[R-G] [BillTottenWeblog] Easthampton Burning?

[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 (October 27 2008)


In the typhoon of commentary that's blown around the world a step behind
the financial tsunami that's wrecking everything, two little words have
been curiously absent: "fraud" and "swindle". But aren't they really at
the core of what has happened? Wall Street took the whole world "for a
ride" and now a handful of Wall Street's erstwhile princelings have
shifted ceremoniously into US Government service to "fix" the problem
with a "toolbox" containing a notional two trillion dollars. This
strange exercise in financial kabuki theater will shut down sometime
between the election and inauguration day, when the inaugurate finds
himself president of the Economic Smoking Wreckage of the United States.
What will happen?

I have thought for some time that things could get dangerously out of
hand in America, despite our exceptionalist notion that we are immune to
the common plot-lines of history. For starters, inauguration night will
seem more like Halloween, as those two little words fly in to haunt the
new president. So, a large and looming question is: who will be
appointed the next attorney general of the US (to replace the human
sash-weight currently occupying the office), and how soon will the
federal marshals be scouring the wainscoted hallways of Goldman Sachs,
JP Morgan Chase, not to mention a thousand Greenwich, Connecticut, hedge
fund boiler rooms, with man-sized nets?

A story-line is already emerging to the effect that these birds really
didn't quite know what they were doing in grinding out that
multi-trillion dollar basket of alphabet securities sausage (a theme on
Sunday's "60-Minutes" broadcast). Nobody will buy that line of bullshit,
though - and certainly not in the courtroom where, for instance, Mr Hank
Paulson will have to answer why his own firm of Goldman Sachs set up a
special unit to short its own issues. It will be edifying to see how
they answer.

In the meantime, however, millions of Joe-the-Plumber types will have
gotten their pink slips, slipped helplessly into foreclosure, watched
the repo men hot-wire their Ford pickups, and eaten down the kitchen
cupboard to a single box of Kellogg's All-Bran (which had been sitting
there for eleven years infested with weevils). They will be watching the
official proceedings in the federal courtrooms with jaundiced eyes as
they hunch in their tent cities, in the rain, sipping amateur-brand
raisin wine bartered for a few snared rock doves. How long before the
hardier ones among them venture out to Easthampton with long knives and
matches?

It will bring little satisfaction though, and the disappointment could
lead to a more inchoate outbreak of civil disorder that would be more
like a free-for-all of vengeance and grievance. There will be a great
outcry for the new government to "do something!" Perhaps that will
finally bring the troops home from Iraq - only for them to find that the
Homeland has become Iraq ...

If the financial system completes its self-destruction - and that's
looking more and more like a real possibility - there will be several
pretty awful consequences. One is that the United States will be forced
to declare bankruptcy by repudiating its own debt. All those who took
refuge in US Treasury bonds and bills will be like folks who sought
shelter from a tornado in their out-house. That would go hand-in-hand
with a massive currency inflation that is likely to follow the current
phase of compressive liquidating deflation - in which every possible
asset is being sold off for less than its face value. That process is
self-limiting due to the finite supply of real salable assets. The
trillions of dollars injected into system while this is happening must
eventually snap-back as people shed the last fungible article and
compete for necessary commodities like food and fuel with dollars that
are suddenly plentiful but worthless. At some point, the government may
have to summon up a new currency. I don't think it will be anything like
the "Amero" which the paranoid fringe incessantly mutters about as part
of their fantasy in which the US, Mexico, and Canada all join up to
become one country. But any "new dollar" would probably have to be
backed by gold.

As we discover ourselves to be a much poorer nation, one of my
correspondents put it: "the bogus risk-swapping economy must be replaced
by a net value-added economy". That means actually making things,
growing things, and rebuilding things, and that can only begin to happen
if we do not stupidly sucker ourselves into a war with other nations who
are liable to be extremely ticked off at us for destroying the global
economy, but also competing with us for a dwindling supply of resources
that are not equitably distributed around the world.

This means especially oil. I hope you're enjoying the temporarily cheap
prices at the gas pumps, because this is purely a function of the
compressive deleveraging that is going on right now, as contracts and
positions held in energy markets are being dumped by everybody and his
uncle to raise cash to meet margin calls. My guess is that oil and its
byproducts will become much more difficult to get in the months ahead -
not just more expensive, but literally not available. The current
falling price of oil has little to do with the real supply and demand
fundamentals. It's simply a function of the markets being in near-total
disarray. We're running on current inventory, and running it down. In
the background, all kinds of peculiar and terrible things are happening.
The entire apparatus of allocation and distribution is being thrown out
of whack. The smaller tanker operations are going bankrupt. The
"less-developed" nations are heading back to the 17th-century level of
daily life without electricity. The oil exploration and development
projects that were planned for hard-to-get oil netting $100-a-barrel
minimum - in places like the deepwater Gulf of Mexico, Siberia, and
Central Asia - are being shelved, which means the world has less of a
chance to offset coming depletions in old fields.

The bottom line of all this is that we in the US could find ourselves in
a situation of shortages, hoarding, and rationing. This would pretty
much kill off whatever remains of the previous shuck-and-jive economy -
hamburger sales, theme park visits, Nascar weekends - while it makes
obvious the failures of our suburban living arrangements (and drives the
value of housing there closer to zero).

The new president will have to be Franklin Roosevelt on steroids, with
some Mahatma Gandhi and Florence Nightingale thrown in. My pet project
of restoring the American passenger railroad system might seem pretty
minor in the face of all this, but it's at least a place to start that
will accomplish several things: allow people and things to get places
without cars and trucks; put many thousands of people to work at many
levels doing something of direct, practical value; and be a small step
in rebuilding confidence that we are a society capable of accomplishing
something.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/