it learned from watching US bankers slime their way into Too Big To Fail nirvana — most particularly the array of swindles, dodges, and frauds constructed in the half-light of shadow banking to hedge the sudden, catastrophic appearance of reality-based price discovery.
When so many loans end up networked as collateral in some kind of bet against previous bets against other previous bets, you can be sure that cascading contagion will follow. And so that is exactly what’s happening as China’s rocket ride into Modernity falls back to earth. Like most historical fiascos, it seemed like a good idea at the time: take a nation of about a billion people living in the equivalent of the Twelfth Century, introduce the magic of money printing, spend a gazillion of it on CAT and Kubota earth-moving machines, build the biggest cement industry the world has ever seen, purchase whole factory set-ups, and flood the rest of the world with stuff. Then the trouble starts when you try to defeat the business cycles associated with over-production and saturated markets.
Poor China and poor us. Escape velocity has failed. Which raises the question: escape from what, exactly? Answer: the implacable limits of life on earth. The metaphor for all this, of course, is the old journey-into-space idea, which still persists in the salesmanship of Elon Musk, the ragged remnants of NASA, and even the nightmares of Stephen Hawking. Get off this messed-up home planet and light out of the territories, say Mars. Of course, this is a vain and stupid idea, since we already have a planet engineered to perfection for all the life systems associated with the human project. We just can’t respect its limits.
So now, that dynamic duo, Nature and Reality, the actual owners of the planet, have showed up to read the riot act to the renters throwing a wild party. The fourth and perhaps ultimate financial crisis of the last twenty years begins to express itself in terms that only the raptors and vultures can see from on high. George Soros, Kyle Bass, and the other flocking shadow banking scavengers prepare to short the living shit out of the old Middle Kingdom. The immortal words of G.W. Bush ring in their ears: “This sucker is going down,” and they are sure to win big by betting on the obvious. Trouble is, this sucker could go down so much further than they imagined, that whatever fortunes they gain from its descent will be foiled by the destruction of the very economic system needed for them to enjoy their gains.
For instance, when banking systems go down, governments usually follow, and when governments go down, societies often unravel. It doesn’t take a great effort of imagination to see China’s one party politburo leadership machine lose the respect of its governed masses, and then its control of events, followed by a Great Struggle among the regions and factions to restore some kind of order. And when the smoke clears there will a whole lot of nearly worthless concrete and steel, and a vast loss of notional wealth, and China will be lucky to land back in some approximation of the Twelfth Century.
It must be interesting for China to watch the horrifying disintegration of America’s political party structure currently on view, with the mad bull called Trump rampaging across the land and the designated inevitable Mz It’s-My-Turn hijacking her collective for the greater glory of Goldman Sachs. The last time China got the vapors politically — the so-called Cultural Revolution of the 1960s — the country went batshit crazy. Surely some of the ruling party remembers that with requisite terror.
Or maybe this is China and the USA’s Thelma and Louise moment. Pedal to the metal, they drive into the abyss of history holding hands. Remember, audiences loved that!
Monday, July 13, 2015
Kunstler: Greek Pudding.
A standard Kunstler column on the financial situation in Greece.
Kunstler: Greek Pudding.
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The heat and humidity lately have been brutal.
Kunstler: Greek Pudding.
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The heat and humidity lately have been brutal.
Wednesday, July 08, 2015
What Kunstler's Been Saying All Along
Hattie summarizes this morning's financial craziness. Kunstler has written for years of the dangers of financial collapse, especially with a system so interconnected.
"...And It Came to Pass."
"...And It Came to Pass."
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.
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, 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.
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.
Monday, April 06, 2015
Monday, November 17, 2014
Kunstler: The Instability Express
Kunstler: The Instability Express
The mentally-challenged kibitzers “out there” — in the hills and hollows of the commentary universe, cable news, the blogosphere, and the pathetic vestige of newspaperdom — are all jumping up and down in a rapture over cheap gasoline prices. [There's a lot about gas prices.--P.Z.] Overlay on this picture the fairy tale of coming US energy independence, stir in the approach of winter in the North Dakota shale oil fields, put an early November polar vortex cherry on top, and you have quite a recipe for smashed expectations.
Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind.
The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Credit evaporates and actual business declines steeply as a result of all those things. Who wants to send a cargo ship of aluminum ore to Guangzhou if nobody shows up at the dock with a certified check to pay for it? Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.
One way this expresses itself is the violent rise and fall of comparative currency values. The Japanese yen and the euro go down, the dollar goes up. It happens in a few months, which is quickly in the world of money. Foolish US cheerleaders suppose that the rising dollar is like the rising score of an NFL football team on any given Sunday. “We’re numbah one!” It’s just not like that. The global economy is not some stupid football contest.
