Kunstler: In the Dark.
The stock market is zooming this morning on the news that only 5.7 million people in Florida will have to do without air conditioning, hot showers, and Keurig mochachinos at dawn’s early light Monday, Sept 11, 2017. I’m mindful that the news cycle right after a hurricane goes kind of blank for a day or more as dazed and confused citizens venture out to assess the damage. For now, there is very little hard information on the Web waves. Does Key West still exist? Hard to tell. We’ll know more this evening.
The one-two punch of Harvey and Irma did afford the folks-in-charge of the nation’s affairs a sly opportunity to get rid of that annoying debt ceiling problem. This is the law that established a limit on how much debt the Federal Reserve could “buy” from the national government. Some of you may be thinking: buy debt? Why would anybody want to buy somebody’s debt? Well, you see, this is securitized debt, i.e. bonds issued by the US Treasury, which pay interest, and so there is the incentive to buy it. Anyway, there used to — back in the days when the real interest rate stayed positive after deducting the percent of running inflation. This is where the situation gets interesting.
The debt ceiling law supposedly set limits on how much bonded debt the government could issue (how much it could borrow) so it wouldn’t go hog wild spending money it didn’t have. Which is exactly what happened despite the debt limit because the “ceiling” got raised about a hundred times though the 20th century into the 21st so that the accumulated debt stands around $20 trillion.
Rational people recognize this $20 trillion for the supernatural scale of obligation it represents, and understand that it will never be paid back, so, what the hell? Why not just drop the pretense, but keep on working this racket of the government borrowing as much money as it wants, and the Federal Reserve creating that money (or “money”) on its computers to infinity. Seems to work so far.
Rational people would also suspect that at some point, something might have to give. For instance, the value of the dollars that the debt is issued in. If the value of dollars goes down, then the real value of the bonds issued in dollars goes down, and as that happens the many various holders of bonds already issued — individuals, pension funds, insurance companies, sovereign wealth funds of foreign countries — will have a strong incentive to dump the bonds as fast as possible. Especially if backstage magic by the Fed and its handmaidens, the “primary dealer” banks, keeps working to suppress the interest rates of these bonds at all costs.
Would the Federal Reserve then vacuum up every bond that others are dumping on the market? They would certainly try. The Bank of Japan has been doing just that with its own government’s bonds to no apparent ill effect, though you kind of wonder what happens when a snake eating its own tail finally reaches its head. What’s left, exactly, after it eats that, too? My own guess would be three words: you go medieval. I mean literally. No more engines, electric lights, central heating….
In this land, we face a situation in which both the value of money and the cost of borrowing money would be, at last, completely detached from reality — reality being the real cost and value of all goods and services exchanged for money. Voila: a king-hell currency crisis and the disruption of trade on the most macro level imaginable. Also, surely, a massive disruption in government services, including social security and medicare, but extending way beyond that. And then we go medieval, too. The mule replaces the Ford F-150. And The New York Times finds something to write about besides Russia and trannies. [A gratuitously nasty comment.--P.Z.]
The value of money and the cost of borrowing it is about as fundamental as it gets in a so-called advanced economy. You can screw around with a lot of things running a society, but when that goes, you’re flirting seriously with anarchy. In the meantime, we’ll see how the social glue holds things together in those parts of Florida that are entering a preview of medieval attractions in the electrical blackout days ahead.
Showing posts with label money. Show all posts
Showing posts with label money. Show all posts
Monday, September 11, 2017
Monday, August 28, 2017
Kunstler: When the Butterfly Flaps Its Wings.
I'll post the last four Kunstler columns soon.--P.Z.
Kunstler: When the Butterfly Flaps Its Wings.
It remains to be seen what the impact will be from Mother Nature putting the nation’s fourth largest city out-of-business. And for how long? It’s possible that Houston will never entirely recover from Hurricane Harvey. The event may exceed the physical damage that Hurricane Katrina did to New Orleans. It may bankrupt large insurance companies and dramatically raise the risk of doing business anywhere along the Gulf and Atlantic coasts of the USA — or at least erase the perceived guarantee that losses are recoverable. It may even turn out to be the black swan that reveals the hyper-fragility of a US-driven financial system.
Houston also happens to be the center of the US oil industry. Offices can be moved elsewhere, of course, but not so easily the nine major oil refineries that sprawl between Buffalo Bayou over to Beaumont, Port Arthur, and then Lake Charles, Louisiana. Harvey is inching back out to the Gulf where it will inhale more energy over the warm ocean waters and then return inland in the direction of those refineries.
