Strange Days

     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 US 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, US 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 US 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. ____________________________________

My 2008 novel of the post-oil future, World Made By Hand, is available in paperback  at all booksellers.

Comments

[Jynx]

Way to neutralize the mob (and solve money problems) -- legalize dope. People won't riot it they're too stoned. Moreover, the revenues raised from taxing marijuana, and money saved in the criminal system, will go a long we toward alleviating our economic problems. Plus hemp has other useful application. Legalize it!

[asoka]

"It's possible Obama understands the situation."

Duh!

His use of the word "pitchforks" was a clue.

"My guess is that this type of economy won't support the standards of living previously enjoyed in places like Dallas and Minneapolis."

Duh!

The economy will continue at a lower standard of living.

"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."

For years CFN comments section has been calling the American public "sheeple"... Now suddenly they are going to man the barricades? Which is it?

"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."

I think you greatly underestimate the apathy level of the American people and their capacity (resilience) when it comes to absorbing economic pain.

[montysano]

Yeah..... Glenn Beck's nationally televised nervous breakdown has been entertaining/scary to watch.

On Moyers' show the other night, he interviewed William Black, a former senior banking regulator. I haven't watched the whole thing yet, but if I get the gist, Black is suggesting that Teh Swindle was criminally fraudulent on several levels, with the bond raters being at the top of his list.

Great post this week, JHK.

[LaughingAsRomeWasBurningDown]

Great column this week. Tattooed minions of Glen Beck? Indeed.

Expanding vocabulary, thanks:

myrmidon - a follower who carries out orders without question

[asoka]

"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"

I think less than one percent of the USA population know who Bernanke and Geithner are, and even fewer people care.

The education system is not turning out well informed citizens.

[free_way_4_life]

Jim, the riots are already starting! I was saddened but not at all suprised at the events in Binghamton and Pittsburgh this weekend. Of course, the MSM presented these events as more Columbines, only layoffs rather than bullying and death metal were the cause.

Layoffs are just an adult form of bullying, aka one man dominating the other, at least in my eyes. Anyone ever notice the pictures they show in those "find a job in the recession" mainstream articles on the web? Those sad looking people lined up at "job fairs" look a lot like draft animals seeking more bullying via corporate/government drudgery to me.

Now the problem, besides tragic human death, with these "mass shooting" reactions to the drudgery and shame is that individuals going nuts are just what the central powers want. They will distract the masses from the real issue and furthermore allow them to accept more police state powers via more manipulation through fear.

People, the underground needs to do something soon - something BIG, COORDINATED and NONVIOLENT!!! Jim has been planting some idea seeds here, as he is completely right about debt and peak oil!

He is wrong about replacing Bernanke, though. We need to completely replace our concept of money. ENERGY=MONEY. We need the gold standard back, with the gold representing kilowatt hours (ENERGY = TIME LABOR) this time around!

I'm working on this idea, but it will take some time and a lot of help. In the meantime, though, if anyone has some geobiophysically impossible to pay debt management advice this is the place to post it this week.

Oh yeah, and if you're anywhere near Little Rock please remember to cover and/or bring your seedlings in tonight - THEY ARE THE REAL MONEY!

[FARfetched]

Indeed, I think Obama understands the situation. There's a good German word, that has gone out of style in the last decayed [sic] but does sum up the current situation: "realpolitik."

The Banker Boyz, like the parasites they are, have rooted themselves deep in the hosts we call our government & our nation. The hosts are awake and aware that their life is being drained from them by these parasites, but ripping them out all at once would cause too much collateral injury, maybe even fatal injury. What the parasite doesn't seem to realize that if the host dies, it dies too — it's rooted too deeply to extract itself.

Getting off my analogy, the system of checks and balances means that Obama can't simply sweep the Boys off the table — they own too many elected and unelected officials, who will push back if Obama pushes too hard. So I think it's actually going to take a few Boyz getting made into examples — torches, bricks, getting bent over their marble countertops, maybe even crucified on their own decorative iron fences — to get the rest to drop their defenses and allow a kinder, gentler Justice Department to have its way with them instead. The Boyz may think that getting stripped of their assets and locked up in a country club prison is the worst of all possible worlds, but they aren't sufficiently aware that there's another kind of far more personal justice awaiting them, one that no number of bought-and-paid-for congresscritters or Treasury employees can stop.