When currencies change value quickly, as has happened since the past summer, big banks get into big trouble. Their revenue streams are pegged to so-called “carry trades” in which big blobs of money are borrowed in one currency and used to place bets in other currencies. When currency values change radically, carry trades blow up. So do so-called “derivatives” such as bets on interest rate differentials. When the sums of money involved are grotesquely large, the parties involved discover that they never had any ability to pay off their losing bet. It was all pretense. In fact, the chance that the bet might go bad never figured into their calculations. The net result of all that foolish irresponsibility is that banks find themselves in a position of being unable to trust each other on virtually any transaction.
When that happens, the flow of credit, a.k.a. “liquidity,” dries up and you have a bona fide financial crisis. Nobody can pay anybody else. Nobody trusts anybody. Fortunes are lost. Elephants stomp around in distress, then keel over and die, and a lot of “little people” get crushed in the dusty ground.
The happy dance about low gasoline pump prices featured on Fox News, combined with the awful instability in currency markets, will cut a swathe of destruction through the shale oil “miracle.” That industry has been relying on high yield “junk” financing to perform its relentless drilling-and-fracking operations — imperative due to the extremely rapid depletion rate of shale oil wells. Across the board, shale oil production has not been a profitable venture since it was ramped up around 2006. Below $80 a barrel, chasing profit only becomes more difficult for those who couldn’t make a profit at $100. A lot of those junk bond “investments” are about to become worthless, and the “investment community” will lose its appetite for any more of it. That will leave the US government as the investor of last resort. Expect that to be the object of the next round of Quantitative Easing. The ultimate destination of these shenanigans will be the sovereign debt crisis of 2015.
The mentally-challenged kibitzers “out there” — in the hills and hollows of the commentary universe, cable news, the blogosphere, and the pathetic vestige of newspaperdom — are all jumping up and down in a rapture over cheap gasoline prices. [There's a lot about gas prices.--P.Z.] Overlay on this picture the fairy tale of coming US energy independence, stir in the approach of winter in the North Dakota shale oil fields, put an early November polar vortex cherry on top, and you have quite a recipe for smashed expectations.
Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind.
The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Credit evaporates and actual business declines steeply as a result of all those things. Who wants to send a cargo ship of aluminum ore to Guangzhou if nobody shows up at the dock with a certified check to pay for it? Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.
One way this expresses itself is the violent rise and fall of comparative currency values. The Japanese yen and the euro go down, the dollar goes up. It happens in a few months, which is quickly in the world of money. Foolish US cheerleaders suppose that the rising dollar is like the rising score of an NFL football team on any given Sunday. “We’re numbah one!” It’s just not like that. The global economy is not some stupid football contest.
When currencies change value quickly, as has happened since the past summer, big banks get into big trouble. Their revenue streams are pegged to so-called “carry trades” in which big blobs of money are borrowed in one currency and used to place bets in other currencies. When currency values change radically, carry trades blow up. So do so-called “derivatives” such as bets on interest rate differentials. When the sums of money involved are grotesquely large, the parties involved discover that they never had any ability to pay off their losing bet. It was all pretense. In fact, the chance that the bet might go bad never figured into their calculations. The net result of all that foolish irresponsibility is that banks find themselves in a position of being unable to trust each other on virtually any transaction.
When that happens, the flow of credit, a.k.a. “liquidity,” dries up and you have a bona fide financial crisis. Nobody can pay anybody else. Nobody trusts anybody. Fortunes are lost. Elephants stomp around in distress, then keel over and die, and a lot of “little people” get crushed in the dusty ground.
The happy dance about low gasoline pump prices featured on Fox News, combined with the awful instability in currency markets, will cut a swathe of destruction through the shale oil “miracle.” That industry has been relying on high yield “junk” financing to perform its relentless drilling-and-fracking operations — imperative due to the extremely rapid depletion rate of shale oil wells. Across the board, shale oil production has not been a profitable venture since it was ramped up around 2006. Below $80 a barrel, chasing profit only becomes more difficult for those who couldn’t make a profit at $100. A lot of those junk bond “investments” are about to become worthless, and the “investment community” will lose its appetite for any more of it. That will leave the US government as the investor of last resort. Expect that to be the object of the next round of Quantitative Easing. The ultimate destination of these shenanigans will be the sovereign debt crisis of 2015.
Monday, February 03, 2014
Monday, January 06, 2014
Kunstler: Forecast 2014: Burning Down the House
Kunstler's latest, which is excerpted below. It was worth the wait and is worth reading in its entirety (see link). Some comments of mine are after the excerpts.
