Full Commanding Denial

       If central casting called for a poised, straight-talking, and capable-seeming president, it would be hard to come up with someone better than the Barack Obama who walked and talked around the White House grounds with Steve Croft on "60-Minutes" Sunday night. He may perfectly represent the majority who elected him, though, because he also appears to be in full commanding denial of the realities overtaking our American experience.
      Those realities include the fact that we can't possibly return to the easy credit and no money down "consumer" economy no matter how many nominal dollars get shoveled into the fiery furnaces of banks too-big-to-fail. As Treasury Secretary Geithner's underling, Stephanie Cutter, said last week, "Our singular focus is on increasing lending to support economic recovery. Everything we do to stabilize the financial system is done with that goal in mind."
      Lending on the scale that became normal over the last decade is for sure the one thing that we will not recover. We turn around in 2009 to find ourselves a much poorer nation than we thought we were a year ago, especially among that broad range of formerly middle-class wage-earners who lived so luxuriously until yesterday. The public can't process this reality and the president, for all his relaxed charm, is either not ready to articulate it, or can't process it himself.
     Everything that we're doing right now is engineered to avoid reality, to sustain the unsustainable, to recover the unrecoverable, when the mandate of reality compels us to face our losses in order to move on to the next chapter of a collective American life. The next chapter would be a society that runs on a much more local and modest scale, centered on essential activities like growing food, requiring harder physical work, and focused attention -- in other words, the opposite of a society lost in abstractions, long-range daisy chains of off-loaded responsibility, and incessant pleasure-seeking.
     In retreat from this reality, we've set in motion two forces that are pretty certain to bring us to grief. The first proceeds from the fateful FMOC decision last week at the Federal Reserve Bank to begin buying massive amounts of our own treasury bonds and bills. This is predicated on the idea that the mechanisms of wealth production -- even of illusory wealth, such as the fortunes created by trading securitized unpayable debt -- can keep chugging along, spinning off limitless additional suburban villas, chain stores, car trips, and deep-fried snacks. It would be sententious to explain how this destroys currencies, but wherever "monetizing debt" has been tried before in history, that is the outcome. The result would be ruinous at every level and would lead straight to the second terrible force: social upheaval brought on by the conversion of economic problems into political turbulence.
     Those two forces are underway right now, in fact, since the overt monetizing of last week was preceded by the shoveling of bail-outs, which tacitly guaranteed a collapse of credibility in US debt instruments. I'm not in favor of violence and anarchy, but after the AIG bonus affair, it's hard to imagine that we are not one more corporate misdeed away from a rocket-propelled-grenade, or something like that, being fired into a glass office tower somewhere -- and then the "first-broken-window" rule of social disintegration comes into play. Meanwhile, I stick to my time-table of six-to-eighteen months before the reckless creation of new money-for-nothing filters through the system, overcomes even compressive mass bankruptcy, and starts expressing itself in the sinking value of dollars and the revved up velocity of their circulation in pursuit of tangible commodities.
     We're already seeing the first twinges of that in the up-creep of oil prices, busting through the $50-a-barrel barrier last week. Since scarcity tends to express itself in gross volatility, it's easy to imagine oil prices rising swiftly beyond the $147-per-barrel record level of last year. As that occurs, the most basic premises of everyday life in the USA will be called into question. If you think car sales have been bad lately, with oil in the $35-a-barrel range most of the winter, just wait. The newly-minted unemployed will be marooned in their subdivisions. They will not be buying GMC Yukons on 48-month installment contracts, let alone X-boxes on their Visa cards. They might be very very hungry, though. All bets are off as to how these social classes may organize themselves to alleviate their hunger (and express their anger about it).
    Given all this, it's kind of hard to believe that the savvy, thoughtful Mr. Obama is going along with such a disastrous program as the one his "team" is rolling out. Perhaps his ease and confidence masks a tragically conventional world-view, an incapacity to imagine "change" outside a very narrow range of possibility. I must say I doubt this is the case. I think, he is going along, for the moment, with a consensus of wishes to prop up life as we know it at all costs. This consensus emanates from the top down and the bottom up. The millions of "Joe-the-Plumber(s)" out there don't want to rethink the terms of existence anymore than the lords of Goldman Sachs. I also think that circumstances will force Mr. Obama's hand before long -- specifically that a moment will arrive when he goes on TV and tells the American public that things have changed way beyond the scope of what they even imagined when they pulled the levers last fall and voted for an uncharted future.
      Capable observers are calling, meanwhile, for a robust bear market rally moving through Spring, on technical grounds that have little to do with the greater forces roistering in the background. Reality is a cruel mistress. If the stock market rally rolls out as predicted, it will surely fake-out the mainstream media. They'll conclude wishfully and foolishly that something like "recovery" is underway. They may even interpret rising oil prices as a "positive sign" that the great groaning enterprise of the something-for-nothing economy is back "on track."
     They'll be shocked sometime after Memorial Day when it all comes off the rails again. We have a lot to sort out and very little time to get on with job. Notice, I haven't even mentioned the potential for mischief and instability coming out of the rest of the world -- enough black swans to blot out the sun. Want some concrete advice? For those of you sitting on US Treasury bonds and bills, now would be a good time to get out.
____________________________________
My 2008 novel of the post-oil future, World Made By Hand, is available in paperback  at all booksellers.

