[R-G] [BillTottenWeblog] Pretend-O-Rama

[Bill Totten]

Clusterfuck Nation

by Jim Kunstler

Comment on current events by the author of
The Long Emergency (Atlantic Monthly Press, 2005)

www.kunstler.com (July 22 2008)


Apology to readers: after being hassled by Canadian immigration
officials at the Edmonton, Alberta, airport on Sunday afternoon, and in
a rush to make my connecting flight to Grand Prairie, I stupidly left my
Mac notebook in a plastic tub at the security gate. Luckily, they'd
checked it into the security lost-and-found and gave me clear
instructions for retrieving it when I called to inquire. I picked it up
today (Tuesday) on my way back through Edmonton en route to Vancouver.

Written on Sunday July 20

The comprehensive bankruptcy of the United States, at every level, in
all corners, atop each hill and mole-hill, and down not a few rat-holes,
is preceding like some kind of hideous multi-media, inter-dimensional
cosmic grand opera as produced and directed by the Devil. Every week,
some bizarre new subplot is introduced by the stage managers, each turn
and twist geared to produce maximum pain and carnage in the US economy,
as if to foreclose any possibility of redemption on the way down. Well,
the absence of hope is, after all, the essential nature of Hell (setting
aside, for the moment, J P Sartre's quaint notion that Hell is other
people).

Among the many developments in the story last week was the solidifying
consensus that the nation is in really serious trouble, and the
noticeable slippage of legitimacy among those pretending to run
financial affairs. The howler of the week was the Securities and
Exchange Commission's edict that Wall Street sportsters would be
prohibited from trafficking in so-called "naked short" sales against a
cherry-picked bunch of nineteen banks and financial companies for the
next two weeks. A cute trick, naked shorting is done by pretending to
borrow a bunch of stocks, pretending to sell them high just before the
share-price falls, pretending to buy them back at a lower price when the
share price has fallen, and then pretending to return exactly the same
number of lower-priced shares to the lender, pocketing the difference.
Real shorting is cute enough, and involves "clearing" the sales - that
is, proving that real stocks were really lent and really returned.
Shorting is helped along by generating rumors that a given company is in
trouble, thus nudging share prices down. This works really well when a
company already is known to be struggling, as many now are. In fact, it
usually works best when a struggle turns into a feeding-frenzy - as when
a bleeding mullet attracts the swarming sharks. When this scam is run
using odd-lots of millions and tens of millions of shares sharked up at
many dollars each, the profits to be made in this sport is obviously huge.

With naked shorting, however, the stocks being shorted are basically
non-existent, imaginary, made-up, fictional, registered only as pixels
in a program. It's a racket, pure and simple, run by both the supposed
borrower of the stocks and the supposed lender and, more to the point,
was wholly and absolutely against the law before the SEC declared a
selective holiday from it last week. So, what the SEC action really
demonstrates is the the utter lawlessness reigning on Wall Street, and
the SEC's singular unfitness as an enforcer of the laws, not to mention
the criminal irresponsibility of the clearing authorities who only
pretend to go through the motions of certifying the sales. What's more,
the companies cherry-picked for immunity against shorting were some of
the very companies believed to be most active in profiting off naked
short sales against other companies.

Thus, the credibility of all the authorities in American finance,
including the Secretary of the Treasury, Mr Paulson, the head of the
Federal Reserve, Mr Bernanke, the director of the SEC, Mr Cox, takes on
the aroma of week-old dead carp, while the affairs of American banking
and business as a general proposition look to the rest of the world like
a simple looting operation, reflecting poorly on the paper certificates
that we use as "money" in the land of the free. The odor of blood and
desperation around these activities must be sending a strong signal to
those offshore who hold American dollars in some form or other. It must
make them rather itchy to dump them while the dumping is good - Before
some clever American B-School Boyz figure out a way to short their own
country (if they haven't already done that). Finally, Mr Bush presides
at a remove from all this, sitting just offstage in his own special
velveteen loge of Hell, watching this opera to end all operas, and
waiting for his reputation to be sealed as the historical equivalent of
something found in a colostomy bag.

The sub-plot of Fannie Mae and Freddie Mac just lends a romantic edge to
the show. You could spin it off as a sitcom called "The Fucked and the
Feckless". This would include all the poor shlubs who signed $XXX-K
mortgage contracts, for houses now worth $XXX-K-minus-XX-K (and still
sinking), as well as the shareholders, who saw their share prices
approach penny stock range (especially the pensioners whose fund
managers gorged on Fannie and Freddie paper) and not least the sovereign
wealth funds of China and Russia. Those responsible for fucking
everybody, the investment bankers who engineered the tranches of
securitized bundled non-performing mortgages, and pocketed huge fees for
doing so, are now conniving to off-load the liability of all this
worthless paper on the taxpayers, led by chief conniver, Secretary Paulson.

Meanwhile, the runs on the banks are just beginning with Indymac last
week and Whachovia warming up to catch the baton this week, with more
banks waiting to enter the relay race to insolvency. It's becoming
obvious that the Federal Deposit Insurance Corporation will choke and
croak on this wad of losses, and its liabilities will also be fobbed
onto the taxpayers. In the meantime, though, it will be obvious that the
full faith backing of the United States is an empty promise. That may be
the near-term endgame for all this pretending. When American depositors
get screwed out of their deposits and the deposit insurance doesn't come
through, the full force of the fiasco will drag the dollar underwater
like the legendary Kraken of old preying on a babe thrown overboard.

Then the forces of darkness will really be loosed.

Things may get so chaotic that Mr Bush and his circle may actually be
removed from the scene before his term in office expires. He could go
out of office much the way he came in: by means unconventional. Mrs
Pelosi will keep the seat in the oval office warm for a few months. Then
the prosecutions will begin.

_____

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

http://jameshowardkunstler.typepad.com/


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