Kunstler: Forecast 2014: Burning Down the House
Many of us in the Long Emergency crowd and like-minded brother-and-sisterhoods remain perplexed by the amazing stasis in our national life, despite the gathering tsunami of forces arrayed to rock our economy, our culture, and our politics. Nothing has yielded to these forces already in motion, so far. Nothing changes, nothing gives, yet. It’s like being buried alive in Jell-O. It’s embarrassing to appear so out-of-tune with the consensus, but we persevere like good soldiers in a just war.
Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations.
Life in the USA is like living in a broken-down, cob-jobbed, vermin-infested house that needs to be gutted, disinfected, and rebuilt — with the hope that it might come out of the restoration process retaining the better qualities of our heritage. Some of us are anxious to get on with the job, to expel all the rats, bats, bedbugs, roaches, and lice, tear out the stinking shag carpet and the moldy sheet-rock, rip off the crappy plastic siding, and start rebuilding along lines that are consistent with the demands of the future — namely, the reality of capital and material resource scarcity. But it has been apparent for a while that the current owners of the house would prefer to let it fall down, or burn down rather than renovate.
Some of us now take that outcome for granted and are left to speculate on how it will play out. These issues were the subjects of my recent non-fiction books, The Long Emergency and Too Much Magic (as well as excellent similar books by Richard Heinberg, John Michael Greer, Dmitry Orlov, and others). They describe the conditions at the end of the cheap energy techno-industrial phase of history and they laid out a conjectural sequence of outcomes that might be stated in shorthand as collapse and re-set. I think the delay in the onset of epochal change can be explained pretty simply. As the peak oil story gained traction around 2005, and was followed (as predicted) by a financial crisis, the established order fought back for its survival, utilizing its remaining dwindling capital and the tremendous inertia of its own gigantic scale, to give the appearance of vitality at all costs.
At the heart of the matter was (and continues to be) the relationship between energy and economic growth. Without increasing supplies of cheap energy, economic growth — as we have known it for a couple of centuries — does not happen anymore. At the center of the economic growth question is credit. Without continued growth, credit can’t be repaid, and new credit cannot be issued honestly — that is, with reasonable assurance of repayment — making it worthless. So, old debt goes bad and the new debt is generated knowing that it is worthless. To complicate matters, the new worthless debt is issued to pay the interest on the old debt, to maintain the pretense that it is not going bad. ...
Miscellany
I get a lot of email on the subject of Bitcoin. Here’s how I feel about it.
It’s an even more abstract form of “money” than fiat currencies or securities based on fiat currencies. Do we need more abstraction in our economic lives? I don’t think so. I believe the trend will be toward what is real. For the moment, Bitcoin seems to be enjoying some success as it beats back successive crashes. I’m not very comfortable with the idea of investing in an algorithm. I don’t see how it is impervious to government hacking. In fact, I’d bet that somewhere in the DOD or the NSA or the CIA right now some nerd is working on that. Bitcoin is provoking imitators, other new computer “currencies.” Why would Bitcoin necessarily enjoy dominance? And how many competing algorithmic currencies can the world stand? Wouldn’t that defeat the whole purpose of an alternative “go to” currency? All I can say is that I’m not buying Bitcoins.
Will ObamaCare crash and burn. It’s not doing very well so far. In fact, it’s a poster-child for Murphy’s Law (Anything that can go wrong, will go wrong). I suppose the primary question is whether they can enroll enough healthy young people to correct the actuarial nightmare that health insurance has become. That’s not looking so good either now. But really, how can anyone trust a law that was written by the insurance companies and the pharmaceutical industry? And how can it be repealed when so many individuals, groups, companies, have already lost their pre-ObamaCare policies? What is there to go back to? Therefore, I’d have to predict turmoil in the health care system for 2014. The failure to resolve the inadequacies of ObamaCare also may be a prime symptom of the increasing impotence of the federal government to accomplish anything. That failure would prompt an even faster downscaling of governance as states, counties, communities, and individuals realize that they are on their own.
Sorry to skip around, but a few stray words about the state of American culture. Outside the capitals of the “one percent” — Manhattan, San Francisco, Boston, Washington, etc. — American material culture is in spectacular disrepair. Car culture and chain store tyranny have destroyed the physical fabric of our communities and wrecked social relations. These days, a successful Main Street is one that has a wig shop and a check-cashing office.^ It is sickening to see what we have become. Our popular entertainments are just what you would design to produce a programmed population of criminals and sex offenders. The spectacle of the way our people look —overfed, tattooed, pierced, clothed in the raiment of clowns — suggests an end-of-empire zeitgeist more disturbing than a Fellini movie. The fact is, it simply mirrors the way we act, our gross, barbaric collective demeanor. A walk down any airport concourse makes the Barnum & Bailey freak shows of yore look quaint. In short, the rot throughout our national life is so conspicuous that a fair assessment would be that we are a wicked people who deserve to be punished.
