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

[scott]

I guess you and Cheney agree one thing, "Deficits don't matter." ;)

Deficits do not matter as long as the U.S. dollar remains the worlds reserve currency--that is why it is said not to be a "zero sum game". If however, we are forced to introduce expectations that assume negative growth indefinitely, then we, well at least the Chinese and Russians are saying that those numbers are calculable and are rumbling about a transition to a new hard currency for global trade. I think we are forced to expect negative growth indefinitely because global crude oil production and distribution rates are at best marginal increases, and at worst, steep declines.

[Nudge]

Asoka .. can you keep finding more new “look who's hiring – the economy is just fine!” news bits at the same rate the bad news keeps coming in?

Layoffdaily.com
4-10-2009
Pinnacle Mine Cuts Coal Production -290
Pratt and Whitney -500
More Layoffs In Boeing's Future
Intuit Real Estate Solutions -40
Buckhorn Group -58
Kobelco -66
Wall Street Refugees Seek Work
Bristol Metals -37
FedEx Services in Akron -74
Maine maritime Academy -9
10,000 Overwhelm Job Fair
Viking Yacht Tally -800
Marana Schools -133
CB and I -250
Joe's Sports Closing 30 Stores
Johnson and Johnson -900
Sailboat Maker Beneteau -600
Evraz Steel Mill -250
GE Healthcare Milwaukee -179
Finning International -170

[scott]

China February Auto Sales Rise 25% After Tax Cuts
"China vehicle sales surged 25 percent in February, the first gain in four months, after the government cut taxes on some models, helping the country extend its lead as the world’s largest auto market this year.
Sales of passenger cars, buses and trucks climbed to 827,600, the China Association of Automobile Manufacturers said today in Beijing. The tally in the first two months rose 2.7 percent to 1.56 million, compared with a 39 percent decline to 1.35 million in the U.S."
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDCOM2mACDYY&refer=home

[scott]

fried chicken shacks...
"While Kentucky Fried Chicken is doing well nationally, the chain has more than 15,000 restaurants worldwide, including some 5,300 in the United States, Eaton said. "We're building 1,000 new stores a year," he said. "We're building a new store in China every 23 hours."
http://www.herald-dispatch.com/business/x503897790/KFC-president-visits-Tri-State-franchises?i=0

[scott]

China, which last year surpassed the United States to become the second largest automaking country, is poised this year to topple Japan as the world's top car producer, a market research firm said Thursday.
"China's rise to the No. 2 position in global car manufacturing in 2008 marks a major milestone in China's economic ascendancy and the United States' industrial decline,"
http://www.informationweek.com/news/showArticle.jhtml?articleID=216400511

[Howard Effing Beale]

"Unions have an interest in keeping workers out of a system where their own efforts can affect their compensation and advancement. That makes them less dependent on the union to negotiate for them. During the campaign, Barack Obama said he would consider an overhaul or "complete repeal" of the merit pay system. If he follows through, the government's new CEO will soon learn that you get what you pay for."

They pretend to pay us and we pretend to work - old Soviet joke.

http://online.wsj.com/article/SB123940322061309643.html

[Werner Patels]

You're absolutely right: We can't and we won't return to the world we used to know. Things will be quite different once this crisis is over.

Hopefully, everyone will have learned a good lesson from all this, such as that we all -- individuals, companies and governments -- have to live within our means, that we can only spend what we have.

I still remember that one New England waitress who was interviewed for an article on the recession several months ago: When asked about the subprime crisis, she replied, "When you give a half-million-dollar house and mortgage to someone who makes only $8 an hour, it doesn't take a financial analyst with all his fancy formulas to figure out that there is something seriously wrong with this picture."

And she was right.

I always urge people to find their common sense again. That's all we need. No special ideology or program, must good old common sense.

[scott]

"And of course the foreign aid the US is receiving is what is keeping up the grand life styles of Americans. A nice little transfer of trillions of dollars of wealth at practically zero interest is being transferred to the US. Even the International Monetary Fund thought the idea of a new rerserve currency was an excellent idea and plans to pursue the discussion in the coming months."
http://www.freebuck.com/articles/dvaughn/090406dvaughn.htm

[Nudge]

A Staggering Swindle: Rented Identities, Extravagant Prices and Foreclosure: A Post-Boom Real Estate Scam

http://www.voiceofsandiego.org/articles/2009/04/11/sommerset/sommerset-onefull041009.txt

A tale of greed-fueled stupidity from the land where the sun shines too much. Enjoy.

[Nudge]

Good morning Asoka. I have a few treats for you this morning. Here is the entirely-predictable one first:

Layoffdaily.com
4-11-2009
Caterpillar Update: More Layoffs
Rumor of Best Buy Layoffs
Watseka Hospital -18
125 Year Old Bakery Closes
Indianapolis Diversified Machining -50
Austal USA -62
MeadWestvaco Update -51
National Semi 2 Week Closure -450
Syracuse China Closing -200
JE Morgan Knitting Mills Closing
City of Hoboken -21
Northern AZ University -9
Nike Inc. -17
PCS Phosphate -24
Greene County OH Sheriff -10

[Nudge]

Lotta Ohio-based cop-shops laying off or downsizing. Lordy, could there possibly be a worse time to lay off law-enforcement officers?

The next big boom in the Ohio economy may well be in coffins and burial services.