Comments

[petruk]

"I stick to my time-table of six-to-eighteen months..."

That's between one and three Friedman Units, you know.

[bud4wiser]

JK,

The - "first broken window" - I've been waiting for that since last month. Nicely written piece.

[LaughingAsRomeWasBurningDown]

RPG's into office towers... Great column this week.

Meanwhile, here in red-state-hell, the first NASCAR race of the season here was sold out, although convenience stores and hotels seemed to be not doing as well. Gasoline up about 20 cents a gallon for "race weekend", too.

[montysano]

If there's anything I've learned about Obama, it's that he plays a long game. So the best we can hope for is that he is well aware of the worst case scenarios (I find it hard to believe that someone of his acumen is not), and that he’ll begin to take baby steps to turn the country in a new direction. I know this much: he cannot go on teevee and say “The Old World is gone, the New World to come is unknown, you’ll never eat Cheetos again.” It would be political suicide.

[beerzie boy]

Nicely done, Jim. My worst fears about Mr. O are being realized: he is just another insider. Or, to put it crassly, same soap, different color box.

[DAL357]

"Perhaps his ease and confidence masks a tragically conventional world-view..."

Or, perhaps, his ease and confidence masks a vacuous mind. Only time (the end of '09, or earlier?) will tell.

[clevelandbob]

Nice 'stache, Jim.

You're starting to look like good ol' Sam Drucker from Green Acres which actually isn't a bad metaphor for your folksy, albeit apocalyptic, musings.

BTW, in terms of investment advice, where would you recommend putting those dollars that may or may not be in T bills?

[LemonLunch]

"For those of you sitting on US Treasury bonds and bills, now would be a good time to get out. "

Get out of treasury bonds and go Where???

[zsazsa]

"If the stock market rally rolls out as predicted, it will surely fake-out the mainstream media."

And? Who cares? The mainstream no longer believes the mainstream media. The MSM has lied, cajoled, and delivered us a Messiah in the White House. For their efforts they continue to shutter one newspaper after another and lose viewer-ship on the broadcast side. Even if the revolution is in fact televised, no one will believe it isn't being staged from a Hollyweird set.

[cleetis]

Jim- you say it may be time to get out of US treasuries... okay you make a good case for that. If you're saying to get out of treasuries, then that also means getting out of the US Dollar(including cash or Federal Reserve Notes). After geeting out of treasuries and the dollar, where then are you suggesting to put the money?

[And the band played on...]