Elsewhere in the World
Globalism, in the Tom Friedman euphoric sense, is unwinding. Currency wars are wearing down the players, conflicts and tensions are breaking out where before there were only Wal-Mart share price triumphs and Foxconn profits. Both American and European middle-classes are too exhausted financially to continue the consumer orgy of the early millennium. The trade imbalances are horrific. Unpayable debt saturates everything. Sick economies will weigh down commodity prices except for food-related things. The planet Earth has probably reached peak food production, including peak fertilizer. Supplies of grain will be inadequate in 2014 to feed the still-expanding masses of the poor places in the world.
The nervous calm in finance and economies since 2008 has its mirror in the relative calm of the political scene. Uprisings and skirmishes have broken out, but nothing that so far threatens the peace between great powers. There have been the now-historic revolts in Egypt, Libya, Syria, and other Middle East and North African (MENA) states. Iraq is once again disintegrating after a decade of American “nation-building.” Greece is falling apart. Spain and Italy should be falling apart but haven’t yet. France is sinking into bankruptcy. The UK is in on the grift with the USA and insulated from the Euro, but the British Isles are way over-populated with a volatile multi-ethnic mix and not much of an economy outside the financial district of London. There were riots in — of all places — Sweden this year. Turkey entered crisis just a few weeks ago along with Ukraine.
I predict more colorful political strife in Europe this year, boots in the street, barricades, gunfire, and bombs. The populations of these countries will want relief measures from their national governments, but the sad news is that these governments are broke, so austerity seems to be the order of the day no matter what. I think this will prod incipient revolts in a rightward nationalist direction. If it was up to Marine LePen’s rising National Front party, they would solve the employment problem by expelling all the recent immigrants — though the mere attempt would probably provoke widespread race war in France.
The quarrel between China and Japan over the Senkaku Islands is a diversion from the real action in the South China Sea, said to hold large underwater petroleum reserves. China is the world’s second greatest oil importer. Their economy and the credibility of its non-elected government depends on keeping the oil supply up. They are a long way from other places in the world where oil comes from, hence their eagerness to secure and dominate the South China Sea. The idea is that China would make a fuss over the Senkaku group, get Japan and the US to the negotiating table, and cede the dispute over them to Japan in exchange for Japan and the US supporting China’s claims in the South China Sea against the other neighbors there: Vietnam, Indonesia, Malaysia, and the Philippines.
The catch is that Japan may be going politically insane just now between the rigors of (Shinzo) Abenomics and the mystical horrors of Fukushima. Japan’s distress appears to be provoking a new mood of nationalist militarism of a kind not seen there since the 1940s. They’re talking about arming up, rewriting the pacifist articles in their constitution. Scary, if you have a memory of the mid-20th century. China should know something about national psychotic breaks, having not so long ago endured the insanity of Mao Zedong’s Cultural Revolution (1966-71). So they might want to handle Japan with care. On the other hand, China surely nurtures a deep, deadly grudge over the crimes perpetrated by Japan in the Second World War, and now has a disciplined, world-class military, and so maybe they would like to kick Japan’s ass. It’s a hard one to call. I suspect that in 2014, the ball is in Japan’s court. What will they do? If the US doesn’t stay out of the way of that action, then we are insane, too.
That said, I stick by my story from last year’s forecast: Japan’s ultimate destination is to “go medieval.”* They’re never going to recover from Fukushima, their economy is unraveling, they have no fossil fuels of their own and have to import everything, and their balance of payments is completely out of whack. The best course for them will be to just throw in the towel on modernity. Everybody else is headed that way, too, eventually, so Japan might as well get there first and set a good example.
By “go medieval” I mean re-set to a pre-industrial World Made By Hand level of operation. I’m sure that outcome seems laughably implausible to most readers, but I maintain that both the human race and the planet Earth need a “time out” from the ravages of “progress,” and circumstances are going to force the issue anyway, so we might as well kick back and get with the program: go local, downscale, learn useful skills, cultivate our gardens, get to know our neighbors, learn how to play a musical instrument, work, dine, and dance with our friends.
As it happens, the third in the series of my World Made By Hand novels, set in upstate New York in the post-collapse economy, will be published in September by the Atlantic Monthly Press. It’s a ripping yarn. Whether anyone will have enough money to buy a copy, I can’t predict. Happy 2014, Everybody!
