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Introduction
There are always disagreements
in a society, differences of opinion, and contested ideas, but I don't
remember any period in my own longish life, even the Vietnam uproar, when the
collective sense of purpose, intent, and self-confidence was so muddled in
this country, so detached from reality. Obviously, in saying this I'm
assuming that I have some reliable notion of what's real. I admit the possibility that I'm as
mistaken as anyone else. But for
the purpose of this exercise I'll ask you to regard me as a reliable narrator.
Forecasting is a nasty job, usually thankless, often disappointing - but
somebody's got to do it. There are so many variables in motion, and so much
of that motion is driven by randomness, and the best one can do in
forecasting amounts to offering up some guesses for whatever they are worth.
I begin by restating
my central theme of recent months: that we're doing a poor job of
constructing a coherent consensus about what is happening to us and what we
are going to do about it.
There is a great
clamor for "solutions" out there. I've noticed that what's
being clamored for is a set of rescue remedies - miracles even - that will
allow us to keep living exactly the way we're accustomed to in the USA, with
all the trappings of comfort and convenience now taken as entitlements. I don't believe that this will be
remotely possible, so I avoid the term "solutions" entirely and
suggest that we speak instead of "intelligent responses" to our
changing circumstances. This implies that our well-being depends on our own
behavior and the choices that we make, not on the lucky arrival of
just-in-time miracles. It is an
active stance, not a passive one. What will we do?
The great muddlement out there, this inability to form a coherent
consensus about what's happening, is especially frightening when, as is the
case today, even the intelligent elites appear clueless or patently
dishonest, in any case unreliable, in their relations with reality. President
Obama, for instance - a charming, articulate man, with a winning smile,
pectorals like Kansas City strip steaks, and a mandate for "change"
- who speaks incessantly and implausibly of "the recovery" when all
the economic vital signs tell a different story except for some obviously
manipulated stock market indexes. You hear this enough times and you can't
help but regard it as lying, and even if it is lying ostensibly for the
good of the nation, it is still lying about what is actually going on and
does much harm to the project of building a coherent consensus. I submit that
we would benefit more if we acknowledged what is really happening to us
because only that will allow us to respond intelligently. What prior state
does Mr. Obama suppose we're recovering to? A Potemkin housing boom and an endless
credit card spending orgy? The
lying spreads downward from the White House and broadly across the fruited
plain and the corporate office landscape and through the campuses and the
editorial floors and the suites of absolutely everyone in charge of
everything until all leadership in every field of endeavor has been given
permission to speak untruth and to reinforce each others
lies and illusions.
How dysfunctional is
our nation? These days, we lie to ourselves perhaps as badly the Soviets did,
and in a worse way, because where information is concerned we really are a
freer people than they were, so our failure is far less excusable, far more
disgraceful. That you are reading this blog is proof that we still enjoy free
speech in this country, whatever state of captivity or foolishness the
so-called "mainstream media" may be in. By submitting to lies and illusions,
therefore, we are discrediting the idea that freedom of speech and action has
any value. How dangerous is that?
Where We Are Now
2009 was the Year of
the Zombie. The system for capital formation and allocation basically died
but there was no funeral. A great national voodoo spell has kept the banks
and related entities like Fannie Mae and the dead insurance giant AIG
lurching around the graveyard with arms outstretched and yellowed eyes bugged
out, howling for fresh infusions of blood... er,
bailout cash, which is delivered in truckloads by the Federal Reserve, which
is itself a zombie in the sense that it is probably insolvent. The government
and the banks (including the Fed) have been playing very complicated games
with each other, and the public, trying to pretend that they can all still
function, shifting and shuffling losses, cooking their books, hiding losses,
and doing everything possible to detach the relation of "money" to
the reality of productive activity.
But nothing has been
fixed, not even a little. Nothing has been enforced. No one has been held responsible for
massive fraud. The underlying reality is that we are a much less affluent
society than we pretend to be, or, to put it bluntly, that we are
functionally bankrupt at every level: household, corporate enterprise, and
government (all levels of that, too).
The difference
between appearance and reality can be easily seen in the everyday facts of
American economic life: soaring federal deficits, real unemployment above 15
percent, steeply falling tax revenues, massive state budget crises,
continuing high rates of mortgage defaults and foreclosures, business and
personal bankruptcies galore, cratering commercial
real estate, dying retail, crumbling infrastructure, dwindling trade, runaway
medical expense, soaring food stamp applications. Meanwhile, the major stock indices
rallied. What's not clear is whether money is actually going somewhere or
only the idea of "money" is appearing to go somewhere. After all, if a company like Goldman
Sachs can borrow gigantic sums of "money" from the Federal Reserve
at zero interest, why would it not shovel that money into the burning furnace
of a fake stock market rally? Of
course, none of this behavior has anything to do with productive activity.
The theme for
2009 - well put by Chris Martenson - was
"extend and pretend," to use all the complex trickery that can be
marshaled in the finance tool bag to keep up the appearance of a revolving
debt economy that produces profits, interest, and dividends, in spite of the
fact that debt is not being "serviced," i.e. repaid. There is an awful lot in the
machinations of Wall Street and Washington that is designed deliberately to
be as incomprehensible as possible to even educated people, but this part is
really simple: if money is created out of lending, then the failure to pay
back loaned money with interest kills the system. That is the situation we are in.
