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A More Bearish View: Change you Won't Believe (Part 3)

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December 15, 2008 – Comments (19) | RELATED TICKERS: OIH , GLD , SLV

FYI - I am still #1 in points with 12k. I still think it is going to be very difficult for any fool to catch that. Points are very tough to aquire.

abitarePERFECT is also floating in the Top 20 rankings.

So I thought I would share what I am reading, what I am thinking. I am still aquiring food, gold silver and physical assets. Gold may come down as the asset deflation continues. 

To treat or cure a disease it is important to recognize you have a problem, identify it and choose the proper treatment. Printing money out of thin air to prop up housing, auto or whatever, is the wrong treatment and does not recognize the current disease.

Today, I am stealing wisdom from James Kunstler from Cluster F-ck Nation: 

Change You Won't Believe  

The peak oil story has not been nullified by the scramble to unload every asset for cash -- including whomping gobs of oil contracts -- during this desperate season of bank liquidation. The main implication of the peak oil story is that we won't be able to generate the kind of economic growth that defined our way of life for decades because the primary energy resources needed for it will be contracting.

      Just as global oil production peaked, our economy evolved into a morbid hypertrophy, and the chief manifestation of it was the suburban sprawl-building fiesta that has now climaxed in the real estate bust. By the early 21st century, when so much American manufacturing had been swapped out to Asia, there was no business left except sprawl-building -- a manifold tragedy which wrecked the banks that financed it, and left the ordinary people mortgaged to it with ruinous liabilities.
      That economy is now in its death throes. The "normality" it represents to so many Americans is gone and can't be brought back, no matter how wistfully we watch it recede. Even so, it was obviously not good for the country. The terrain of North America has been left scarred by unlovable objects and baleful futureless vistas that, from now on, will shed whatever pecuniary value they once had. It represents the physical counterpart to the financial mess that has been left to the young generations to clean up -- and the job will take a very long time.
     We have to, so to speak, get to place mentally where we can face the kinds of change that are now necessary and unavoidable. We're not there yet. It's not clear whether the elected new national leadership knows just how severe the required changes will really be. Surely the public would be shocked to grasp what's in store. Probably the worst thing we can do now would be to mount a campaign to stay where we are, lost in raptures of happy motoring and blue-light-special shopping.
      The economy we're evolving into will be un-global, necessarily local and regional, and austere. It won't support even our current population. This being the case, the political fallout is also liable to be severe. For one thing, we'll have to put aside our sentimental fantasies about immigration. This is almost impossible to imagine, since that narrative is especially potent among the Democratic Party members who are coming in to run things. A tough immigration policy is exactly the kind of difficult change we have to face. This is no longer the 19th century. The narrative has to change.
     The new narrative has to be about a managed contraction -- and by "managed" I mean a way that does not produce civil violence, starvation, and public health disasters. One of the telltale signs to look for will be whether the Obama administration bandies around the word "growth." If you hear them use it, it will indicate that they don't understand the kind of change we face.
     It is hugely ironic that the US automobile industry is collapsing at this very moment, and the ongoing debate about whether to "rescue" it or not is an obvious kabuki theater exercise because this industry is hopeless. It is headed into bankruptcy with one hundred percent certainty. The only thing in question is whether the news of its death will spoil the Christmas of those who draw a paycheck from it, or those whose hopes for an easy retirement are vested in it. But American political-economy being very Santa Claus oriented for recent generations, the gesture will be made. A single leaky little lifeboat will be lowered and the chiefs of the Big Three will be invited to go for a brief little row, and then they will sink, glug, glug, glug, while the rusty old Titanic of the car industry slides diagonally into the deep behind them, against a sickening greenish-orange sunset backdrop of the morbid economy.
     A key concept of the economy to come is that size matters -- everything organized at the giant scale will suffer dysfunction and failure. Giant companies, giant governments, giant institutions will all get into trouble. This, unfortunately, doesn't bode so well for the Obama team and it is salient reason why they must not mount a campaign to keep things the way they are and support enterprises that have to be let go, including many of the government's own operations. The best thing Mr. Obama can do is act as a wise counselor companion-in-chief to a people who now have to leave a lot behind in order to move forward into a plausible future. He seems well-suited to this task in sensibility and intelligence. The task will surely include a degree of pretense that he is holding some familiar things together and propping up some touchstones of the comfortable life. But the truth is we are all going to the same unfamiliar new territory.
     The economy we're moving into will have to be one of real work, producing real things of value, at a scale consistent with energy resource reality. I'm convinced that farming will come much closer to the center of economic life, as the death of petro-agribusiness makes food production a matter of life and death in America -- as opposed to the disaster of metabolic entertainment it is now. Reorganizing the landscape itself for this finer-scaled new type of farming is a task fraught with political peril (land ownership questions being historically one of the main reasons that societies fall into revolution). The public is completely unprepared for this kind of change. We still think that "the path to success" is based on getting a college degree certifying people for a lifetime of sitting in an office cubicle. This is so far from the approaching reality that it will be eventually viewed as a sick joke -- like those old 1912 lithographs of mega-cities with Zeppelins plying the air between Everest-size skyscrapers.
     The crucial element in the transformation underway will be emotion. The American experience for a few generations has produced an adult population with very childish instincts, increasingly worse each decade. For instance, the desperate power fantasies among the younger tattooed lumpenproles -- those with next-to-zero real economic power -- suggest a certain unappetizing playing-out of resource competition when the supply of Cheez Doodles and Pepsi starts to dwindle. But even the heretofore gainfully employed middle classes are pretty lost in fantasies at least of comfort an convenience. For years now, I have wondered how their sense of grievance and resentment will be expressed when the supermarket shelves run bare and the cardboard signs get taped over the local gas pump and the cable TV gets cut off for non-payment. You wonder, to put it bluntly, how far gone we really are.