===
Eventually, there'll be
^I went to the Kuhio Plaza on Friday, and after our breakfast at IHOP, walked around a bit. Big Island Surf closed, but an HIC opened in the old Waldenbooks space next to Radio Shack. At one end, it's bustling with the new Zippy's and Sports Authority, but throughout the mall are vacant spaces or stores that barely occupy their spaces and sell cheap stuff. Near IHOP, what used to be Suncoast Video was more recently an anime shop (that could have fit in a smaller space; it was cavernous). Now it's closed and serves as an occasional meeting room, which itself was moved from the original Footlocker space to make way for a calendar shop. I'd like your thoughts on the Plaza: what it was like? where it's going? It's been in operation almost thirty years (opening in 1985). The Kaiko`o Mall was around for about that long before it closed. (To malihini and visitors: that giant courthouse in midtown Hilo is on the site of the mall.) Downtown is mixed: pockets of gentrification, longtime businesses, and some downscaling and "frivilousation" (e.g., a good toy shop replaced with a nail salon; the Farmers Exchange, with a bar and a tattoo parlor).
*As I posted recently, our cable system broadcasts a free preview of the Nippon Golden Network around New Year's (this year it ran from 30 December through 3 January). Many of the movies are samurai films from the `50s and `60s. Will Japan go back to the time of the shogunate? Probably not.
Kunstler: Forecast 2014: Burning Down the House
Many of us in the Long Emergency crowd and like-minded brother-and-sisterhoods remain perplexed by the amazing stasis in our national life, despite the gathering tsunami of forces arrayed to rock our economy, our culture, and our politics. Nothing has yielded to these forces already in motion, so far. Nothing changes, nothing gives, yet. It’s like being buried alive in Jell-O. It’s embarrassing to appear so out-of-tune with the consensus, but we persevere like good soldiers in a just war.
Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations.
Life in the USA is like living in a broken-down, cob-jobbed, vermin-infested house that needs to be gutted, disinfected, and rebuilt — with the hope that it might come out of the restoration process retaining the better qualities of our heritage. Some of us are anxious to get on with the job, to expel all the rats, bats, bedbugs, roaches, and lice, tear out the stinking shag carpet and the moldy sheet-rock, rip off the crappy plastic siding, and start rebuilding along lines that are consistent with the demands of the future — namely, the reality of capital and material resource scarcity. But it has been apparent for a while that the current owners of the house would prefer to let it fall down, or burn down rather than renovate.
Some of us now take that outcome for granted and are left to speculate on how it will play out. These issues were the subjects of my recent non-fiction books, The Long Emergency and Too Much Magic (as well as excellent similar books by Richard Heinberg, John Michael Greer, Dmitry Orlov, and others). They describe the conditions at the end of the cheap energy techno-industrial phase of history and they laid out a conjectural sequence of outcomes that might be stated in shorthand as collapse and re-set. I think the delay in the onset of epochal change can be explained pretty simply. As the peak oil story gained traction around 2005, and was followed (as predicted) by a financial crisis, the established order fought back for its survival, utilizing its remaining dwindling capital and the tremendous inertia of its own gigantic scale, to give the appearance of vitality at all costs.
At the heart of the matter was (and continues to be) the relationship between energy and economic growth. Without increasing supplies of cheap energy, economic growth — as we have known it for a couple of centuries — does not happen anymore. At the center of the economic growth question is credit. Without continued growth, credit can’t be repaid, and new credit cannot be issued honestly — that is, with reasonable assurance of repayment — making it worthless. So, old debt goes bad and the new debt is generated knowing that it is worthless. To complicate matters, the new worthless debt is issued to pay the interest on the old debt, to maintain the pretense that it is not going bad. ...
Miscellany
I get a lot of email on the subject of Bitcoin. Here’s how I feel about it.
It’s an even more abstract form of “money” than fiat currencies or securities based on fiat currencies. Do we need more abstraction in our economic lives? I don’t think so. I believe the trend will be toward what is real. For the moment, Bitcoin seems to be enjoying some success as it beats back successive crashes. I’m not very comfortable with the idea of investing in an algorithm. I don’t see how it is impervious to government hacking. In fact, I’d bet that somewhere in the DOD or the NSA or the CIA right now some nerd is working on that. Bitcoin is provoking imitators, other new computer “currencies.” Why would Bitcoin necessarily enjoy dominance? And how many competing algorithmic currencies can the world stand? Wouldn’t that defeat the whole purpose of an alternative “go to” currency? All I can say is that I’m not buying Bitcoins.
