The executives of Citibank,
Goldman Sachs, J.P. Morgan, and a long list of hedge funds, will be
found cringing in their wine-lockers behind a measly layer of privet
hedge when the tattooed minions of Glen Beck come a'calling.
James Kunstler -- World News Trust
April 6, 2009 -- Even while a wave of reflex nausea washed over America last week, and
the unemployment rolls swelled by much more than another half million,
the greatest stock market suckers' rally in seventy years pulled in the
last of the credulous.
These are strange days. The earth is heaving and
the buds swelling again -- at least north of the equator, where most of
the action is -- and the global economy, which was supposed to be a
permanent new add-on to the human condition, is sloughing away in big
horrid gobs. But no one in charge of anything can believe it. The
banking fiasco has introduced so much noise into the system that world
leadership can't think straight.
What they're missing is real
simple: peak oil means no more ability to service debt at all levels,
personal, corporate, and government. End of story. All the other
exertions being performed in opposition to this basic fact-of-life
amount to a spastic soft-shoe performed before a smokescreen concealing
a world of hurt.
If the "quantitative easing" (money creation) and
fiscal legerdemain (TARPs, TARFs, et cetera) happen to jack up the
"velocity" of the new funny-money, and the world resumes its previous
level of oil use, the price of oil would rise again -- this time
astronomically because the previous crash of oil prices crushed the
development of new oil projects to offset depletion -- and the global
economy will crash again. Only the next phase of the disease is liable
to move beyond the financial and into the social and political realms.
Disorder of various kinds will rule -- toppled governments, civil
unrest, international tension and conflict.
The United States is doing
everything possible to avoid these awful realities, but probably the
worst self-deception is the idea that everything would be okay if we
could just "re-start lending." That's just not going to happen. There
is no more capacity to service the debt we've already piled on.
Americans borrowed too much, and the bankers who made obscene fortunes
in fees and bonuses in fraudulent lending managed to leverage this
unpayable debt into the greatest collective swindle the world has ever
known. The swindle has sent poison into every cell of the macro
socio-economic organism, and further swindles are unlikely to revive it.
The
rally in stocks, the financials in particular, could go on for another
month or two. In the meantime, banks are striving desperately to avoid
calling in more bad loans -- especially in commercial real estate,
malls, strip malls, Big Box power centers -- because they don't want
any more losses on their balance sheets. That can only go on for so
long, too. Sooner or later the daisy chain of credibility in the
fundamental transactions of business lose legitimacy and something's
got to give.
My guess is it will first take the form, sometime
after Memorial Day (but maybe sooner) of wholesale liquidations of
everything under the North American sun: companies, households,
chattels, U.S. Treasury paper of all kinds, and, of course, the S&P
500. We'll soon find out whether an organism the size of the United
States can run an economy based on one family selling the contents of
its garage to the family next door. My guess is that this type of
economy won't support the standards of living previously enjoyed in
places like Dallas and Minneapolis.
The socio-political
fallout from the inherent anger and disappointment in all this is
liable to be severe. The public is already warming up for it, with
cheerleaders such as Glen Beck on Fox TV News calling for the formation
of militias, and gun sales moving out-of-sight. One mistake that the
banking elite and their lawyer paladins made the past decade was their
show of conspicuous acquisition -- of houses especially -- in
easy-to-get-to places where anyone can see them, for instance an angry
mob in Fairfield County, Connecticut, or Easthampton, New York. Unlike
the beleaguered elites of South Africa (where I visited recently), who
live behind layers of fortification, the executives of Citibank,
Goldman Sachs, J.P. Morgan, and a long list of hedge funds, will be
found cringing in their wine-lockers behind a measly layer of privet
hedge when the tattooed minions of Glen Beck come a'calling.
This could perhaps be avoided if someone in authority like U.S. Attorney
General Eric Holder took an aggressive interest in the multiple
swindles of the decade past, and commenced some prosecutions. But the
window of opportunity for this sort of meliorating action may close
sooner than the government and the mainstream media believe. Social
phase-change, as in the formations of mobs, is nothing to screw around
with. Once the first window is broken, all bets are off for social
stability. My guess is that the various bail-out gifts to the bankers
are long past having gone too far in the eyes of this increasingly
flammable public.
We have no previous experience with this
type of social unrest. The violence of the Vietnam era will look very
limited and reasonable in comparison -- in the sense that it was an
uprising on the grounds of principle, not survival. And the Civil War
was a wholly regimented affair between two rival factions. This time,
people with little interest in principle beyond some dim idea of
economic fairness, will be hoisting the flaming brands out of sheer
grievance and malice. By the time Lloyd Blankfein sees the torches
flickering through his privet, it will be too late to defend the honor
of his cappuccino machine.
President Obama will have to starkly
change his current game plan if this outcome is to be avoided. I think
he's capable of turning off the mob -- of preventing the grasshoppers
from turning into ravening locusts -- but it may take an extraordinary
exercise in authority to do it, such as the true (not pretend)
nationalization of the big banks, engineering the exit of Ben Bernanke
from the Federal Reserve, sucking up the ignominy of having to replace
failed regulator Tim Geithner in the Treasury Department, and calling
out the dogs on the swindlers who had the gall to play their country
for a sucker.
As I've averred more than a few times in this
space before, the standard of living in America has got to come way
down. We mortgaged our future and the future has now begun. Tough
noogies for us. But the broad public won't accept the reality of this
as long as the grandees of finance and their myrmidons appear to still
enjoy the high life. They've got to be brought down hard, perhaps even
disgraced and humiliated in the courts, and certainly parted from some
of their fortunes -- if only in lawyer's fees. Mr. Obama pretty much
served notice to this effect last week, telling a delegation of bankers
in the White House that he was the only thing standing between them and
"the pitchforks." It's possible he understands the situation.
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My 2008 novel of the post-oil future, World Made By Hand, is available in paperback at all booksellers.
LINK: Clusterfuck Nation