The economic damage could be epic. Much of the supply for the Colonial Pipeline system emanates from the region around Houston, running through Atlanta and clear up to Philadelphia and New York. There could be lines at the gas stations along the eastern seaboard in early September.
The event is converging with the US government running out of money this fall without new authority to borrow more by congress voting to raise the US debt ceiling. Perhaps the emergency of Hurricane Harvey and its costly aftermath will bludgeon congress into quickly raising the debt ceiling. If that doesn’t happen, and the debt ceiling is not raised, the federal government might have to pretend that it can pay for emergency assistance to Texas and Louisiana. That pretense can only go so far before government contractors balk and maybe even walk.
Ordinarily, failure to raise the debt ceiling would lead to a government shut-down, including hurricane recovery operations, unless the president invoked some kind of emergency powers. That would be decisive action, but it could also be the beginning of something that looks like a full-out dictatorship. Powers assumed are often not surrendered when the original emergency is over. And what would the president use for money if a substantial enough number of congresspersons and senators are prompted by their distaste for Mr. Trump to drag out the process of financially re-liquefying the government? (And nevermind even passing a budget.)
Meanwhile, two other major sources of aggravation are waiting off-stage: one is North Korea. Why wouldn’t Kim Jong-un use the opportunity of political disarray in the US to create more headaches for a distracted US government? Never let a crisis go to waste. Another potential irritant is the return of students to American college campuses. Imagine how the campus Antifa forces would react to Mr. Trump assuming emergency powers. It’s easy to foresee an acceleration of violence between the extreme Left and the Extreme right during what is shaping up to look like a major crisis in governing. If the campus Left had any tactical brains, they’d stop marching around in black uniforms and instead organize a mass renunciation of college loan debt.
Behind all this political strife will be wobbling financial markets. The message from the debt ceiling stalemate to the bond market would be that the US can no longer be relied on to pay its debts. Interest rates on US Treasury paper would have to go up as the long-lost concept of risk returned to the bond scene. People and institutions will not be induced to hold bonds unless the yield is recalibrated to the actual risk. Of course, in the mysterious world of bonds (i.e. securitized debt), the price of bonds goes down as interest rates rise. Meaning a lot of current holders of bonds would be hammered if they tried to sell. Rates rising would also spell big trouble for corporations and governments who have to make regular interest payments to bond-holders. A rate rise to as little as 3 percent on US Treasury bonds could spin the country into comprehensive bankruptcy.
How might stock markets and currency markets react to the scenario above? To me it would look like a drop of at least 1000 points on the S & P. The US dollar might actually rise initially as a whole lot of debt is renounced — which makes money actually disappear — but then you have the Federal Reserve waiting on another flank to roll out their own emergency response: Quantitative Easing No. 4, flooding the system with new “money” that has all the appearance and none of the mojo of value, tanking the dollar anew. As a wise correspondent of mine wrote a while back: “financialization is nothing more than money with its value removed.” (Graham Reinders.)
A lot can happen when a faraway butterfly flaps its wings and sets a slight current of air in motion.
Kunstler: When the Butterfly Flaps Its Wings.
It remains to be seen what the impact will be from Mother Nature putting the nation’s fourth largest city out-of-business. And for how long? It’s possible that Houston will never entirely recover from Hurricane Harvey. The event may exceed the physical damage that Hurricane Katrina did to New Orleans. It may bankrupt large insurance companies and dramatically raise the risk of doing business anywhere along the Gulf and Atlantic coasts of the USA — or at least erase the perceived guarantee that losses are recoverable. It may even turn out to be the black swan that reveals the hyper-fragility of a US-driven financial system.
Houston also happens to be the center of the US oil industry. Offices can be moved elsewhere, of course, but not so easily the nine major oil refineries that sprawl between Buffalo Bayou over to Beaumont, Port Arthur, and then Lake Charles, Louisiana. Harvey is inching back out to the Gulf where it will inhale more energy over the warm ocean waters and then return inland in the direction of those refineries.
The economic damage could be epic. Much of the supply for the Colonial Pipeline system emanates from the region around Houston, running through Atlanta and clear up to Philadelphia and New York. There could be lines at the gas stations along the eastern seaboard in early September.