Clusterf-ck Nation by Jim Kunstler

Comment on current events by the author of "The Long Emergency" (also on www.kunstler.com)

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

19 Comments – Post Your Own

#1) On December 15, 2008 at 10:34 PM, kstarich (30.83) wrote:

Abitare,

 

I love your blogs but this is one is a bit over the top.  Kunstler forgot what made our country great and that is the icredible spirit, will and ingenuity of Americans.  Yeah the sh!! needs to hit the fan and it won't be fun for awhile but the spirit of many Americans will turn it around.  Not the way it was but better minus the evil jokers who got us here.

This brings me to my point.  Those fools ( Alstry, Nuf2b, Sinch, Mary, to name a few) who have incredible brains,  need to create in their minds the positive good that can emerge and write about it.  The few can affect the many.

We're all buying food, gold, silver etc. but then what?

THank you and keep writing!

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#2) On December 16, 2008 at 2:05 AM, motleyanimal (92.22) wrote:

Kunstler is, at best, a science fiction writer. His predictions of doom go as far back as Y2K, and this is the first year he has been somewhat accurate.

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#3) On December 16, 2008 at 7:43 AM, abitare (63.42) wrote:

kstarich,

I like your optimism. Lets hope you are right.

Kunstler forgot what made our country great and that is the icredible spirit, will and ingenuity of Americans. 

That is not the history books I read. I read: Guns, Germs and Steel. By Guns, Germs and Steel the British Empire sailed, loss by guns and debt in WW1 and WW2 brought it down. Guns, Germs and Steal brought down Time Magazines 1938 Man of the Year and the Third Reich. Guns, Germs and Steal brought down the Aztecs and Inca empire. Guns, Germs and Steal brought down Imperial Japan and the Chinesse Imperial Palace....on and on and on.

America took the world stage after the success of Guns, Germs and Steal over Mexico to its south, over of England in 1776, Japan, Germany...well all of Europe in WW2.

We're all buying food, gold, silver etc. but then what?

I own some real estate, I am now 100% leveraged short the US market, but I have taken about 20% of my money in to real (drop on your foot) assets. 

then what? 

We wait, life goes on...but we do not fear, but we wait and we are prepared as possible for the future and we adapt to the changing circumstances.

A prudent man foreseeth the evil, and hideth himself; but the simple pass on, and are punished. 

Proverbs 27:12

motleyanimal,

I have not read Kunstler back to y2k, I do not doubt he was talking about all hell breaking loose.I had a girlfriiend at the time, who's parents would not let her go out on New Years Eve for the fear of what they were reading. Life goes on, we laugh about it now. Even one of my favorite economic writers Gary North had big time Y2K fear and wrote about it. 

Some people make aliving selling fear, no doubt.

I do not know Kunstler's history. But I do know some history.

I know about Extra Ordinary Delusions and the Madness of Crowds written in 1841. I read the book.

I know about War and the impacts on the economy.  I know Ayn Rand said Communism would fail, long before it became apparent to others. 

I know gold has been money for 3000 years and 3800+ paper currencies (fiat) have come and gone during that time. 

