"and gun sales moving out-of-sight"
Kunstler's 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. _
Kunstler's novel of the post-oil future, World Made By Hand, is available in paperback at all booksellers.