Event Horizon

     There's a particular moment known to all Baby Boomers when Wile E. Coyote, in a rapture of over-reaching, has run past the edge of the mesa and, still licking his chops and rubbing his front paws in anticipation of fricasseed roadrunner, discovers that he is suspended in thin air by nothing more than momentum. Grin becomes chagrin. He turns a nauseating shade of green, and drops, whistling, back to earth thousands of feet below, with a distant, dismal, barely audible thud at the end of his journey. We are Wile E. Coyote Nation.
      Is there anyone in the known universe who thinks that the US financial system is not fifty feet beyond the edge of the mesa of credibility?
      Nothing will avail now. Not even if Sirhan Sirhan were paroled at noon today and transported directly to the West Wing with a .44 magnum in each hand (and a taxi driven by the Devil waiting outside to take him to the US Treasury and the offices of the Federal Reserve).
     It's hard to imagine what kind of melodramas were unspooling on the Hamptons lawns this weekend, while everybody else in America was watching Nascar, or plying the aisles of BJs Discount Warehouse for next week's supply of mesquite-and-guacamole flavored Doritos, or having flames and chains tattooed on their necks, or lost in a haze of valium and methedrine.
      With the death of the IndyMac Bank last week, and the GSEs Fannie Mae and Freddie Mac laying side-by-side in the EMT van on IV drips, headed for the Federal Reserve's ever more crowded intensive care unit, there was a sense of the American Dream having passed through the event horizon that denotes the opening of a black hole.
     What would happen if the US Government acted to bail out these feckless enterprises (and what if they don't)? Either way, it's not a pretty picture. If Mr. Bernanke does start shoveling loans into the GSE black hole, he'll further undermine the soundness of his own outfit and do nothing, really, to repair Fannie and Freddie's structural problem of having securitized too many loans that will never be paid back. If instead Fannie and Freddie are flat-out taken over entirely by the US government (and remember the Federal Reserve is not the government), then the national debt will roughly double overnight -- which will pound the US dollar down a rat-hole.
      Meanwhile, the foreign holders of those decrepitating dollars might not rush to the redemption window, but they certainly would use them to buy up every oil futures contract on God's not-so-green Earth as fast as possible -- they'd be dumb not to -- which would leave American Happy Motorists with gasoline prices north of $5 a gallon, and possibly north of $10. (In that case, say goodbye to the airlines. In fact, say goodbye to what passes for the rest of the US economy, including especially the vaunted retail sector that supposedly counts for 70 percent of the action.)
     If Fannie and Freddie are left to die out on the desert floor, say goodbye to the housing market, the major investment banks, countless regional banks, the retirement accounts of virtually everyone in America, the viability of all fifty states' governments, and the day-to-day operating ability of all their municipalities -- and very likely the current incarnation of the world banking system.
     This process is really out of control now. The bottom line is the comprehensive bankruptcy of the United States. The Republican Party under George Bush will be known as the party that wrecked America (release 2.0). Painful as it is, Americans had better get a new "Dream" and fast. It better be a dream based on the way the universe actually works, which is to say an operating procedure run on earnest effort and truthfulness rather than merely trying to get something for nothing and wishing on stars. We might begin symbolically by evacuating Las Vegas and calling in an air strike on the loathsome place -- to register our new reality-based attitude adjustment.
      After that, we've got to get to work re-tooling all the everyday activities of life, including the way we grow our food, the way we raise and deploy capital, the way we do trade and manufacturing, the way we go from point A to point B, the way we educate children, the way we stay healthy, and the way we occupy the landscape. I know, it sounds like a lot, maybe too much. But grok this: we don't have any choice if we want a plausible future on this portion of the North American continent.
     Of course, none of that is likely to happen. Instead, and under the worst imaginable economic conditions, we'll probably embark on a campaign to prop up the un-prop-up-able and sustain the unsustainable -- that is, defend every status quo habit and behavior that we're used to, whether it can be salvaged or not. Of course, this would be a fatal squandering of our dwindling resources, but it it tends, historically, to be the last act of the melodrama in any faltering empire.
     The result, pretty soon into that process, will be social breakdown and political upheaval. Every tattoo freak out there who has been prepping for his own starring role in some kind of comic book armageddon will finally get his chance to shine. Lots of people will get hurt and starve. Property will change hands in a disorderly way. And at the end of this process an American corn-pone Hitler may be waiting to set everything and everyone straight.
     The markets open in about an hour. Good luck everybody.