I know "There is no instance of a nation benefitting from prolonged warfare." - Sun Tzu.  There are, however, a lot of instances of certain private persons and institutions benefiting from prolonged warfare.

I am aligned with Kunstler here:

Reorganizing the landscape itself for this finer-scaled new type of farming is a task fraught with political peril (land ownership questions being historically one of the main reasons that societies fall into revolution). The public is completely unprepared for this kind of change. We still think that "the path to success" is based on getting a college degree certifying people for a lifetime of sitting in an office cubicle. This is so far from the approaching reality that it will be eventually viewed as a sick joke -- 

 

 

 

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#4) On December 16, 2008 at 9:01 AM, Mary953 (71.86) wrote:

kstarich,

You have put me in a group with Alstry, Nuf2, and Sinch.  I am honored.  To be thought of at all in a post by abitare is also pretty awesome.  If I have to grow my own food, I am in trouble.  I have never met a plant I couldn't kill!  On the other hand, I am good at home repair, wallpapering, painting, cooking. I can watch children and grandchildren.  I have a large number of skills that I can barter for food if necessary.  If all of this doom-and-gloom prophecy comes true, barter would be a good thing to know and to be capable of. 

I live in an area that was flooded a dozen years back.  We were declared an emergency zone, eligible for government assistance. The funds were there, subject only to rules as to how we were to use the money and what we were to do.  We took a vote and overwhelmingly turned the money down.  We took care of ourselves.

You are interested in a bit of the positive, a bit of what can be done to help ourselves.  This, by way of an example, is what my small church is doing at the moment.  We (fewer than 30 on any given Sunday) run a small school for pregnant teens and then, after the babies are born, for the young mothers.  This allows the mothers to get diplomas or GEDs, and it helps them start with one less strike against them.  We create and send dolls, hats, scarves, and other items to a hospital in Latvia for the children there. 

We also have a building contract that will double the size of the church.  As soon as the building is complete,  our church will have a new addition.  It will be used for the daytime housing for families who are homeless.  This will give these families a telephone nmber and address for job interviews and for jobs later on.  Kids can catch the bus from here.  Little ones can take their naps. 

My job for today is this.  A young woman invited a stranger to come live in her house.  A hand up rather than a hand out.  She went north to visit her baby sister who had just become a mom.  Upon returning home, she found that her home had been desroyed and she had been stolen from. All over our county, we cannot just ignore this young woman.  By nightfall, she will have a new home, fully furnished. I am sending glasses and two couches at the moment.  I am looking for more.

If our monetary system breaks down, we wll handle it.  We will find alternatives.  Do not let the worst case scenarios cause you to doubt  the ability of this country and its citizens to  do what must be done.  Remain true to yourself and trust others to do the same.

And have a truly Merry Chismas!

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#5) On December 16, 2008 at 11:30 AM, kstarich (30.83) wrote:

Abitare

Mary doesn't need guns , germs, or steel.  I think the meek will be the warriors.

Mary,

A huge thank you for all you do!  And Merry Christmas to you too.

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#6) On December 16, 2008 at 11:35 AM, abitarePERFECT (29.15) wrote:

kstarich,

I think everyone needs a gun. It is insurance and protection and an asset class that holds some value.

Reference the Collapse of Argentina etc...

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#7) On December 16, 2008 at 12:41 PM, lucas1985 (< 20) wrote:

Hello,

I'm an Argentine and I can tell you that guns did nothing in our 2001-2002 collapse. We just kept working, going to school and so on. We defaulted on our national debt, devalued our currency, eliminated superfluous household spending, created new business (some bankrupt factories were taken over by their workers) and profited by the soaring commodity prices (we are an agriculture power thanks to our land, our climate and our technology)

We suffered great pain: our savings have lost great value, poverty skyrocketed in the years of the collapse, we had malnutrition in a country that produces food for 300 million people but we have recovered for the most part.

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#8) On December 16, 2008 at 1:34 PM, abitare (63.42) wrote:

lucas1985,

Nice to meet you. I posted on the Argentina Collapse here on 02 Nov: Lessons from Argentina's Economic Collapse
November 02, 2008

Take a read and let me know what you think. 

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#9) On December 16, 2008 at 2:18 PM, kstarich (30.83) wrote:

Abitare

Oh, I have guns and know how to use them, Hardy Har Har  for the unlucky scumbag who would think otherwise.  But I don't think I will have to use them.

Lucas,

Brilliant!!! Hear ye hear ye employees of Ford, Chrysler, and GM PLEASE TAKE OVER YOUR COMPANIES!