The event is converging with the US government running out of money this fall without new authority to borrow more by congress voting to raise the US debt ceiling. Perhaps the emergency of Hurricane Harvey and its costly aftermath will bludgeon congress into quickly raising the debt ceiling. If that doesn’t happen, and the debt ceiling is not raised, the federal government might have to pretend that it can pay for emergency assistance to Texas and Louisiana. That pretense can only go so far before government contractors balk and maybe even walk.
Ordinarily, failure to raise the debt ceiling would lead to a government shut-down, including hurricane recovery operations, unless the president invoked some kind of emergency powers. That would be decisive action, but it could also be the beginning of something that looks like a full-out dictatorship. Powers assumed are often not surrendered when the original emergency is over. And what would the president use for money if a substantial enough number of congresspersons and senators are prompted by their distaste for Mr. Trump to drag out the process of financially re-liquefying the government? (And nevermind even passing a budget.)
Meanwhile, two other major sources of aggravation are waiting off-stage: one is North Korea. Why wouldn’t Kim Jong-un use the opportunity of political disarray in the US to create more headaches for a distracted US government? Never let a crisis go to waste. Another potential irritant is the return of students to American college campuses. Imagine how the campus Antifa forces would react to Mr. Trump assuming emergency powers. It’s easy to foresee an acceleration of violence between the extreme Left and the Extreme right during what is shaping up to look like a major crisis in governing. If the campus Left had any tactical brains, they’d stop marching around in black uniforms and instead organize a mass renunciation of college loan debt.
Behind all this political strife will be wobbling financial markets. The message from the debt ceiling stalemate to the bond market would be that the US can no longer be relied on to pay its debts. Interest rates on US Treasury paper would have to go up as the long-lost concept of risk returned to the bond scene. People and institutions will not be induced to hold bonds unless the yield is recalibrated to the actual risk. Of course, in the mysterious world of bonds (i.e. securitized debt), the price of bonds goes down as interest rates rise. Meaning a lot of current holders of bonds would be hammered if they tried to sell. Rates rising would also spell big trouble for corporations and governments who have to make regular interest payments to bond-holders. A rate rise to as little as 3 percent on US Treasury bonds could spin the country into comprehensive bankruptcy.
How might stock markets and currency markets react to the scenario above? To me it would look like a drop of at least 1000 points on the S & P. The US dollar might actually rise initially as a whole lot of debt is renounced — which makes money actually disappear — but then you have the Federal Reserve waiting on another flank to roll out their own emergency response: Quantitative Easing No. 4, flooding the system with new “money” that has all the appearance and none of the mojo of value, tanking the dollar anew. As a wise correspondent of mine wrote a while back: “financialization is nothing more than money with its value removed.” (Graham Reinders.)
A lot can happen when a faraway butterfly flaps its wings and sets a slight current of air in motion.
Friday, June 30, 2017
Kunstler: The Technicolor Swan and When the Deal Goes Down.
Kunstler is a registered Democrat but despises the modern party. Perhaps he could register as an independent.
Kunstler: The Technicolor Swan.
Morehere.
Kunstler: When the Deal Goes Down.
More here.
Kunstler: The Technicolor Swan.
I registered as a Democrat in 1972 — largely because good ole Nixon was at the height of his power (just before his fall, of course), and because he was preceded as party leader by Barry Goldwater, who, at the time, was avatar for the John Birch Society and all its poisonous nonsense. The Democratic Party was still deeply imbued with the personality of Franklin Roosevelt, with a frosting of the recent memory of John F. Kennedy and his brother Bobby, tragic, heroic, and glamorous. I was old enough to remember the magic of JFK’s press conferences — a type of performance art that neither Bill Clinton or Barack Obama could match for wit and intelligence — and the charisma of authenticity that Bobby projected in the months before that little creep shot him in the kitchen of the Ambassador Hotel. Even the lugubrious Lyndon Johnson had the heroic quality of a Southerner stepping up to abolish the reign of Jim Crow.
Lately, people refer to this bygone era of the 1960s as “the American High” — and by that they are not talking about smoking dope (though it did go mainstream then), but rather the post World War Two economic high, when American business might truly ruled the planet. Perhaps the seeming strength of American political leaders back then was merely a reflection of the country’s economic power, which since has been squandered and purloined into a matrix of rackets loosely called financialization — a criminal magic act whereby wealth is generated without producing anything of value.
Morehere.
Kunstler: When the Deal Goes Down.