Will ObamaCare crash and burn. It’s not doing very well so far. In fact, it’s a poster-child for Murphy’s Law (Anything that can go wrong, will go wrong). I suppose the primary question is whether they can enroll enough healthy young people to correct the actuarial nightmare that health insurance has become. That’s not looking so good either now. But really, how can anyone trust a law that was written by the insurance companies and the pharmaceutical industry? And how can it be repealed when so many individuals, groups, companies, have already lost their pre-ObamaCare policies? What is there to go back to? Therefore, I’d have to predict turmoil in the health care system for 2014. The failure to resolve the inadequacies of ObamaCare also may be a prime symptom of the increasing impotence of the federal government to accomplish anything. That failure would prompt an even faster downscaling of governance as states, counties, communities, and individuals realize that they are on their own.
Sorry to skip around, but a few stray words about the state of American culture. Outside the capitals of the “one percent” — Manhattan, San Francisco, Boston, Washington, etc. — American material culture is in spectacular disrepair. Car culture and chain store tyranny have destroyed the physical fabric of our communities and wrecked social relations. These days, a successful Main Street is one that has a wig shop and a check-cashing office.^ It is sickening to see what we have become. Our popular entertainments are just what you would design to produce a programmed population of criminals and sex offenders. The spectacle of the way our people look —overfed, tattooed, pierced, clothed in the raiment of clowns — suggests an end-of-empire zeitgeist more disturbing than a Fellini movie. The fact is, it simply mirrors the way we act, our gross, barbaric collective demeanor. A walk down any airport concourse makes the Barnum & Bailey freak shows of yore look quaint. In short, the rot throughout our national life is so conspicuous that a fair assessment would be that we are a wicked people who deserve to be punished.
Elsewhere in the World
Globalism, in the Tom Friedman euphoric sense, is unwinding. Currency wars are wearing down the players, conflicts and tensions are breaking out where before there were only Wal-Mart share price triumphs and Foxconn profits. Both American and European middle-classes are too exhausted financially to continue the consumer orgy of the early millennium. The trade imbalances are horrific. Unpayable debt saturates everything. Sick economies will weigh down commodity prices except for food-related things. The planet Earth has probably reached peak food production, including peak fertilizer. Supplies of grain will be inadequate in 2014 to feed the still-expanding masses of the poor places in the world.
The nervous calm in finance and economies since 2008 has its mirror in the relative calm of the political scene. Uprisings and skirmishes have broken out, but nothing that so far threatens the peace between great powers. There have been the now-historic revolts in Egypt, Libya, Syria, and other Middle East and North African (MENA) states. Iraq is once again disintegrating after a decade of American “nation-building.” Greece is falling apart. Spain and Italy should be falling apart but haven’t yet. France is sinking into bankruptcy. The UK is in on the grift with the USA and insulated from the Euro, but the British Isles are way over-populated with a volatile multi-ethnic mix and not much of an economy outside the financial district of London. There were riots in — of all places — Sweden this year. Turkey entered crisis just a few weeks ago along with Ukraine.
I predict more colorful political strife in Europe this year, boots in the street, barricades, gunfire, and bombs. The populations of these countries will want relief measures from their national governments, but the sad news is that these governments are broke, so austerity seems to be the order of the day no matter what. I think this will prod incipient revolts in a rightward nationalist direction. If it was up to Marine LePen’s rising National Front party, they would solve the employment problem by expelling all the recent immigrants — though the mere attempt would probably provoke widespread race war in France.
The quarrel between China and Japan over the Senkaku Islands is a diversion from the real action in the South China Sea, said to hold large underwater petroleum reserves. China is the world’s second greatest oil importer. Their economy and the credibility of its non-elected government depends on keeping the oil supply up. They are a long way from other places in the world where oil comes from, hence their eagerness to secure and dominate the South China Sea. The idea is that China would make a fuss over the Senkaku group, get Japan and the US to the negotiating table, and cede the dispute over them to Japan in exchange for Japan and the US supporting China’s claims in the South China Sea against the other neighbors there: Vietnam, Indonesia, Malaysia, and the Philippines.
The catch is that Japan may be going politically insane just now between the rigors of (Shinzo) Abenomics and the mystical horrors of Fukushima. Japan’s distress appears to be provoking a new mood of nationalist militarism of a kind not seen there since the 1940s. They’re talking about arming up, rewriting the pacifist articles in their constitution. Scary, if you have a memory of the mid-20th century. China should know something about national psychotic breaks, having not so long ago endured the insanity of Mao Zedong’s Cultural Revolution (1966-71). So they might want to handle Japan with care. On the other hand, China surely nurtures a deep, deadly grudge over the crimes perpetrated by Japan in the Second World War, and now has a disciplined, world-class military, and so maybe they would like to kick Japan’s ass. It’s a hard one to call. I suspect that in 2014, the ball is in Japan’s court. What will they do? If the US doesn’t stay out of the way of that action, then we are insane, too.
