[R-G] [BillTottenWeblog] Bad Collateral

[Bill Totten]

Clusterfuck Nation

by Jim Kunstler

Comment on current events by the author of
The Long Emergency (2005)

www.kunstler.com (May 18 2009)


The wishes of the "green shoots and mustard seed" crowd really hinge on
whether the various organs of the suburban economy can be jump-started
back to life - the production home-builders, the granite countertop
outfitters, the mall and strip-mall gang, the national chain discount
retailers, all the people who make Happy Motoring possible from the
factory to the showroom, and, of course, the banks who shovel money into
these enterprises.

All these organs of our now-former economy are gravely impaired, and a
realistic appraisal of them would have to conclude that they've entered
the zone of congestive failure. The choice we face really comes down to
this: do we put our dwindling resources and "hopes" into resuscitating
those dying systems, or do we move forward to the next chapter of
American life, cut our losses, and make new arrangements more consistent
with the realities on offer from the universe? To take it a step
further, can we remain one nation, a common culture, without such a
conscious re-purposing of our collective spirit?

The bizarre spectacle being played out right now by President Obama and
his team only adds layers of mystery and mystification to this big
question. On the one hand, you have Mr Obama giving a graceful,
thoughtful speech on a very difficult issue (abortion) at a very tough
venue (the country's leading Catholic university), and presenting an
excellent case for common ground. It was a bold deed, unshirking, even
brave considering what have come to be the standard modes of pander or
evasion in presidential politics. I suspect that Mr Obama did it as much
to demonstrate his willingness to face tough questions in general as to
address abortion per se.

All this is to say why it is so dispiriting to see Mr Obama's White
House mount a campaign to sustain the unsustainable in the economic
realm. Everything they've done for four months involving money
management and enterprise policy - from backstopping hopeless banks, to
gaming the bankruptcies of the big car companies, to the bungled efforts
to prop up artificially-high house prices - amounts to a gigantic
exercise in futility. Worse, it gives off odors of dishonesty or
stupidity, since the ominous tendings of our system are so starkly
self-evident.

Not least of the problems entailed in all this are the scary political
consequences. It's one thing for a business such as a bank to fail; its
another thing for the public to lose confidence in banking, or their own
currency, or the credibility of all the people who work in banking, or
the authority of those charged to regulate these activities, or the
courts and their officers who are supposed to adjudicate misconduct in
them. When faith in all these things starts to go, all bets are off for
even larger social constructs like democracy, justice, and the destiny
of a federal republic.

The Obama White House has very quickly painted itself into a corner on
these things. The so-called bank "stress test" couldn't have backfired
more completely. Rather than bolster confidence in our money system and
the people who run it, it only made the system appear more obviously
corrupt. It made the Treasury Department (and the White House by
extension) look idiotic for concocting it. Worse, the game of allowing
the banks to audit themselves, and cook their books under newly jiggered
accounting rules, only made them look less sound and trustworthy, and
their executives more venal and mendacious. The stress test scam also
virtually guaranteed that the banks will not get another dime out of
congress - even while it is common knowledge that they will desperately
need quadrillions more dimes in the months ahead.

Who knows what the point of this ludicrous exercise was? Observers in
all corners of the media saw through it, and the public has only been
made more cynical, and is now so furious over related stunts like AIG
using taxpayer money to pay back swaps bets to Goldman Sachs that there
is a whiff of revolution in the American air for the first time, really,
since 1861. A lot of reasonable people see a good chance that our
society will sink into disorder if these trends continue, and these
fears could beat a path into radical politics, even the frightful
prospect of coup d'etat - not something that I advocate, by the way.

The president is playing with fire on all this. The old economy is not
going to recover, and so far he has not used his rhetorical talents to
articulate what the next economy is likely to be about. It is reasonable
to wonder whether he even really has a clear sense of it - and, based on
the fatuous utterances of his economic mandarins like Larry Summers and
Austan Goolsby, this team is really behind the curve.

There are plenty of things you can state about the economy past and
future with some confidence right now:

- Cheap energy is over and our wishes for alt.energy are currently
inconsistent with reality, meaning we have to live differently.

- We have to downscale and re-localize our major economic activities:
food production, commerce and manufacturing, banking, schooling, et cetera.

- We can't hope to have a stable money system unless we allow a workout
of unpayable debt to proceed.

- Even if we can do this, universal easy credit is a thing of the past.
>From now on, we have to save for the things we want and run our
businesses and households on accounts receivable.

- Major demographic shifts are inevitable as it becomes necessary to let
go of suburbia and reactivate our derelict towns and smaller cities (and
allow our giant metroplexes to contract).

- We have to face the truth that our major social contracts cannot be
met, namely the continuation of social security as we know it and
probably all pension arrangements. We'll probably have to change
household arrangements to make up for these losses.

- Health care will have to go through a revolution more comprehensive
than just changing how we pay for it. Like everything else, it will have
to downscale, re-localize, and become more rigorous.

We're not going to rescue the banks. The collateral for their loans is
no good and it will only lose more value. All those tract houses on the
cul-de-sacs of America and scattered on the out-parcels of our
tragically subdivided farming landscape will only lose value, one way or
another, in the years ahead. Right now they're simply losing inflated
cash value - and that has been bad enough to sink the banks. In the
months and years ahead, they'll lose their sheer usefulness as the
distances once mitigated by cheap gasoline loom larger again, and the
jobs vanish and incomes with them, and the supermarket shelves cease to
groan with eighty-seven different varieties of flavored coffee creamers,
and one-by-one the national chain stores shutter, and the theme parks,
and the Nascar ovals, and the malls, and the colossal superfluous
cretin-cargo of consumer nonsense that we've been daydreaming in gets
blown away in a hurricane of change that we were not ready to believe in.

_____

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

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2009/05/bad-collateral.html


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