Who needs Russia when the Tweety-Bird-in-Chief is hacking his own presidency into a global joke? Or at least it might be a joke if the USA weren’t such a menace to international order, and to itself, by the way. Interestingly, the 25th amendment allows for the removal of a president from office on account of incompetence or disability, but not for being an embarrassment to the nation.
They may come after him anyway with the 25th, especially as the financial system unravels later this year, because this time, unlike 2008-9, central bank interventions will not avail to rescue the faltering money system from nine years of previous central bank interventions. All it takes is for the “liquidity” flows to seize up and before you know it, there’s no food in the supermarkets because everything in our just-in-time economy is exquisitely calibrated to the sure expectation of getting paid, and when that goes, it all goes.
More here.
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, March 06, 2017
Kunstler: Great Expectations (Not).
Kunstler: Great Expectations (Not).
Halloween’s coming super-early this year and it will be a shocking surprise to those currently busy looking for Russians behind every potted plant in Washington DC. First, accept the premise that your country has lost its mind.
This is what happens when societies (and individuals) can’t face the true quandaries of a particular moment in their history. All of their attention gets channeled into fantasy: spooks, sexual freakery, conspiracies, persecution narratives, savior fairy tales. It’s been quite a cavalcade of unreality for the past six months, with great entertainment value for connoisseurs of the bizarre — until you’re reminded that the fate of the nation is at stake.
The questions Americans might more profitably ask ourselves: can we continue living the way we do? And by what means? These matters of home economics have been sequestered in some forgotten storage unit of the collective mind for at least a year while a clock ticks in the time-bomb that sits on the national welcome mat. That bomb is made of financial plutonium and it’s getting ready to blow. When it does, all the distracting spookery and freakery will vaporize and the shell-shocked citizens will have a clear view of the bleak, toxic, devastated landscape they actually inhabit.
March 15 is when the temporary suspension of the national debt ceiling — engineered in a 2015 deal between Barack Obama and then House Speaker John Boehner — finally expires, meaning the government loses its authority to continue borrowing money. The chance that congress can pass a bill raising the debt ceiling to enable further borrowing is about the same as the chance that Xi Jinping will send every American household a dim sum breakfast next Sunday morning by FedEx. The US treasury will then be left with around $200 billion in walking-around money, at a burn rate of about $90 billion a month — meaning that that around June sometime the country won’t be able to pay invoices, issue salaries, send out entitlement checks, or do anything, really. It means pure government paralysis. It means no infrastructure spending jamboree, no “great” wall, no military shopping spree, none of the Great Expectations sewn into the golden fleece of Trumptopia.
Meanwhile, over the next few weeks, Janet Yellen and her crew of economic astrologasters at the Federal Reserve will have to put up or shut up vis-à-vis raising the interest rate on the basic overnight lending rate. The Las Vegas odds of it being raised currently stand at around 95 percent. So, they will be running that play around the time that the debt ceiling issue materializes into a live-action event. Of course, the Fed could welsh on its carefully-scripted previous hints and utterances and do nothing. But that option would probably extinguish the last remaining shreds of the Fed’s credibility, since they’ve been jive-talking about raising rates since they began “tapering” the QE bond-buying spree in the spring of 2013, i.e., a long time ago. The Fed’s credibility is synonymous with the dollar’s credibility. Look out below.
If those 95 percent odds are correct, the end of all that lovely cheap money will be the death of the Trumphoria stock market zoom as all algo hell breaks loose in Wall Street’s server farms and the trend is no longer anyone’s friend. Enter, stage left, the unintended consequences and diminishing returns of computer technology ripping apart the financial expectations of every banking official from Shanghai to 20th Street and Constitution Avenue. The American public will be left out in the parking lot with its head spinning.
So, enjoy the last few weeks of artificial Russia hysteria and LBGTQ bathroom neurosis. You’ll have other things to think about as the daffodils come peeping through the garden loam — like what to use for money to buy stuff if, perchance, the ATM machines go to lockdown, and anyway, after three days of that there won’t even be anything to buy (or steal) at the local supermarket, given the fragility of our supply chains. I know this sounds a little extreme, like Zombie Apocalypse, but you won’t actually see any zombies around. They were just part of the perpetual freak show of the mind that is being shoved aside for the starker theatrics of reality.
Halloween’s coming super-early this year and it will be a shocking surprise to those currently busy looking for Russians behind every potted plant in Washington DC. First, accept the premise that your country has lost its mind.