That said, I stick by my story from last year’s forecast: Japan’s ultimate destination is to “go medieval.”* They’re never going to recover from Fukushima, their economy is unraveling, they have no fossil fuels of their own and have to import everything, and their balance of payments is completely out of whack. The best course for them will be to just throw in the towel on modernity. Everybody else is headed that way, too, eventually, so Japan might as well get there first and set a good example.
By “go medieval” I mean re-set to a pre-industrial World Made By Hand level of operation. I’m sure that outcome seems laughably implausible to most readers, but I maintain that both the human race and the planet Earth need a “time out” from the ravages of “progress,” and circumstances are going to force the issue anyway, so we might as well kick back and get with the program: go local, downscale, learn useful skills, cultivate our gardens, get to know our neighbors, learn how to play a musical instrument, work, dine, and dance with our friends.
As it happens, the third in the series of my World Made By Hand novels, set in upstate New York in the post-collapse economy, will be published in September by the Atlantic Monthly Press. It’s a ripping yarn. Whether anyone will have enough money to buy a copy, I can’t predict. Happy 2014, Everybody!
===
Eventually, there'll be
^I went to the Kuhio Plaza on Friday, and after our breakfast at IHOP, walked around a bit. Big Island Surf closed, but an HIC opened in the old Waldenbooks space next to Radio Shack. At one end, it's bustling with the new Zippy's and Sports Authority, but throughout the mall are vacant spaces or stores that barely occupy their spaces and sell cheap stuff. Near IHOP, what used to be Suncoast Video was more recently an anime shop (that could have fit in a smaller space; it was cavernous). Now it's closed and serves as an occasional meeting room, which itself was moved from the original Footlocker space to make way for a calendar shop. I'd like your thoughts on the Plaza: what it was like? where it's going? It's been in operation almost thirty years (opening in 1985). The Kaiko`o Mall was around for about that long before it closed. (To malihini and visitors: that giant courthouse in midtown Hilo is on the site of the mall.) Downtown is mixed: pockets of gentrification, longtime businesses, and some downscaling and "frivilousation" (e.g., a good toy shop replaced with a nail salon; the Farmers Exchange, with a bar and a tattoo parlor).
*As I posted recently, our cable system broadcasts a free preview of the Nippon Golden Network around New Year's (this year it ran from 30 December through 3 January). Many of the movies are samurai films from the `50s and `60s. Will Japan go back to the time of the shogunate? Probably not.
Tuesday, December 31, 2013
Monday, December 30, 2013
Kunstler: "The End of Pretend"
Next week will be his forecast for 2014.--P.Z.
...December 30, 2013 The End of Pretend
If being wealthy was the same as pretending to be wealthy then people who care about reality would have a little less to complain about. But pretending is a poor way for a society to negotiate its way through history. It makes for accumulating distortions which eventually undermine the society’s ability to function, especially when the pretending is about money, which is society’s operating system.
The distortion that even simple people care about is that the gap between the rich and the poor is as plain, vast, and grotesque as at any time in our history — except perhaps during slavery times in Dixieland, when many of the poor did not even own their existence. We’ve had plenty of reminders of that in pop culture the last couple of years, including Quentin Tarantino’s fiercely stupid movie Django Unchained and the more recent melodrama 12 Years a Slave. But you have to wonder what young adults weighed down by unpayable college debt think when they go to see them, because without a rebellion that millennial generation will not own their own lives either. They must know it, but they must not know what to do about it.
The pretense and distortions start at the top of American life with a President who broadcasts the message that some kind of “recovery” has occurred in the economic affairs of the country. Either he just wants the public feel better, or he is misled by the people and agencies in his own government, or perhaps he just lies to keep the lid on. To truly recover from the dislocations of 2008, we would have to make a consensual decision to start behaving differently in the process of adapting to the new circumstances that the arc of history is presenting to us. We’d have to decide to leave behind the economy of financialization, suburban sprawl, car dependency, Wal-Mart consumerism, and prepare for a different way of inhabiting North America.
The dislocations of 2008 when the banking system nearly imploded were Nature’s way of telling us that dishonesty has consequences. The immediate dishonesty of that day was the racket in securitizing worthless mortgages — promises to pay large sums of money over long periods of time. The promises were false and the collateral was janky. It got so bad and ran so far and deep that it essentially destroyed the mechanism of credit creation as it had been known until then, and it has not been repaired.
Since then, we have pretended to repair the operations of credit by falsely substituting bank bailouts and Federal Reserve “quantitative easing” (QE) or digital money-printing for plain dealing in borrowed money between honest brokers at the local level. The unfortunate consequence is that in the process we have distorted — and possibly destroyed — the value of our money and the various things denominated in it, especially securities, bonds, stocks and other money-like paper.
