No Discipline

August 8, 2005,
     Has the world noted that the conservative establishment in America -- including the always prim George W. Bush and his buttoned-down minions, the heavenly hosts of mass-market evangelism, the zillionaire retired CEO authors of how-to-get-rich books, and the media tub-thumpers like David Brooks of the New York Times -- I repeat, has the world noted that they all preside over the most slovenly, undisciplined, and reckless economy the world has seen since mankind started bathing regularly?

     Many are amazed at the levitation of a financial system with no remaining reality-based understructure of value creation. Zero-percent financing. Loans to anybody with a pulse. Instant conversion of hallucinated house value appreciation into speedboats and Hummers, college kids declaring bankruptcy on graduation at unprecedented rates, the explosion of "creative" financial instruments conjured out of the promises of millions to pay back money that they will never earn, and swapped in a spiral of casino-like wagers into metaphysical ethers of delusion -- things like that. I sort of left out the pretend money that Mr. Bush's government itself affects to disburse, and the bond racket linked to that affectation.

     We're a country with no discipline, led by fake scoutmasters, moneygrubbing ministers, chiseling accountants, and oversexed schoolmarms. The new national motto: Something for Nothing. The new spiritual capital: Las Vegas.

     Now, it's my personal opinion that we really are headed for crash central this fall. The price of oil is entering uncharted territory. Natural gas has virtually tripled in price since 2003. People are beginning to fear that the heating season will be brutal for those in the employ of WalMart and worse for those in the employ of nobody. Magical as this phony-baloney over-leveraged economy has seemed, whatever remains of real life will be affected by higher gasoline prices. I know it sounds absurd to say that, because so far Americans have seemed to absorb a one year price doubling without complaint. But we're hostages to motoring, whether we like it or not, and when the price of gasoline goes north of $3 a gallon (coming very soon) yowls will be heard even in the soundproofed sanctums of Karl Rove's west wing headquarters.

     Trouble is brewing with WalMart's chief partner, China. They are ticked off that they are prevented from acquiring hard strategic assets, such as US owned oil companies, with all those US dollars we have snookered them into hoarding from the sale of their plastic-ware. Together with Russia, China is egging on the former soviet-o-stans to kick out our military bases. China is inking long-term supply contracts with the people we desperately depend on for our oil: Venezuela and Canada. China is tired of our tendentious jive. Pretty soon they are going to want to try to kick our ass. Let's hope they don't try that by making moves in central Asia, where our prospects for fighting a land war with them are not promising.

     Meanwhile, at home, we will come to grips with the sheer fact that a society unable to produce things of real value must contend with a tanking of those financial markers pegged to the expectation that a society can produced things of value. When that recognition hits, there will be far fewer zero percent loans and no money down ghost condo sales. The unwinding will begin. America will be reunited with it's long-lost biological parent: reality. What will the despondent public think of the conservative establishment then?

Comments

[Barry]

Good morning, Mr. K. -
Great post, as always! My hunch is we'll see and even geater divide between 'haves' and 'have-nots' emerge. The diminishing 'middle class' or what's left of it, will be hit very hard - many will discover, perhaps for the first time in their lives, the real horrors of being 'poor.' While many have found solace in prayer, it's not going to feed the family (barring a 'yet-to-be-seen miracle.'
All this brought to a city/town near you, courtesy of an administration that is 'conservative' in name only.
Is that a 'great gnashing of teeth' that I hear?

[speedbird]

So we have the crazy situation where prices are rising, but they are being tolerated by a society that cannot see past the price...

You know, I've only just noticed just how bizarre that really is.

Sounds like something's broken, but I wouldn't like to say what.

[Barry]

Ooops. I meant to type an, not and.

[Dave]

The enforcement of solvency on the insolvent will mark the early stages of collapse as the bankruptcy bill takes hold. This in turn will further alientate the underclass and terrify the rickety middle class. This winter's heating season will see the appearance of the 100,000 of thousands become the newly huddled masses yearning to be warm. Ungodly hell is right around the corner and we have no party to defend the real interests of the country. The Republicrats will be soon viewed as a treasonous pack of scum who led us into a corner with no escape. Once this understanding gains hold and the now entranced and deluded are waken up by Mommy Reality all bets are off with what will transpire. I predice revolutionary violence and a long spell of tyranny of what type I can't predict but my biggest fear is it may go by the name of the "Jesus Brigade" or some such thing. Don't expect reason and rationality to supervene along with reality. Rather it will be further delusional scapegoating and the rise of militant groupings promising salvation. Oh well at the least reaity is humanly interesting as opposed to most what this society offers for fun.