[Nudge]

Hi again Asoka. Here is some more stuff in homage of your god:

“Hear No Evil”
http://onthemedia.org/transcripts/2009/04/10/01

“Last week, the Obama Administration invoked the state secrets privilege for the third time in as many months when arguing that Jewel v. NSA should be dismissed. How does this square with his much-touted promise of openness and transparency? We asked Marc Ambinder, associate editor of the Atlantic and chief political consultant to CBS.”

Welcome to the world of perfectly ordinary administrations, in which large corporate interests (like Goldman-Sachs) get the run of the treasury, where secrecy (aka coverup) is directed from top down, and where saying one thing and doing another thing is the rule of the land.

If you want, I can go dig up all the (s)election-time comments you left here saying how the Oh!bama administration would be the most open & transparent government ever. Interested?

[bud4wiser]

I got nothin' but anyway:

Saw a freight train on a bike yesterday - it was an "all can" container train, nearly all the containers had "CHINA" displayed - in nice big two-foot letters......

How come I didn't figure out this whole finance thing back in the eighties - man I'd be rich now - just chose the wrong profession...

What the fuck is it with America's youth - if I were twenty-years-old right now, I be marching on Washington and turning cars over on wall street, etc........

We all know what's going on, but unless you show dead people night after night on the evening news - all's well......

During the bicycle ride - encountered the least traffic ever for that given route - strangely, plenty of motorcycles out.....

Sunspot activity and recent three-tear trends support the contention of a possible "mini-ice-age" over the 10-20 years...

Happy Easter, take time to enjoy the fertility rituals of your choice.

[messianicdruid]

Another pry-your-eyes-open site:

http://www.goldmansachs666.com/

from one of the comments;

"Liar's Poker summed it up -- Goldman runs wall street. And wall street runs the country.

Your plight has garnered the attention of the social news networks. It's the #1 link at reddit.com as I type this. Know that you have supporters -- in the thousands and potentially millions more.

I'll be referring this issue to my contact at the ACLU and asking them to contact the NY-ACLU to argue on your behalf. _Please_ do not cave in to the frivolous lawsuits."

[Howard Effing Beale]

Goldman Sachs hires law firm to shut blogger's site

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5137489/Goldman-Sachs-hires-law-firm-to-shut-bloggers-site.html

[ljarvi]

Interesting that you still cling to the manifestly silly idea that Obama will turn on his masters. If I didn't know better, I'd conclude from this that you're just another media darling like Amy Goodman - profiting from the illusion that this is all about personalities and what they do or don't do.

By the way, there won't be any pitchforks and mobs in this country. You know those funny lines in the sky? And the flouride in the water? And the prozac people are taking? And the 24/7 entertainment? And the marginalization of anyone who could articulate an alternative ideology to this orgy of self-aggrandizement we call a culture? Our emotions are being skillfully managed by psychotropics and psychology. Sure, people will get worried and frustrated and spout off - like you do - but the sort of anger that builds into wide-spread mob action requires inner resources that people are simply not able to access right now.

About those lines in the sky: Most of them act as a dispersal agent (creating the milky white effect in an otherwise blue sky). The lines that drip contain the psychoactive.

[scott]

"About those lines in the sky: Most of them act as a dispersal agent (creating the milky white effect in an otherwise blue sky). The lines that drip contain the psychoactive."

I thought those white lines are condensation that is formed from the friction of aircraft wings and the atmosphere?

[Howard Effing Beale]

"The lines that drip contain the psychoactive"

Oh yeah baby. Put the In-A-Gadda-Da-Vida 8-track in and commence to get all Leary.

Don't bogart that flashback...[adjusting tin-foil fez]

[Howard Effing Beale]

Effing nose-pickers.

[Howard Effing Beale]

Strength through unity, unity through blind faith.

Denial prevails.

[Nudge]

Damn, where did the Asokanator go? It seemed as if he was going to do a glorious Custer's last stand impersonation there with all that “Hahah, you're wrong!! Look at all the companies hiring! The economy is doing FANTASTIC! The president said so!!1” stuff. It was funny as all hell in its own right.

[FARfetched]

Nudge, I think Asoka said he was going to take a break earlier in the week. Probably out spending the check from George Soros that all Obama supporters are supposed to get. (Still waiting for mine!)

Howard, I remember chemtrail nutters from the Y2K days… only a matter of time before they'd start showing up on Peak Everything fora, I guess. ljarvi, here's my advice for you: shiny side out!

[studduck]

I have my picthfork ready! I would really like to use my castrating knife (recently sharpened). I believe castration and taking of all assets of the hucksters would be more appropriate.
Regarding the American sheep comments, I have a lot of experience raising sheep in Colorado and believe my Suffock and Southdown's had more moxie for self preservation that most of the apathetic population using good air in this country right now!
I witnessed the social breakdown in Miami during hurrucane Andrew, the Mississippi coast during Katrina, and many other tornado devastated area's over a 32 year career as a insurance adjuster. I saw how people sat on their pile of rubble waiting for someone to come to the rescue, only to find out they were on there own! Forget insurance companies with compassion, forget goverment offical's with compassion! They are only motivated by money and self preservation, and your real problems are the least of there worries!
If you really want to see how sick this world is getting, check out the insurance adjuster comments when they get together at dinner and determine who had the best customer's "I thought I was going to die story of the day" of the stricken customer!