____________________________________
My new novel of the post-oil future, World Made By Hand, is available at all booksellers.

Comments

[Nicholas Paredes]

Must work for those pesky clients today, but I'll have to keep an eye on the ticker. It'll probably continue to bobble around 11. It's like the Energizer Bunny, but has to make a move towards 10 one of these days...

[Farmgal]

Well having just found out today that I'm now jobless- other than the farm of course- and we all know how lucrative being a small farmer has been here in the US- I'm feeling about as optimistic as you are Jim.
That said, I've got wood for the stove, food to eat and a roof over my head(a paid for roof!)- so am better off than some may be this winter. It seems to me that greed has been the greatest cause of this- I think that you've been spot-on when you've targeted the whole idea that we can get something for nothing. We gotta start repeating-"there is no such thing as a free lunch" I guess- over and over til the masses get it.......

The saddest thing is that it seems to have been so avoidable- we have squandered so much in the way of resources and for what? I have visions of our descendents digging through landfills unearthing all the happy meal toys and Wal Mart junk and such- wondering just what it was that we were thinking...... kind of like when we look at the statues on Easter Island and wonder what the person who chopped down the last tree there had in mind.....

[LaughingAsRomeWasBurningDown]

Grin becomes chagrin: Love that turn of phrase. Excellent post today, thank you.

[upstatebob]

The corn-pone Hitler possibility is what concerns me. When things turn bleak the masses will grasp at a happy-talk, mythlike, hot air-spewing
Great Oz for deliverance from reality. The only sensible way out of this mess is to attempt to stabilize the dollar and let things
collapse that are unable to stand alone. -and then be VERY patient.

[Dave]

bombing vegas would be cool. we could do it with drones hooked to video game counsols. the kids would have a blast.

maybe we could put detroit out of its' misery while we're at it.

[Flamsey]

I was at a party this weekend and a woman there told me she thoguht it would take 2 years for housing prices to come back. I didn't have the heart to tell her they would never come back. And on NPR this morning they had a segment on Off Shore drilling. No one mentioned conservation. No one mentioned leaving a the tiny bit of oil out there for future generations.

[Moondog]

We are definitely "suspended in thin air by nothing more than momentum," so BRING IT ON, as Our Dear Leader once remarked. The headlines are "Stocks to rally, Markets to open sharply higher," and they will will just "prop up and sustain" as long as the momentum of this woefully bloated empire allows.

Not getting a free lunch does not adequately convey the prospects of what lies ahead: a very expensive lunch earned through physical labor, and the alternative for many will simply be: no lunch.

Meanwhile, there is a collective cognitive dissonance of a magnitude heretofore unimaginable. When Wile E. splats or the last tree falls, will anyone hear the "barely audible thud"?

The Beatles sang it so sweetly... "It won't be long, yeah." but the emergency will be. The stick of Acme Dynamite has been lit; it's just a matter of waiting to see how long the fuse is.

Moondog

"He not busy being born is busy dying." RZ

[FARfetched]

Farmgal, best of luck in your own personal CF. I figure I've got another year, maybe two tops, before I follow you to the unemployment lines. If that happens before the foreclosure moratorium that I anticipate happening, good-bye FAR Manor. Not too much to worry about there; just boot the renters who aren't paying rent anyway & move back into our old place off the road. Mrs. Fetched will piss and moan until she dies, but I told her when she forced this pig of a house on me that we'd probably lose it. At least we have a fallback position.

I'll be responding directly to JHK a little later. Meanwhile, the newest FAR Future episode (#42) is up.

[DanaJ]

Sorry to hear about your jobloss, Farmgal. Wish you the best.

And I have to agree that Greed is indeed the root cause of all that is going down here. Its like Wall Street took that '80s movie to heart and made Gordon Geko a real hero with "Greed is Good" as their mantra. So the money flows shamelessly to the top echelons, and they bitched about having to pay 'any' taxes on it, so they got their Boy George to basically eliminate taxes for the Uber-Wealthy (come on, do the wealthy really pay 'any' taxes, naw). So there you have it: The wealthy pay NO taxes having shoved off the burden on the remaining "Middle Class", or whats left of it, and oh, BTW, the Mid-Class is out of a job and BROKE.
And the so-called conservative Repugnicans went on a spending spree.
Just dont call it "Nation Building", that was a Clinton thingy. We are a "Hyper-Power" now, and can create our own realities, and a New Pax Americana, and by God them foreigners will love our Mom's Apple Pie or we will bomb them all to hell.
Ooops, is that a chink in our New Reality? Do I see some 'Real' reality peaking thru? Un-oh, better pass the Nu-Koolaid. Say, maybe if we paper over the chinks with some freshly printed $100 bills it will be ok.
And so the Holy Dow is down from its Rocky Mt Hi in January of 14000 to jerking around 10000 like a heart patient on the ER bed after getting hit with the paddles.
So just who gets to pronounce the Hour of Death? It can't be that far off.