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#10) On December 16, 2008 at 8:11 PM, Xucolat (56.69) wrote:

Abitare,

Impressive posts. Keep feeding "Proverbs", as I for one enjoys wisdoms!

* stoxinves 

 

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#11) On December 16, 2008 at 8:39 PM, bridgeboy0 (32.42) wrote:

Abi,

"I own some real estate, I am now 100% leveraged short the US market, but I have taken about 20% of my money in to real (drop on your foot) assets."

How can you be "100% leveraged short" and still have investments in other places as well (you also have real estate and real assets).  Is 100% leveraged short supposed to mean that you have 50% of your investments in 2-1 short ETFs??  I would have thought it meant you had 100% of your investment capital in 2-1 (or greater) leveraged short investment vehicles.

I'm confuzzled.

Bridgeboy

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#12) On December 16, 2008 at 9:03 PM, abitare (63.42) wrote:

I was leveraged short via ETFs. I am covering some this week, as I think they will print money to prop up assets values in nominial terms. I was betting on defaltion. I think we got that, now we are moving to a hyperinfationiary depression.  Deflation nation is over, moving to closer to stagflation. I will likely sell some real estate here. 

I took 20% of my cash out moved it to real assets. The money I have remaining was leveraged short. I am considering covering my short postion, I took a hit on my shorts today, but my real estate has stregthened as the FED seems to want to move towards an Argentina collapse. 

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#13) On December 17, 2008 at 1:40 PM, ReaganD (31.19) wrote:

that article makes me more bullish than anything i've read in the past year.  agricultural economy? nonsense.  death of petroagribusiness?  retarded.  oil is cheap

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#14) On December 17, 2008 at 3:40 PM, abitare (63.42) wrote:

ReaganD,

I am glad someone is bullish, here. Certainly, there are plenty of sellers. Printing 2 trillion out of thin air and not telling people what it is being used for is not bullish to me. 

I think most intelligent people must feel like this a totally rigged game, that the government has taken control of the market in varying ways. 0% interest rate and the stock market is still down 40%... is bullish? LOL! Bullish for bankers, for savers it is destruction.

Kunstler has writen books on the issue. Reading one article and calling it retarded, is pretty narrow scope call...I guess you are not a believer in Peak oil. Do not confuse Peak Oil and forced liquidation.

FYI - I hope you have a "Trillion dollars" to invest so most Americans can make their escape from this market. 

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#15) On December 18, 2008 at 2:36 AM, ReaganD (31.19) wrote:

i was a little harsh, but this guy is just really afraid.  facts are almost nonexistant in that article. 

in rl, i have all my money in puts and am hedged a little with tna, so i'm not THAT bullish, haha. 

commodities were up huge in a short period of time in which demand had changed very little.  thats not peak oil.  peak oil might be real, but its not a major issue at the moment.  i dont think you can focus on forced liquidation of commodities without mentioning that everyone levered up big time up to cram into that crowded trade earlier in the year.  doing so would be analagous to saying pets.com should have gone up 100000% if only it wasnt for the forced liquidation by new economy funds.

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#16) On December 18, 2008 at 1:26 PM, lucas1985 (< 20) wrote:

@abitare,

I've read your article on our collapse and I can tell you that that guy from silverbearcafe (Esteban Morales) is misinformed, a liar or he suffers of some mental illness. No new diseases appeared, nobody chased gold/silver, very few hoarded canned food, guns and ammo, insecurity wasn't everywhere and so on. But the social damage was really great (GDP shrank 10% on 2002 for instance) and the social landscape has changed.

@kstarich,

Please, read this Wikipedia article: http://en.wikipedia.org/wiki/Workers%27_self-management

@To all,

IMO, the solution for the current crisis is to bailout the debtors, not the creditors. In other words, induce the euthanasia of the rentier system as Keynes suggested in his  General Theory of Employment, Interest and Money (Chapter 24, Concluding Notes). After that, create a new financial system (way smaller than the one we have today) oriented towards saving and capital formation, not rent and without systemic risk (nice draft here : http://www.prudentbear.com/index.php/component/content/article/33-BearLair/10159-the-wall-street-of-the-future )

My ideas are pretty much aligned with those of Prof. Michael Hudson: http://michael-hudson.com/

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#17) On December 23, 2008 at 12:40 PM, portefeuille (99.60) wrote:

I am catching up.

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#18) On April 07, 2009 at 11:05 AM, portefeuille (99.60) wrote:

still

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#19) On May 09, 2009 at 8:54 AM, portefeuille (99.60) wrote:

done

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