This is what happens when societies (and individuals) can’t face the true quandaries of a particular moment in their history. All of their attention gets channeled into fantasy: spooks, sexual freakery, conspiracies, persecution narratives, savior fairy tales. It’s been quite a cavalcade of unreality for the past six months, with great entertainment value for connoisseurs of the bizarre — until you’re reminded that the fate of the nation is at stake.
The questions Americans might more profitably ask ourselves: can we continue living the way we do? And by what means? These matters of home economics have been sequestered in some forgotten storage unit of the collective mind for at least a year while a clock ticks in the time-bomb that sits on the national welcome mat. That bomb is made of financial plutonium and it’s getting ready to blow. When it does, all the distracting spookery and freakery will vaporize and the shell-shocked citizens will have a clear view of the bleak, toxic, devastated landscape they actually inhabit.
March 15 is when the temporary suspension of the national debt ceiling — engineered in a 2015 deal between Barack Obama and then House Speaker John Boehner — finally expires, meaning the government loses its authority to continue borrowing money. The chance that congress can pass a bill raising the debt ceiling to enable further borrowing is about the same as the chance that Xi Jinping will send every American household a dim sum breakfast next Sunday morning by FedEx. The US treasury will then be left with around $200 billion in walking-around money, at a burn rate of about $90 billion a month — meaning that that around June sometime the country won’t be able to pay invoices, issue salaries, send out entitlement checks, or do anything, really. It means pure government paralysis. It means no infrastructure spending jamboree, no “great” wall, no military shopping spree, none of the Great Expectations sewn into the golden fleece of Trumptopia.
Meanwhile, over the next few weeks, Janet Yellen and her crew of economic astrologasters at the Federal Reserve will have to put up or shut up vis-à-vis raising the interest rate on the basic overnight lending rate. The Las Vegas odds of it being raised currently stand at around 95 percent. So, they will be running that play around the time that the debt ceiling issue materializes into a live-action event. Of course, the Fed could welsh on its carefully-scripted previous hints and utterances and do nothing. But that option would probably extinguish the last remaining shreds of the Fed’s credibility, since they’ve been jive-talking about raising rates since they began “tapering” the QE bond-buying spree in the spring of 2013, i.e., a long time ago. The Fed’s credibility is synonymous with the dollar’s credibility. Look out below.
If those 95 percent odds are correct, the end of all that lovely cheap money will be the death of the Trumphoria stock market zoom as all algo hell breaks loose in Wall Street’s server farms and the trend is no longer anyone’s friend. Enter, stage left, the unintended consequences and diminishing returns of computer technology ripping apart the financial expectations of every banking official from Shanghai to 20th Street and Constitution Avenue. The American public will be left out in the parking lot with its head spinning.
So, enjoy the last few weeks of artificial Russia hysteria and LBGTQ bathroom neurosis. You’ll have other things to think about as the daffodils come peeping through the garden loam — like what to use for money to buy stuff if, perchance, the ATM machines go to lockdown, and anyway, after three days of that there won’t even be anything to buy (or steal) at the local supermarket, given the fragility of our supply chains. I know this sounds a little extreme, like Zombie Apocalypse, but you won’t actually see any zombies around. They were just part of the perpetual freak show of the mind that is being shoved aside for the starker theatrics of reality.
Monday, September 12, 2016
Kunstler: Signs of Desperation.
Kunstler: Signs of Desperation.
Idiocy and mendacity are a bad combo in the affairs of nations, especially in elections. The present case in the USA displays both qualities to near-perfection: on one side, a boorish pseudo-savior in zero command of ideas; on the other side, a wannabe racketeer-in-chief in full command of her instinctive deceit. Trump offers incoherent rhetoric in opposition to the current dismal order of things; Clinton offers empty, pandering rhetoric in defense of that order. Both represent an epic national drive toward political suicide.
The idiocy and mendacity extend to the broad voting public and the discredited elites pretending to run the life of the nation. The American public has never been this badly educated and more distracted by manufactured trivia. They know next to nothing. Even college seniors can’t name the Secretary of State or find Switzerland on a map. They don’t know in what century the Civil War took place. They couldn’t tell you whether a hypotenuse is an animal, a vegetable, or a mineral. Their right to vote is a danger to themselves.