[Ulrich Schreglmann]

People bathe regularly??

When’d that happen?

Why does no one ever tell me of those trends?!

[unwashed]

let the games begin....whoopeee!!!

[ross]

I do fear that despite the heretefore resilience of the U.S. consumer to the incessant rising price of petroleum and oil, it will prove to be the straw that will eventually break the camel's back. the camel's back of course is our economy. Oddly, I too have this fall as the time for the worm to turn. And if early September, specifically September the 3rd turns out to be THE date of the secondary top in the stock market, well that will be quite something for anyone with a knowledge of stock market history.

[kd]

Great post, Jim.

You've hit the nail on the head about our nation's hallucinated wealth, & "Something for Nothing" being the blissed-out prayer of the American worker/shopper. Perhaps it's no accident that the poker/gambling section is right next to the business section at the bookstore where I work. The customer who buys "How to Think Like a Billionaire" is just as likely to be the same one who buys "Winning at High Stakes Poker".

Another great American scam (in addition to zero financing, instant loans, creative accounting, etc) is the resounding corporate cry of "Jobs! Jobs! Jobs! We've got 'em! Come & get 'em!" Yesiree folks, manufacturing jobs (such as flipping hamburgers), service jobs ("Welcome to Save-O-Rama. How may I help you?"), & of course everyone's favorite, contract labor! (No more pesky benefits that leach profits! Give that CEO a raise!)

*

Some have pointed out the "dark" tone of these posts. Yes, there's no denying it. But there is light, too. The light of reality. A flame that Jim & many others are trying to kindle. Because it's important (& for many, it's the first step) to see the hallucinatory nature of what's being passed off for the American Dream these days. To talk about it, at home & at work. To be the boy in "The Emperor's New Clothes". It takes courage to cultivate sanity, cultivate ties with sane people. To de-hypnotize.
You'll find you are not alone.

*

"Even so, at the feet of the great and grim vertical problems
Of contemporary life I am sustained and cheered
By the perenial shining of a few
Little personal relationships..."

-Hugh MacDiarmid

[Sarah]

I wonder what will happen to the telecommunications industry... and the Internet?

[Dave]

"What will happen to the internet ?"

As commerce collapses and mass poverty ensues all tools for radical organizing will be attacked. The elites want us even more stupid than we already are about how the world really works. They will concoct some excuse to close the internet and along with it other sources of information. If they could they would even confiscate booksk in your possession. We are on our way toward the last attempt at totalitarianism in world history. It will last a brief spell but them sputter out in the face of rsing problems and the energy demands of maintaining despotic regimes. Afterwards it will be much smaller social world existing in vastly large and strange new earth. Humankind is returning to the margins of the life of the earth and will be forced there or run there. Either way prepare for very strange period in human history.

[kd]

http://perspectives.anarchist-studies.org/11resistingpanic.htm

[biztheclown]

"And if early September, specifically September the 3rd turns out to be THE date of the secondary top in the stock market, well that will be quite something for anyone with a knowledge of stock market history."

Ross, what does this mean? Help out those of us who don't know what your intriguing comment refers to.

[Euthydemos in Athens]

I'd like to ask a question, but I don't really expect any reponses.

Every time I come here, I get terribly depressed, yet I can't stay away.

What should I do?

I am trying to follow Jim's advice of buying a reasonably priced house in a smallish town. I live 8 miles from work, I drive a reliable Hyundai, which gets pretty good mileage. I have no credit card debt, no consumer binging, paying down mortgage fast. Most of my money is in MMMFs and large caps. What should I be doing? The peak oil people say, start a home garden, but I say without a shotgun, they ain't gonna have that home garden long.

[octingentenary]

The Hummers and speedboats are everywhere here in coastal California. Years of seeing the newest Mercedes or Porsche on the road on the very day they hit the dealerships can't prepare you for this. Even old Los Angeles hands are asking where all this wealth is coming from. In west Los Angeles last month, I saw a new $50K+ vehicle every few yards.

My neighbor -- four kids, wife doesn't work -- just bought a monster Toyota Sequoia. He's a good guy, very hard working, but he is a garbage man.

Local grocery clerk drives a Cadillac Escalade.

I agree with a previous poster's observation about the peculiar price insensitivity lately: another neighbor complains about the $100/wk gas bill for his commute, but doesn't sell his F250 pickup truck.

House prices may be nearing a plateau in my neighborhood. An interesting couple of years lie ahead: I suspect that the bankruptcy bill may be mentioned in our grandchildren's history textbooks.

