[R-G] [BillTottenWeblog] The Nausea Express

[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 13 2008)


The G-7 world, the club of "developed" western nations plus Japan, has
commenced an ordeal of suddenly waking up much poorer. All the desperate
work-arounds being engineered by governments and central banks on an al
fresco basis are intended to overcome this stunning basic fact, and none
of them will. The benchmarks of everything are in flux - stocks, bond
values and yields, commodity prices, most especially currencies - but
these tend to disguise the basic fact of growing and spreading
impoverishment. Is oil priced at $80 a barrel this morning? That's nice.
Except if the company that employs you is about to fold up and you face
a holiday season of driving frantically around Atlanta in search of
another job, which the odds are against you find finding. Or if you're
living on a retirement fund that's just lost 37 percent of its value and
it's time to fill the heating oil tank.

Iceland is the poster-child du jour for this. The little island nation
of about 320,000 souls (roughly half of Vermont's population) lately
grew a banking sector that thrived on something-for-nothing finance. In
little more than a month, its banks have imploded like mini death stars,
leaving Iceland with a pariah currency. Since it has to import just
about everything, and it suddenly finds itself unable to pay for
imports, the people are stripping the grocery markets of whatever
remains there now. You wonder what they will do in two weeks. Ten years
from now there may be 32,000 of them left, subsisting on blubber sandwiches.

I exaggerate perhaps a little, but who really knows where all this
leads? Here in the USA, the Treasury, enjoying new and seemingly
limitless powers of discretionary spending, has begun shoveling dollars
into every truck that backs up to the loading dock. The numbers are
staggering. In ten days it's reached into the trillions in loans and
handouts. Most of this money is getting sucked directly into the black
hole of debt and margin calls of one kind or another. This is
previously-presumed wealth that is now un-presumed. It's leaving the
system, never to be seen again. One useful way of thinking about it is
to regard it as our society's previous borrowings against our own
future. Thus, we are seeing our future vanish into a black hole - our
future comfort, health, and basic nourishment.

This is the kind of fiasco that brings down governments, propels
societies into revolutions, and starts wars. In a few months, America
will be full of angry economic losers. We're not the same nation that
crowded around the old radio consoles for Franklin Roosevelt's fireside
chats. Back then, we were mostly a highly-disciplined, regimented,
industrial society full of citizens who mostly did what they were told
to do, and mostly trusted in authority. Today we're a nation of tattooed
barbarian "consumers" with no impulse control, a swollen sense of
entitlement, ruled by a set of authorities ranging from one G W Bush to
the grifter-billionaire pantheon of Wall Street CEOs - now heading into
secret bunkers with their stashes of krugerrands, freeze-dried veal
Milanese, and private security squads armed with XM-8 carbines.

I go along with Nassim Nicholas Taleb's idea - read The Black Swan
(2007) - that nobody really knows anything. We construct our narratives
to try and explain circumstances that are unraveling non-linearly before
us, and some narratives are more plausible than others, depending on
your vantage point. There are infinite narratives. This is nothing more
than my narrative. The circumstances we're entering appear, for the
moment, to take the shape of a compressive deflationary depression with
the cherry-on-top add-on of a hyper-inflation further down the road -
meaning initially that jobs, incomes, and pensions are lost, but that
later on even the little money that people manage to get - perhaps
mostly from government hand-outs of one kind or another - steadily loses
its value. Every way you jigger things, it just ends up meaning the same
thing: a much poorer society. It certainly won't be a society of
recreational shoppers plying the Target store aisles for scented candles
and home accents. Hyper-inflation could make old debts meaningless, but
it would also make credit meaningless and spending absurd.

Given the way our society has evolved to operate - as an endless upward
spiral of borrowings - you can see an awful lot of things not working
anymore, and an awful lot of people not working in them or at them.
Maybe the governments of the G-7 will get lending unstuck at the upper
levels, but who, exactly, is able to borrow now besides companies on the
verge of bankruptcy - and why continue to lend to them? (Except to
maintain the pretense that "something is being done".) Besides, there's
much too much previously borrowed money that won't ever paid back, and
the "work-out" of all that debt only implies the continued distress sale
of any-and-all assets - so that the USA in effect becomes yard-sale nation.

Personally, I think all the rejiggering in the world of numbers and
indexes will not solve anything, and really only represents a kind
obsessive-compulsive neurosis related to numerology that will do nothing
to readjust our daily activities toward the production of things that
have real and enduring value. In my narrative, the fate of industrial
nations really depends on energy resources. The price of oil may be
going down for the moment - perhaps due to the deleveraging of hedge
funds, banks, and invested individuals, perhaps combined with a
perception of "demand destruction" - but the geology and geopolitics of
oil have not changed since June of this year when oil was at $147. Let's
say US oil consumption is down one million barrels of oil a day. Within
the next two years, we're liable to lose more than that in import
declines from Mexico and Venezuela alone. The International Energy
Agency's latest estimate is for only slightly less of an increase in
worldwide oil demand than was previously posted. It's still a net demand
increase. World oil consumption still exceeds world production now,
perhaps permanently so. Finally, the current plunge of oil prices has
suddenly halted the very capital ventures in exploration and development
that were hoped to increase the worldwide supply of oil. All this
portends an aggravation of oil supply and allocation problems in the
five years ahead, and ultimately much more expensive, harder-to-get oil.

What we can't face is the prospect that we might become something other
than an industrial "consumer" society. My narrative includes the
conviction that we will have trouble producing food for ourselves as
petro-agriculture fails, and since society can't go on without food
production, I see this activity coming back much closer to the center of
our daily lives. We're not ready to think about that. The downside of
our unreadiness may be that a lot of Americans will go hungry in the
decade ahead.

None of this is an argument for despair, by the way, but it certainly
invokes the need for steeply revised expectations and serious attention
to a national "to-do" list. We're on our way to becoming another nation,
whether we like it or not. No amount of numerological augury or even
hand-wringing will change that. The big question for, say, the 24 months
ahead is: how disorderly will we allow this transition to be?

_____

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

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2008/10/the-nausea-express.html


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