In the FAR Future, the winter of 2035-36 is comparatively peaceful. There are storms on the way, to be sure, but for now the crowd is enjoying a rare snowfall:

http://is.gd/qZpv

And tomorrow, we're looking at snow flurries on Planet Georgia. Syncrhonicity at its finest.

[Freddie_the_Fixer]

Good interview with JHK from last week:

http://www.infrastructurist.com/2009/04/02/james-howard-kunstler-how-to-invest-infrastructure-for-an-age-of-scarcity/

[Patrizia]

It doesn´t take more than an intelligent fool to understand that you cannot make new debts to pay the old ones.
I mean, you can, but the result will be an even worse situation than the current one.
You cannot make the economy going better using the same ways you used to make it worse.
It simply doesn´t work.
That is what any reasonable and wise president should see.
But we do not have such men anymore.
We have people whose only concern is how to get and keep votes.
All the rest is just governing.

[dale]

"For years CFN comments section has been calling the American public "sheeple"... Now suddenly they are going to man the barricades? Which is it?" - Asoka

Bahahaha!....one of the most insightful and amusing comments I've read here in a long time. Well put.

[upstatebob]

The country is too large and spread out for a real pitchfork revolution but some of the places where the rich live close by the poor could have a problem; such as miami, tampa, newport beach, encinitas, and Jim's fav - fairfield, CT

[And the band played on...]

You guys are fucking hallucinating. Obama doesn't get shit. He is a fucking douchebab and a liar with a crocodile smile. Glenn Beck gets it. He's fucking crazy as hell too, but he gets it. Everyone loves making fun of him but they are missing the bigger point. Many people who listen to glenn beck don't have tattoos and arent't mormons. But they empathize and feel his anger. Obama is not angry, he is a fucking house nigger. You sad losers who are putting your faith in him will be sorely disappointed. The pitchforks are coming and hopefully right soon. No go ahead and psycho analyze me and tell me why I am a "neo-con nutjob", and marginalize my like anyone else making any sense. Have a nice fucking day you miserable lemming pussies.

[zerotsm]

Don't count on the US Government to do anything useful. The US has become a faschist state. When business is good, corporations get to keep the profit, when business is bad, the corporations foist the losses onto the general public via government bailouts.

The main stream media is corporate controlled. The revolution will not be televised. The last source of truth, the Internet is under attack. Jay Rockefeller says the Intenet is a threat to national security. SB 773 and SB 778 are bills before the Senate proposing to grant the president the right to shut down the Internet. So don't throw away your old dial up modems yet! We may need to go back to the days of the Bulletin Board System and FIDO net.

[bud4wiser]

JK,

Media sources have been so good at ignoring these situations for so many years that its inevitable that NOTHING is going to happen.

I always thought as soon as the media accepted the "war" on terror that we might as well live in in post "1984" world. Now, we must accept the fact that our government works for those that contribute the most.

Since we no longer have a meaningful "fifth estate" - its useless to want for any social conscience of any consequence.

I wonder what the numbers are for reality TV shows - against PBS broadcasts?

In any case, I too thought that people understood the connection between stealing from the treasury and our in ability to manage national health care or maintain state of the art infrastructure. But they do not.

Jim,if any uprisings, any social unrest is to take place, it won't be until well after the evening news starts depicting "granny" freezing to death or little Timmy starving or diseased.

What our future does hold - more market manipulations - Ala Enron-style regarding oil, coal, natural gas and just about any mass-traded consumables.

We need two or more years of people freezing. Some massive "brown-puts" in the northeast in July, and of course, two or three more Interstate highway bridge collapses.

Then maybe, just maybe -a few patriots will rise up and warn our government of its errant ways.

[David Mathews]

The sooner that this world ends, the better.

Peak Oil was supposed to happen by now and the Peak Oil movement was going to lead the world to salvation (or at least lead America to "Drill, baby, drill!") but that hasn't quite materialized.

Peak Oil has become an also-ran catastrophe. Whatever impacts Peak Oil will have are going to be lost in the noise of civilization's inevitable collapse.

