Use access key #2 to skip to page content.

Enough Black Swans to Blot Out the Sun

Recs

26

March 23, 2009 – Comments (6) | RELATED TICKERS: RGR , SWHC , OLN

Kunstler's Full Commanding Denial

http://jameshowardkunstler.typepad.com/

       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. 

6 Comments – Post Your Own

#1) On March 23, 2009 at 4:22 PM, Rehydrogenated (32.56) wrote:

Yeah yeah...I've heard it all before. Everyone is getting something for nothing, you, the reader, will sit on your high seat and know you are the only person doing an honest days work for an honest days pay. Now everyone will get what's coming to them!

 

Or maybe they'll just declare bankruptcy, find another job, and go on being total idiots. If they don't we will just have to take care of them, would you prefer that?

Report this comment
#2) On March 23, 2009 at 5:23 PM, RootnToot (30.15) wrote:

Aw common Ab, don't sugar coat it, tell us how you really feel!

I really believe that the Prez is a supremely gifted puppet-master, very adeptly manipulating the talking heads on TV as will as the unthinking public in support of his prime agenda, the social reengineering of America. Ain't it grand?

Report this comment
#3) On March 23, 2009 at 5:40 PM, whereaminow (42.76) wrote:

Abitare always gets a rec from me. Just because. Oh, and because his SWHC call made me a lot of money :) Thanks bud!

David in Qatar

Report this comment
#4) On March 23, 2009 at 5:58 PM, abitare (58.11) wrote:

ALCON,

Thank you for the replies. This is my second post in 24 hours. Some other ideas were posted at my previous post.

Including some discussion about SWHC. 

The Solution. What is more rare, harder to find then gold and the consumer is buying at a high premium? March 22, 2009

 

Report this comment
#5) On March 23, 2009 at 6:24 PM, abitare (58.11) wrote:

FYI -  James Galbraith: Geithner Plan "Extremely Dangerous," Banks "Massively Corrupted"

Henry Blodget|Mar. 23, 2009, 2:10 PM

http://www.businessinsider.com/henry-blodget-james-galbraith-geithner-plan-extremely-dangerous-banks-massively-corrupted-2009-3

 

Report this comment
#6) On March 23, 2009 at 6:44 PM, ralphmachio (23.67) wrote:

One cannot be both puppet and puppet master. Where did obama come from? The CFR. Our only possible salvation might have been Ron Paul, but the fourth branch of the government convinced us we didn't like him. To be in denial of collusion between the press and government is the same as being in denial of the state of our consume 40% export 20% 'economy'. I agree with Abitare. Eventually, this will be corrected, both short term and medium, but I believe we will see enough "happy days are here again" rhetoric from the gov/press to fool us into a rally until sept. My guess is, and it's just a guess, come fall, things may get worse. The bears should probably go into hibernation for the spring and summer, if my guess is right. That jives with global warming, and of course, it's no coincidence. :)

peace 

Report this comment

Featured Broker Partners


Advertisement