The elites operate in their own twilight zone of ignorance, only at a loftier level, flying on wings of sheepskin. Submitted for your approval: Harvard wizard Kenneth Rogoff’s new book, The Curse of Cash. This is the latest salvo in the international campaign to herd all money into the control of central banks and central governments, supposedly to make central planning of the economy more effective — but really for the purpose of extending the fallacy that the mis-pricing of credit and collateral (that is, of everything) can save the current incarnation of crony capitalism, and more to the point, save the fortunes of the racketeers running it, along with the reputations of their intellectual errand boys. Henceforth, all “money” transactions would be traceable, allowing unprecedented power for authorities to regulate the lives of citizens.
It remains to seen whether the American public might be snookered into this scheme, which already has some traction in Europe. Of course, Europe is headed into some interesting political heavy weather of its own in the months ahead, and there is plenty of reason to think that even the docile people of Denmark and Sweden might eventually revolt against the central bank regime if they see the Germans do it.
Aggravating matters is the hyper-complexity of our current financial arrangements, much of it in the service of deliberately mystifying the masses. Does the public understand the rationale behind zero interest rate policy (ZIRP)? Not any more than they understand the interaction of gluons and quarks or the doctrine of the Holy Trinity. It is one of the abiding mysteries of our time, for instance, that a group like AARP, purporting to represent the interests of retired persons, has offered not a peep of pushback to ZIRP, which has pounded retired people dependent on savings into penury. Of course, this might be explained by the pervasive racketeering feature of our current national life: AARP is an insurance racket masquerading as a citizen interest group. Or, stretching credulity to suppose that AARP is honest, perhaps the org’s executives don’t understand that zero interest on savings equals zero income to savers.
Kenneth Rogoff tries to justify his war on cash by invoking two of the era’s favorite bogymen: terrorists and drug dealers. Cash, he says, allows this axis of evil to do its thing(s). This is a ruse, of course. If currency is eliminated, these outfits will turn to gold and silver, it’s that simple. And so will everybody else, by the way. The real reason to abolish cash and herd all money into central banks is to permit the authorities to confiscate it one way or another, either by unavoidable taxation or by “bail-ins” — declaring deposits to be “unsecured loans” that can be repudiated in the event of a financial “accident.”
The results are already in for this experiment: “money” becomes more and more dishonest, that is, it cannot be trusted to represent what it pretends to stand for: an index of account and a store of value. Its role as the basis of capital formation is so impaired that real capital (i.e. wealth) cannot be generated, meaning that none of the credit issued as “money” will ever be paid back. Zero interest rate policy eventually equals zero interest paid. “Money” based on loans that won’t be paid back loses its legitimacy. Herding all the “money” onto central bank computers only allows for more three-card-monte maneuvers to conceal the bezzle. It would be much harder to hide the destruction of value in circulating paper currency. Eliminating currency as a medium of exchange can only lead to the repudiation of “money” — which will beat a quick path to the repudiation of all authority. And there is your recipe for really suicidal political disorder.
One more thing this week: why exactly are America’s Clinton-invested political elites inveighing so strenuously against Russia and its president, Mr. Putin? The US has gone out of its way to provoke Russia militarily the past several years. We foolishly sponsored the revolution in Ukraine that has left it a failed state — and which prompted Russia to reclaim the Crimea, historically its own territory and the site of its strategically crucial warm water ports. We continue to run NATO war game exercises along Russia’s borders. We fly surveillance planes in their airspace and then act surprised when Russia sends up fighters to remind us where we are. We hold naval exercises in the Black Sea and wonder why the Russians buzz us. Are we out of our minds? How would we act if the Russians flew their planes over Catalina Island or held naval war games off Hampton Roads? Who does the US policy elite think they’re kidding?
These memes in financial and foreign policy are dangerously crazy and dishonest. They are doing a good job of making the US political establishment look like a claque of fools and outlaws, and laying a red carpet for the election of Trump, the fake savior… the apotheosis of the fabled Greater Fool.
Idiocy and mendacity are a bad combo in the affairs of nations, especially in elections. The present case in the USA displays both qualities to near-perfection: on one side, a boorish pseudo-savior in zero command of ideas; on the other side, a wannabe racketeer-in-chief in full command of her instinctive deceit. Trump offers incoherent rhetoric in opposition to the current dismal order of things; Clinton offers empty, pandering rhetoric in defense of that order. Both represent an epic national drive toward political suicide.