Isn't it a tragedy that the American Petroleum Institute failed to generate enough interest in the Peak Oil movement in order to render it into a legitimate political force? The oil industry must be really sad ... they really pushed, too, especially during last year's election.

The Oil Drum failed. No wonder Leanan and the rest spent so much time crying about Obama's election and have repeatedly whined since then about Obama's leadership.

In regards to the credit crisis blogs ... I've got to tell you those people are spreading pure unadulterated BS most of the time and the vast majority of these people are also drawn from the same sort of Fox News - Talk Radio demographic as the Peak Oil movement.

Their predictions have routinely failed, too. They have failed just as often as CNBC has failed. Most recently prominent credit crisis bloggers have predicted that we wouldn't have a spring rally in the stock market.

As it turned out, we did ...

So much for the credit crisis and peak oil bloggers.

Needless to say, this world is going to end at its own pace and in its own way.

http://www.flickr.com/dmathew1

[James]

Great post Jim. Really enjoy your allegorical rants, which increasingly remind me of some of of Lewis Lapham's Harper's stuff.

I too, am still holding out hope that Obama get's it, and that even if he does, he has the political horsepower to get done what needs to be done. Keep in mind, should the meltdown come sooner rather than later (regardless of who is to blame), the neanderthal GOP hordes will be reasserting themselves once again at the ballot box, after which we had probably all just resign ourselves to bending over and taking it like a man/sheep/whatever.

Finally, even more on Ponzis and government finance:

http://www.nakedcapitalism.com/2009/04/guest-post-fdics-insurance-commitments.html

[Loveandlight]

I agree with cuntageous (quite a nick, that). Yes cannabis certainly does have abuse potential that will always make a handful of ignorant unfortunates bleary, passive, and indolent, but would you rather have these unfortunates smoking crystal meth? And besides, one good thing about pot is that it makes people who are wound up in destructive emotions take a step back and see what they're feeling and doing in context. With any luck, this will help people to realize that frenzied mob-action rarely results in any constructive change. Of course, there's also the alarming consideration that we may be well beyond any possibility for constructive change for quite a while, at least until the USA breaks up into its constituent geographic nations.

[rlsconrad]

Here's a shovel-ready idea for income fairness.

A simple, one-sentence federal law:

"Within any one corporation, the income disparity, measured in total compensation, between the highest-paid full-time employee and the lowest-paid full-time employee can be no more than 10 to 1."

Or 7 to 1. Or 5 to 1. Whatever. Let the corporations work it out. So if the CEO wants 10 million dollars a year, fine -- that means the janitor gets one million. If the board-shareholders-owners don't like those numbers, work them until you do. And if that means you have leftover money because your salaries are now equitable -- start a day care center. Or a scholarship. Or open up a new line of business and employ more people.

This law would be (a) fair and (b) is achievable RIGHT NOW. Anybody who wants more than 10x what their co-workers are getting should be welcome to move to a country where their lottery fantasies are welcome.

[Sabretache]

Great post as always but I think you may be missing something too. With all the expertise at their disposal, do you not think it possible that the REAL Elites understand the implications of 'Peak-Oil' only too well and have been laying plans for a long time.

If that IS the case (and I think it more likely than not) then what we are witnessing takes on a different and rather more sinister hue. Instead of being characterised as fools, perhaps they not only saw all this coming but even gave it a nudge here and a push there, all the while busily making certain that they retain (even enhance) their wealth and power in whatever 'New World Order' is either planned or emerges. I personally doubt that those at CFR/TC/Bilderberger et al level are the clowns and fools they are made out to be. They have an agenda that takes full account of 'Peak Oil' and they are busily working through it.

Otherwise, so far as what's in store for the average American and a certain class of nouveau-rich (mere $ millions) yuppies, I think you are spot-on

[FARfetched]

Free_way, interesting thoughts. I hear ya about covering the seedlings… we're supposed to have snow on Planet Georgia tomorrow morning. I'll just stick my trays back inside the cold frame (they're sitting on top for now) and they'll be fine… I'm concentrating on cold-weather crops at the moment (lettuce, spinach, onions) anyway.