The crash of the mortgage racket occurred not just because of swindling and fraud among bankers; in fact, that was only a nasty symptom of something larger: peak oil. I know that many people have come to disbelieve in the idea of peak oil, but that is only another mode of playing pretend. Peak oil, which essentially arrived in 2006, undermined the basic conditions of credit creation in an advanced techno-industrial society dependent on increasing supplies of fossil fuels. Most people, including practically all credentialed economists, fail to understand this. There is a fundamental relationship between ever-increasing energy supplies > economic growth > and credit-based money (or “money,” if you will). When the energy inputs flatten out or decrease, growth stops, wealth is no longer generated, old loans can’t be repaid, and new loans can’t be generated honestly, i.e. with the expectation of repayment. That has been our predicament since 2008 and nothing has changed. We are pretending to compensate by issuing new unpayable debt to pay the interest on our old accumulated debt. This pretense can only go on so long before our economic relations reflect the basic dishonesty of it. Reality is a harsh mistress.
In the meantime, we amuse ourselves with fairy tales about “the shale oil revolution” and “the manufacturing renaissance.” 2014 could be the year that the forces of Nature compel our attention and give us a reason to stop all this pretending. I’ll address this question in next week’s annual yearly forecast.
...December 30, 2013 The End of Pretend
If being wealthy was the same as pretending to be wealthy then people who care about reality would have a little less to complain about. But pretending is a poor way for a society to negotiate its way through history. It makes for accumulating distortions which eventually undermine the society’s ability to function, especially when the pretending is about money, which is society’s operating system.
The distortion that even simple people care about is that the gap between the rich and the poor is as plain, vast, and grotesque as at any time in our history — except perhaps during slavery times in Dixieland, when many of the poor did not even own their existence. We’ve had plenty of reminders of that in pop culture the last couple of years, including Quentin Tarantino’s fiercely stupid movie Django Unchained and the more recent melodrama 12 Years a Slave. But you have to wonder what young adults weighed down by unpayable college debt think when they go to see them, because without a rebellion that millennial generation will not own their own lives either. They must know it, but they must not know what to do about it.
The pretense and distortions start at the top of American life with a President who broadcasts the message that some kind of “recovery” has occurred in the economic affairs of the country. Either he just wants the public feel better, or he is misled by the people and agencies in his own government, or perhaps he just lies to keep the lid on. To truly recover from the dislocations of 2008, we would have to make a consensual decision to start behaving differently in the process of adapting to the new circumstances that the arc of history is presenting to us. We’d have to decide to leave behind the economy of financialization, suburban sprawl, car dependency, Wal-Mart consumerism, and prepare for a different way of inhabiting North America.
The dislocations of 2008 when the banking system nearly imploded were Nature’s way of telling us that dishonesty has consequences. The immediate dishonesty of that day was the racket in securitizing worthless mortgages — promises to pay large sums of money over long periods of time. The promises were false and the collateral was janky. It got so bad and ran so far and deep that it essentially destroyed the mechanism of credit creation as it had been known until then, and it has not been repaired.
Since then, we have pretended to repair the operations of credit by falsely substituting bank bailouts and Federal Reserve “quantitative easing” (QE) or digital money-printing for plain dealing in borrowed money between honest brokers at the local level. The unfortunate consequence is that in the process we have distorted — and possibly destroyed — the value of our money and the various things denominated in it, especially securities, bonds, stocks and other money-like paper.
The crash of the mortgage racket occurred not just because of swindling and fraud among bankers; in fact, that was only a nasty symptom of something larger: peak oil. I know that many people have come to disbelieve in the idea of peak oil, but that is only another mode of playing pretend. Peak oil, which essentially arrived in 2006, undermined the basic conditions of credit creation in an advanced techno-industrial society dependent on increasing supplies of fossil fuels. Most people, including practically all credentialed economists, fail to understand this. There is a fundamental relationship between ever-increasing energy supplies > economic growth > and credit-based money (or “money,” if you will). When the energy inputs flatten out or decrease, growth stops, wealth is no longer generated, old loans can’t be repaid, and new loans can’t be generated honestly, i.e. with the expectation of repayment. That has been our predicament since 2008 and nothing has changed. We are pretending to compensate by issuing new unpayable debt to pay the interest on our old accumulated debt. This pretense can only go on so long before our economic relations reflect the basic dishonesty of it. Reality is a harsh mistress.
In the meantime, we amuse ourselves with fairy tales about “the shale oil revolution” and “the manufacturing renaissance.” 2014 could be the year that the forces of Nature compel our attention and give us a reason to stop all this pretending. I’ll address this question in next week’s annual yearly forecast.
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