The idiocy and mendacity extend to the broad voting public and the discredited elites pretending to run the life of the nation. The American public has never been this badly educated and more distracted by manufactured trivia. They know next to nothing. Even college seniors can’t name the Secretary of State or find Switzerland on a map. They don’t know in what century the Civil War took place. They couldn’t tell you whether a hypotenuse is an animal, a vegetable, or a mineral. Their right to vote is a danger to themselves.
The elites operate in their own twilight zone of ignorance, only at a loftier level, flying on wings of sheepskin. Submitted for your approval: Harvard wizard Kenneth Rogoff’s new book, The Curse of Cash. This is the latest salvo in the international campaign to herd all money into the control of central banks and central governments, supposedly to make central planning of the economy more effective — but really for the purpose of extending the fallacy that the mis-pricing of credit and collateral (that is, of everything) can save the current incarnation of crony capitalism, and more to the point, save the fortunes of the racketeers running it, along with the reputations of their intellectual errand boys. Henceforth, all “money” transactions would be traceable, allowing unprecedented power for authorities to regulate the lives of citizens.
It remains to seen whether the American public might be snookered into this scheme, which already has some traction in Europe. Of course, Europe is headed into some interesting political heavy weather of its own in the months ahead, and there is plenty of reason to think that even the docile people of Denmark and Sweden might eventually revolt against the central bank regime if they see the Germans do it.
Aggravating matters is the hyper-complexity of our current financial arrangements, much of it in the service of deliberately mystifying the masses. Does the public understand the rationale behind zero interest rate policy (ZIRP)? Not any more than they understand the interaction of gluons and quarks or the doctrine of the Holy Trinity. It is one of the abiding mysteries of our time, for instance, that a group like AARP, purporting to represent the interests of retired persons, has offered not a peep of pushback to ZIRP, which has pounded retired people dependent on savings into penury. Of course, this might be explained by the pervasive racketeering feature of our current national life: AARP is an insurance racket masquerading as a citizen interest group. Or, stretching credulity to suppose that AARP is honest, perhaps the org’s executives don’t understand that zero interest on savings equals zero income to savers.
Kenneth Rogoff tries to justify his war on cash by invoking two of the era’s favorite bogymen: terrorists and drug dealers. Cash, he says, allows this axis of evil to do its thing(s). This is a ruse, of course. If currency is eliminated, these outfits will turn to gold and silver, it’s that simple. And so will everybody else, by the way. The real reason to abolish cash and herd all money into central banks is to permit the authorities to confiscate it one way or another, either by unavoidable taxation or by “bail-ins” — declaring deposits to be “unsecured loans” that can be repudiated in the event of a financial “accident.”
The results are already in for this experiment: “money” becomes more and more dishonest, that is, it cannot be trusted to represent what it pretends to stand for: an index of account and a store of value. Its role as the basis of capital formation is so impaired that real capital (i.e. wealth) cannot be generated, meaning that none of the credit issued as “money” will ever be paid back. Zero interest rate policy eventually equals zero interest paid. “Money” based on loans that won’t be paid back loses its legitimacy. Herding all the “money” onto central bank computers only allows for more three-card-monte maneuvers to conceal the bezzle. It would be much harder to hide the destruction of value in circulating paper currency. Eliminating currency as a medium of exchange can only lead to the repudiation of “money” — which will beat a quick path to the repudiation of all authority. And there is your recipe for really suicidal political disorder.
One more thing this week: why exactly are America’s Clinton-invested political elites inveighing so strenuously against Russia and its president, Mr. Putin? The US has gone out of its way to provoke Russia militarily the past several years. We foolishly sponsored the revolution in Ukraine that has left it a failed state — and which prompted Russia to reclaim the Crimea, historically its own territory and the site of its strategically crucial warm water ports. We continue to run NATO war game exercises along Russia’s borders. We fly surveillance planes in their airspace and then act surprised when Russia sends up fighters to remind us where we are. We hold naval exercises in the Black Sea and wonder why the Russians buzz us. Are we out of our minds? How would we act if the Russians flew their planes over Catalina Island or held naval war games off Hampton Roads? Who does the US policy elite think they’re kidding?
These memes in financial and foreign policy are dangerously crazy and dishonest. They are doing a good job of making the US political establishment look like a claque of fools and outlaws, and laying a red carpet for the election of Trump, the fake savior… the apotheosis of the fabled Greater Fool.
Monday, October 05, 2015
"The Best Use of Wealth"
Searching online for examples of "misappropriation of wealth" I found this link to an essay, "The Best Use of Wealth" published in The Californian.
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