[octingentenary]

I may have mis-typed some word in my above post, but, as usual, you can figure out my meaning from the context -- we all type "then" for "than" sometimes, or "of" for "off" -- so I see no need to post a follow-up message correcting anything.

[kd]

Euthydemos,

Sounds like you're doing fine, in my estimation. Go ahead, buy a shotgun. Cultivate your garden, stay debt free, sane in your actions, responsible. Make friends, learn a musical instrument. Write, paint (draw, if painting's too expensive), scavenge. Walk, ride a bike. Learn new skills. Read. Lots. Surf the net while it's still here & still "free". Get involved in local politics if you like. Wean yourself from worry/attachment to money. Don't be scared (fear is the greatest mass control technique of all); why be depressed? Love. Work. Develop a sense of humor.

http://www.tinfishpress.com/tinfish1/tinfishnet/mamas.html

Sure, some of it sounds trivial. It's what I believe.

[kd]

Well, I tried to link with a fine, funny poem titled "Mamas, Don't Let Your Babies Grow Up to be Supply-Side Economists" by Jules Boykoff, but it didn't work.

[Loveandlight]

"Even so, at the feet of the great and grim vertical problems
Of contemporary life I am sustained and cheered
By the perenial shining of a few
Little personal relationships..."

That is a beautiful and noble sentiment, and that you posted it shows that you are a true "mensch" (retroslang for "cool dude" or whatever they say these days, AFAIK), but there is part of me that fears that our consumer culture has so screwed up our values that are a lot of people who won't be able to relate to that quote because nearly everybody in their environment subscribes to these screwed up values.

I think Ross may very well be referring to the big stock-market crash of October 29, 1929 ("Black Tuesday"), which ushered in the Great Depression.

[Syltty]

"when the price of gasoline goes north of $3 a gallon"

Newsflash:

$5,3 a gallon here where I live and still no riots.

[kd]

Where do you live, Syltty?

[Syltty]

I would like to know if old 20/80-thumb rule applies in oil usage (20% accounts for 80% of usage). How big portion of US population consumes 80% of oil? Is oil consumption evenly divided?

"Most of my money is in MMMFs and large caps. What should I be doing?"

Moving at least 50% of your portfolio to foreign currencies so you will be protected if dollar will take a dive. If it does not dive, it is anyway good idea to diversify around world. Just pick some indices/stocks from all continents. Don't forget ener

[The trick]

What will the despondent public think of the conservative establishment then?

The trick will be to mold that rage into something constructive. The simpler trick will be to move the destructive rage onto a different target.

Alas, the easy way shall be chosen.

[Syltty]

"Where do you live, Syltty?"

Finland at Northtern Europe. This is not densely populated country. For example my father has 80 km to work (they use joint ride). But most of people have reasonable work trips, I think most of people will have less than 20 km to work.

I work at home so oil prices will not direct affect my financial situation (indirecty, if depression, yes ofcourse). I really need my car maybe two times a week.

[Weaseldog]

Some people are under the misconception that oil prices only affect commuters going to and from work.

They don't know that there's a whole business infrastructure called transportation, that includes commuters as a mere subset of it's functioning.

When prices spiked in late 2000, several long time trucking companies went out of business. They were unable to continue to do business in a worse case environment because like all businesses they had locked in long term contracts to keep customers.

As a result, their customers that wouldn't budge on higher costs to keep those companies solvent, had to negotiate new contracts with other firms that were being stretched thin and needed to make numbers. As a result, shipping costs for food and cotton shirts went up. We all paid higher prices.

Everyone paid more. And the ripple effect put additional businesses under. And with all of these businesses going under, people lost jobs. As people lost jobs, they quit spending money. This caused a loss of business which costs jobs and put businesses under.

Now the US, the UK and Australia are financing their way out of inflation by opening the money supply. People in all three nations are using their homes as ATM machines to finance Las Vegas vacations and concert tickets to see the Rolling Stones. There are signs that this market mania is reaching it's limits.

When the bubble stops expanding, we'll soon see if the Chinese will pay the bill. If not, expect to see rising fuel prices, loss of business, increased unemployment, cycle and repeat.

When it's over, then fuel prices will drop and economists will explain it all away. In the end they'll say, "See! There was no problem!"

[estraven]

Ah, and on top of all this, look for the H5N1 pandemic coming to your neighborhood soon ... I don't know about y'all, but between PO and the pandemic, and global warming and global economic meltdown, I'm starting to feel like a really bad country music song.