Well, off to the habitrail, check in with ya'll later.
And say, the smoke seems to have cleared a bit here in NorCal. Did someone get Dicky to close the Black Portal? Thanks.

[peakoilmom]

Not to be mundane, but is there a way to read the last 20 or so comments on one of Jim's posts without having to scroll through the 500 or so before them?

I wanted to read what people were chatting about last night, since it seemed like such a pivotal time and I had insomnia, but I gave up. It's too time-consuming to get through all the comments pages by using the arrow at the bottom of the page.

(I do not want to subscribe to the blog's feed.)

Thanks!

[just john]

You're deliberately distorting the whole motivation behind the Parole Sirhan, Arm Him and Send Him To The White House movement!

[FARfetched]

Peakoilmom, click on the "next page" link at the bottom of the first page of comments. Then go up to the address bar, and find the bit that says "..../2/#comments"

Change the "2" to "200" and hit Return — that loads the very last page. Figure about two pages per day, so you may have to back up one page to catch all the comments if you don't check in often.

[jay]

peakoilmom, I just leave the page open and hit refresh...

[westville_girl]

peakoilmom, you can also bookmark the last page you read....

[Consultant]

We sold TRILLIONS of dollars of worthless securitized bonds, paper, whatever, to countless central banks, investments houses and wealthy individuals here and mostly around the world. They want their money back, but it's gone.

It's not really gone, its just that the money that was loaned is not being used to repay mortgages. You can find the money in all those stainless steel appliances in those fancy new kitchens, in tricked out backyard pools and cabanas, new monsters SUVs and other toys.

Some of the money IS gone. Vacation trips to Fiji and other places, high end dinners, were paid for with home equity loans that are in foreclosure. You can't give back a vacation.

All the institutions and people who are now holding the bags are very mad. Historically, people die when this much money is involved. At the very least, they will not do business with the scammers for a long time. It usually takes new people, with new rules, and often new institutions to restore confidence.

Most of the people and institutions who committed this epic fraud are still in place. They include Republicans, Democrats and Independents. The American financial system is now considered a gangster organization.

It will take a completely different group of people with different values and few associations with the perpetrators of this epic fraud to restore confidence in our financial markets. No amount of Jim Cramer shouting or pretty young TV commentators is going to change that. That means the next generation. Folks, that is years from now.

The Housing Bubble, as we know it, is dead.

For those of you too young (Wow! under 50) to remember life before easy credit, get ready. We are returning to the days of living life within your means. A very different country.

[Uncle Al]

All civilizations grow and die like an RC circuit,

http://www.mindcreators.com/Images/NM_RCCircuit.gif

The US is Slim Pickens riding the bomb. "Aaaaaa hooooo! Aaaaaa hooooo!" plop

[peakoilmom]

Thanks for the suggestions on getting to the last page quickly. I appreciate them.

[LaughingAsRomeWasBurningDown]

Speaking of corn-pone Hitler, all this technology will make things so much more fun on a large scale. And by fun, I mean the sarcastic ironic version of "fun".

http://www.washingtontimes.com/weblogs/aviation-security/2008/Jul/01/want-some-torture-with-your-peanuts/

[peakoilmom]

Changing the page number is great! I should have realized to look at the code. (Kunstler's previous post looks to have 22 pages of comments at this point.)

That's a great suggestion. Thanks again!

[hooting]

Nozzle Rage:

http://www.youtube.com/watch?v=VDXTgfDJP3I

[Moondog]

Nice image, Uncle Al, but it's not Slim--- it is T. Boone Pickens, waving his Texas Stetson, straddling the bomb, and making himself the illusory savior to rise from these streets with those endless natural gas reserves that will save us. Yeeeeee-hahhhhhh!

And it's a 50-megaton Acme stick 'o dynamite that Slim's riding.