I have to disagree about gold, though. It's too easily hoarded, and the gold standard itself has been behind some of the worst depressions in American history. I advocate a labor-based currency instead: it can expand and contract as needed, but still be cashed in for a thing of value. You could steal my gold bars (if I had any), then kill me to ensure my silence — but if you try to kill me to steal my labor, you've destroyed what you wanted to take. As I've said many times, money is what enough people say it is: there's no reason that gold should be considered money any more than copper, iron, pretty pieces of paper, cattle, or big stone disks with a hole in the middle.

Heck, for that matter, debt is money at the moment. That's why we haven't seen hyperinflation yet, even with all the moolah the Treasury is printing: the inflation has already happened. As debt erases the money supply, the new pixel money replaces it, and the money supply remains essentially constant. But if TPTB *do* manage to unstick the lending jam, watch out.

[RUMCSwan]

And the band played on...
(April 06, 2009 at 10:30 AM)

'And the Band Played On' for President!

But Americans prefer Diplomats who fuck them up the ASS; instead of Brutal Honesty Goldwaters who call a Spade a Spade...

Lara

[Consultant]

Tim Geithner is just the wrong pick for Sec. of Treasury. He not only looks like, he is Dr. Strangelove.

I'm a black guy, 10 years older than Barack, well educated, and because of my age, old enough to have been a "first" in some of the positions I've held. I know all about being "between a rock and a hard place". Part of the team, often leading it, but more isolated than you can imagine.

Barack has weighed the political calculus (the inevitable backlash of all kinds, the threats, of all kinds) and determined that in the first few months he'll play with the establishment.

The problem is, he doesn't have that much time. Sometimes you just have a bad hand of cards. Barack was given a terrible hand, but he's made it worst. He had to make a choice, fight the establishment, or try to co-opt it. So far they've co-opted him.

The part of the calculus he got wrong was a huge majority of Americans really want dramatic change. Our financial system has become a Frankenstein monster. Everyone knows that, and we want Barack to slay it. Right now the monster, through Geithner and Summers, is winning.

[FARfetched]

rlsconrad, a few of us have been discussing that very idea offline. Unfortunately, there's an easy loophole: make your executive team the only "full-time employees" of the company, then use contract labor for everything else and pay 'em what you please. Employers already abuse the system, setting up teenagers with 1099 and sticking them with the taxes come April; why wouldn't they just abuse it more?

[free_way_4_life]

FAR - good points on the drawbacks of gold. Believe me, I've thought alot about labor as money in this past year. I was just trying to argue that some tangible chips are needed to represent labor, and maybe some cheaper more abundant metal that conducts electricity is a better idea.

I've also noticed the employment loopholes, too. I got sucked into a Sears commissions sales job a year ago - selling appliances just as the housing market was tanking. My airhead boss blamed it on jewish holidays, and I realized he was just overhiring minimum wage plus commissions kids - probably to get Maryland tax credits for "job creation" - so needless to say I bolted and went back to freelancing.

loveandlight - I've thought about the USA breaking up too. In fact, I realized that Upstate New York would probably be better off as its own nation. There is a ton of infrastructure, labor, farmland and forests up there, and I realized the disconnect between this and all the outsourcing and ratings agencies credit ratfucks being pulled on the region when I was a twelve year old Buffalo kid. Well, that area will be independent in future fiction, the sequels to my current Fairyheart project, where it will be called the Lakes Federation.

Zerotsm - I'll be doing too much other writing today to research those bills, but last week I learned with my HR 875 posting here that there is a lot of disinfo out there. Still, I think it is a great idea to start thinking of internet contingencies, as I really believe that society will be splitting into two in the near future (the topic of my blog - http://fairyheart-movement.blogspot.com - today. The self sufficient segment will need its own independent communications web, and the 1990's technology is easily available at those garage sales JHK likes to write about.

[templewhore]

Obama gets it, for sure. He's not that fucking dumb. But if you think he's looking for solutions for the people, you're delusional. He's in the pockets of the same people who brought you 8 years of Bushco. He'll maintain the status quo as long as possible; if the SHTF for real he'll impose martial law.

I also think you greatly underestimate the American people's willingness to suck up shit for long periods of time. Only those at the very bottom who have never been invested in the system are likely to riot. The erstwhile middle class will continue to cling to the shreds of the American dream for some time and rioting doesn't fit into that scenario.