Hate to break it to you jim but obama is a fucking dipshit and everyone who thought he was going to rescue us is a fool. Remember, he was a 2 term senator for christ's sake, can you get any more bureaucratic? Change? Ha... his problem is he is as vacuous and retarded as every other middle american douchebag, probably more so. Just look at his friggin wife, that power hungry bitch makes omarossa look like mother theresa. Forget it, we're fucked in the ass and there ain't no lube. I can't believe all you liberal boomers and mini-boomers thought things would "change". All power corrupts and absolute power corrupts absolutely. Later...

[clevelandbob]

Hey, "And the band played on"...

You folks fascinate me. You're all keen on self reliance, free markets and Randian philosophy yet when faced with large scale problems and issues of epic proportions, you curl up and mewl like a wee infant. Neo-Cons are pussies.

Man up, junior! We had to abide your massive failure of a frat boy in charge, why so glum now tough guy?

[LaughingAsRomeWasBurningDown]

> Get out of treasury bonds and go Where???

Well, I went and got out of debt, and put the rest into canned food, shotguns and ammon, and gardening tools.

[RealProblems]

So finally the Obama lovers have woken up the the morning after.
Ron Paul was and is right. Fox news lampooned him during the debates making him look like an old fool. The only fools are the Obama voters and the Neocons.

[LaughingAsRomeWasBurningDown]

"ammo" not "ammon". Stupid fingers.

[And the band played on...]

hey clevelandbob, I got to go to work so i'll make this quick: go fuck yourself. I am not a "neo-con" and I couldn't stand george bush. What the fuck are you talking about? curled up in a ball whining? I'm making a statement about my opinion. btw, i hate the two party monopoly and your shortsighted assumptions about me illustrate to perfection why we are fucked; i.e., I state a negative position about obomba and you instantly assume I liked bush. You are a fucktard and an idiot. I hope you get colon cancer and die a painful and debilitating death. Have a nice day pussy.

[FARfetched]

«I think, he is going along, for the moment, with a consensus of wishes to prop up life as we know it at all costs.»

I agree — there's a lot of momentum (or inertia) to overcome before the country can make a I'm guessing the first part of that sentence is the linchpin… leadership is said to be a matter of getting in front of a parade. As you said toward the beginning of the column, "The public can't process this reality" — and that's the whole enchilada right there. Montysano is right: if the president, or anyone else in a high position, were to lay out the bare bones of the situation right now… well, the phrase "EPIC FAIL" comes to mind. I don't think there would be mass panic, most people would be simply unable to grasp it. The opposition would trot out some version of "morning in America" and their do-nothing agenda would come right back to the front of the line starting in 2011.

But while there's all the show & blow about bailouts and finance and bonus clawbacks (and I agree with most that the latter should leave claw marks in the financiers), there's the groundbreaking on the White House vegetable garden. Lots of gardens going in this year… once again, get in front of the parade. There have been the less-reported remarks about getting serious about CO2 reduction, the alt-energy initiatives, and so on. It may be that Obama is doing the sociopolitical equivalent of a magic trick: keep everyone focused on the big showy finance stuff while laying the new foundation for a new way of life… and presto!

In the FAR Future, things have changed a lot. Episode 78 introduces new boarders at the manor, and a history lesson hints at the changes: http://is.gd/owFG

[Evelyn]

Several weeks back Jim scoffed at and summarily dismissed any, I forget the term he used, but something to the effect 'new age quantum leap' solutions to the impending singularity in human evolution. He insists as always that evolution will not shift in a new direction but merely slow down hurriedly or terminate. I was wondering at the time what he was dismissing in his generalized reference. The closest I could think of were the suggestions made in the book "Waking up in Time" (see except below this) but now I'm thinking he was referring to something more along the lines of what is explained here...

http://tinyurl.com/d6ngcw

* * *

Excerpt from "Waking up in Time"