[PillowTick]

truly strange days people. im in the grocery store, I'm in the bread aisle
and theres big gaping holes of stock, whole sections missing where the store brands would be. and I know this isn't a lazy stock boy thing, because it was like that last week.
no one wants the good bread. the 9 grain sunflower seed and raisin jobbers. they gotta buy the bad bread to survive.it's either glue flavored bread, or a tank of gas to work long hours, in order to buy (you guessed it).another loaf of glue flavored bread. and when 5 people are standing around trying to make a major decision on a freakin loaf of glue flavored bread, you know your through the looking glass.
or maybe you dont.
i see a lot of people posting about which candidate is good for what, and who's policy sucks more, which frankly bores the tits offa me. it seem to me like trying to elect a captain of a life raft, while it's sinking. (a tired analogy yes but apt none the less.) i just started to post here and believe me i can pundit like a rockstar. but i made a promise to myself to tell you guys about the things that are happening around me with as little florish as possible I hope im doing that i'm trying to talk about things I see, for real! there a low level anxiety out there for real.there's people living on one can of soup a day,for real! I for one am luck I have no children and live on TWO cans of soup. FOR REAL! flip flop, swift boat, soft on terrorism, my Ass! I'm worried for my neighbors and friend I'm stocking up on canned goods,dry goods,patching up my inner tubes on my ten speed and debating whether or not the local shoe repair guy will think I lost my mind if I ask him to teach me his trade. your might be saying "oh your just scared pillow tick, don't be so chickensh@t" have hope for corn sakes".well i do hope what JHK calls "The Long Emergency only last a couple of years,and at the end I'll get on my knees and thank Jesus,Buddha,and the Wizard of Oz for the return of the Mac Rib sandwich.but deep in my heart i don't think it's a short term thing. my instincts say to prepare and i try to.in the meantime the slaughterhouse stare in the face of the old lady in front of the pharmacy haunts me. this is not a divisive statement it's the Goddamn truth and i'm powerless to help her.FOR REAL.
Welcome to Dick Cheney's America

[montysano]

As I made my 4 mile commute this morning, the rightwing yapping dogs were hard at work on the radio: "Nothing changes! Conserve nothing! Drive! Buy! DRILL!", as if a big ol' dose of steely American resolve will win the day.

Rush summed it up last week:
“Remember Ronaldus Magnus talking about the shining city on a hill. Well, there is no shining city on a hill without domestic oil, coal, gas, and nuclear power. There is no shining city on a hill with windmills and solar panels and compact fluorescents and hybrids and ethanol. That has never equaled a shining city on a hill, and it won't. The Democrats have turned the dimmers on in the shining city on a hill. The Democrats would prefer a blackout in the shining city on a hill.”

Shorter Rush: "Conservation is for pussies. Liberals hate America."

I've come to believe that this steady diet of crap from the MSM and talk radio has, in essence, caused national brain damage. My colleagues and neighbors who wallow in this stuff now see the world purely in ideological terms. Reality, mathematics, etc. are irrelevant. These are the morons who will, when TSHTF, turn to the "new Hitler" for answers.

[Rubber Toe]

@ Peakoilmom: Don't know if this is the fastest way to get to the end of a long blog, but this works for me. Go to the comments section of the blog that you want, then go to the bottom of the first page and hit the "double arrow" thing to go to page 2. If you then look in the URL line of the browser, the thing that starts with http://james... you will see the number 2 by itself near the end indicating that you are on page #2. If you change that 2 to a big number, say 200, and hit return, the blog software will take you to the last page.

RT

[FARfetched]

«The American financial system is now considered a gangster organization.»

By whom, Consultant? As far as I can see, the prime players are going along with the bailout, perhaps hoping they can get most of their money out. But… like I said last week: all that "money" was created out of thin air, and back to thin air it's going. Nobody has really lost anything except points in a game. That's why they're called "players."

Now lest anyone think I'm saying the consumers get off scot-free, they haven't. Their jobs (source of income) have gone to Mexico or China. The real money they've put into the system (via houses, primarily) is no longer liquid, and it's the bulk of their assets. The players haven't lost anything significant by comparison.

«they gotta buy the bad bread to survive.it's either glue flavored bread, or a tank of gas to work long hours, in order to buy (you guessed it).another loaf of glue flavored bread.»

PillowTick, it's pretty easy to make bread. The price per loaf is about the same as the glue-flavored stuff, but the quality is premium. I kind of locked-in my per-loaf price a few months back by buying about 40 pounds of flour & stashing it in the freezer. Use whatever local sugar source you have — honey, molasses, and sorghum syrup all make good bread. Even light corn syrup works if you don't have anything else.