The Quickening of Spirit
If the pace of development continues to increase - and we shall see shortly that there is every reason to believe it will - then the amount of change that we have seen in the last twenty years will be compressed into the next ten years, or less, and after that into an even shorter time. This itself is not a new revelation - even so, it is not always taken into full account in our extrapolations into the future. However, such ever-accelerating has another, much more startling consequence - and one that is not usually considered at all.
We might imagine that this speeding up could continue a long way into the future; in a hundred years it would be much faster than it is now, and in a thousand years much faster still. But this sort of acceleration cannot continue forever. The timescales involved are getting shorter and shorter; from billions of years, to millions, to thousands, to centuries, and now to mere decades. Before very much longer it comes to an end. If you plot out the curve of this sort of acceleration you find that the curve soon approaches the vertical. In other words, the rate of change tends towards the infinitely rapid. Mathematicians call such a point a “singularity”; the equations break down and cease to have any useful meaning.
Whether or not humanity actually reaches this point of unimaginably rapid progress I shall leave for the moment. What is clear is that a trend that has been going on for billions of years is going to come to an end - and probably fairly soon. The general concensus of opinion amongst researchers in this area is that this singularity in time lies in the first half the twenty-first century - assuming, that is, that we do not in the meantime turn the planet into a nuclear wasteland, accidentally create a plague that destroys us all, or decimate the ozone layer to such an extent that the land becomes uninhabitable.
Some, such as Vernor Vinge, a mathematician at San Diego State University, see the singularity to be consequence of technological acceleration, with ultra-intelligent computers creating an exponential runaway effect. But I believe technological progress to be but a phase in the overall pattern of development. Millions of years ago it was biological evolution that was accelerating. Ten thousand years ago the development of agriculture was speeding the rate of progress. A century ago it was industrial breakthroughs. Today it is information technology that is pushing the rate of development ever faster. Tomorrow we may be in a new phase of progress. The exploration and development of human consciousness could take over from information technology as an even faster arena of quickening. If so, it would be spiritual evolution, not technological evolution, that takes us into the singularity.
To see how this might come about, and where it might lead to, we must first go back and ask why is it that evolution tends to accelerate? And why, of all the creatures on this planet, human beings have created so much change so fast? We shall investigate why the exploration and development of the human mind is the next logical step in our evolutionary process, and why it is so critical for the world today. Our journey will lead us to consider what this inner development means on a personal level. How it can be encouraged and facilitated? And what the future might look like as we speed ever-faster towards this singularity in time?"

[clevelandbob]

"I got to go to work", aka, "would you like the large fries with that?"

[Autonomous Unit]

"RPG's into office towers"
Film at eleven-
http://www.youtube.com/watch?v=XkUaV9GZDuk

(37 seconds)

"Trust me, everything is going to be fine."

[zsazsa]

"I got to go to work", aka, "would you like the large fries with that?"

I got to go the work, aka, I live in fucking Cleveland.

[Evelyn]

@realproblems

"So finally the **** lovers have woken up the the morning after."

Pearls of wisdom from the mouths of fools. When did that happen for you Realproblems? After you watched his helicopter leaving to take him back to Texas or the first time you looked at your 401K around the time Palin was selected???

[zsazsa]

In the mean time as I type this the Dow is up 260 points.

[sharon]

"Get out of Treasuries and go WHERE?"

LaughingAsRomeWasBurningDown has it right, I think.

But he/she forgot to mention land. Get yourself a little place in the country on a small acreage. If you are now tied to a job that doesn't allow you to move to a more rural area--well, you probably won't be for long.

It takes time to get a deal on this stuff. Start diligently searching NOW. And if you're buying with cash, drive a VERY hard bargain. Pay only 30% to 50% (max) of the asking price. If the sellers won't take it, find one that will.

[zsazsa]

"If you are now tied to a job that doesn't allow you to move to a more rural area--well, you probably won't be for long."

Hey Sharon, if you are the newbie in the rural hood when things get dodgy your neighbors will most likely EAT YOU. Particularly the one that settled for 30 to 50% of the asking price. My advice...stay fucking put (unless you live next to bob in cleveland...cleveland is so over) and hunker down.