The inertia
displayed by our system - especially its manifest ability to keep stock
markets levitating in the absence of value creation - is strictly a function
of its size and complexity. It is running on fumes. I thought it would
finally crash and burn in 2009. The Dow Jones industrial average certainly
fell on its ass last March, bottoming in the mid-6000 range. But then it picked its sorry ass off
the ground and rallied back up again thanks to bail-outs and ZIRPs and really
no other place to look for returns on the accumulated wealth of the past two
hundred years, especially for large institutions like pension funds that need
income to function. I'd called
for a Dow at 4000. A lot of readers ridiculed that call. Was it really that far off?
A feature of 2009
easily overlooked is what a generally placid year it was around the world.
Apart from the election uproar in Iran, there were few events of any size or
potency to shove all the various wobbly things - central banks, markets,
governments, etc - into failure mode.
So things just kept wobbling.
I don't think that state of affairs is likely to continue. With that, on to the particulars.
The Year Ahead
Just about
everything which evaded fate via gamed numbers, budgets, and balance sheets
in 2009 seems destined to hit a wall in 2010. To pick an arbitrary starting point,
it is hard to see how states like California and New York can keep staving
off monumental changes in their scale of operations with further budget
trickery. Those cans they've been
kicking down the street have fallen through the sewer grate. What will they do? They can massively raise taxes or
massively lay off employees and default on obligations - or they can do all
these things. The net result will be populations with less income, arguably
impoverished, suffering, and perhaps very angry about it. Welcome to reality. Will Washington bail the states out,
too? I wouldn't be surprised to
see them pretend to do so, but not without immense collateral damage in
everybody's legitimacy and surely an increase in US treasury interest rates.
But backing up
a moment, I'm writing between Christmas and New Year's Eve. The frenzied
distractions of the holidays ongoing for much of Q4-2009 are still in
force. In a week or so, when the
Christmas trees are hauled out to the curbs (and it turns out that municipal
garbage pickup has been curtailed for lack of funds) a picture will start to
emerge of exactly how retail sales went leading up to the big climax. My
guess is that sales were dismal. Reports of such will start a train of events
that sends many retail companies careening into bankruptcy, including some
national chains, leading to lost leases in malls and strip malls, leading to
a final push off the cliff for commercial real estate, leading to the failure
of many local and regional banks, leading to the bankrupt FDIC having to go
to congress directly to get more money to bail out the depositors, leading
again to rising interest rates for US treasuries, leading to higher mortgage
interest rates for whoever out there is crazy enough to venture to buy a
house with borrowed money, leading to the probability that there are few of
the foregoing, leading to another hard leg down in house values because so
few are now crazy enough to buy a house in the face of falling prices - all
of this leading to the recognition that we have entered a serious depression,
which is only a facet of the greater period of hardship we have also entered,
which I call The Long Emergency.
This
depression will be a classic deleveraging, or resolution of debt. Debt will
either be paid back or defaulted on.
Since a lot can't be paid back, a lot of it will have to be defaulted
on, which will make a lot of money disappear, which
will make many people a lot poorer. President Obama will be faced with a
basic choice. He can either make
the situation worse by offering more bailouts and similar moves aimed at
stopping the deleveraging process - that is, continue what he has been doing,
only perhaps twice as much, which may crash the system more rapidly - or he
can recognize the larger trends in The Long Emergency and begin marshalling
our remaining collective resources to restructure the economy along less
complex and more local lines. Don't count on that.
Of course,
this downscaling will happen whether we want it or not. It's really a matter
of whether we go along with it consciously and intelligently - or just let
things slide. Paradoxically and unfortunately in this situation, the federal
government is apt to become ever more ineffectual in its ability to manage
anything, no matter how many times Mr. Obama comes on television. Does this
leave him as a kind of national camp counselor trying to offer consolation to
the suffering American people, without being able to really affect the way
the "workout" works out? Was Franklin Roosevelt really much more
than an affable presence on the radio in a dark time that had to take its
course and was only resolved by a global convulsion that left the USA
standing in a smoldering field of prostrate losers?
One wild card is how
angry the American people might get.
Unlike the 1930s, we are no longer a nation who call each other
"Mister" and "Ma'am," where even the down-and-out wear
neckties and speak a discernible variant of regular English, where hoboes say
"thank you," and where, in short, there is something like a common
culture of shared values. We're a
nation of thugs and louts with flames tattooed on our necks, who call each other "motherfucker" and are
skilled only in playing video games based on mass murder. The masses of
Roosevelt's time were coming off decades of programmed, regimented work,
where people showed up in well-run factories and schools and pretty much
behaved themselves. In my view, that's one of the reasons that the US didn't
explode in political violence during the Great Depression of the 1930s - the
discipline and fortitude of the citizenry. The sheer weight of demoralization now
is so titanic that it is very hard to imagine the people of the USA pulling
together for anything beyond the most superficial ceremonies - placing teddy
bears on a crash site. And forget
about discipline and fortitude in a nation of ADD victims and self-esteem
seekers.
I believe we will
see the outbreak of civil disturbance at many levels in 2010. One will be plain old crime against
property and persons, especially where the sense of community is
flimsy-to-nonexistent, and that includes most of suburban America. The
automobile is a fabulous aid to crime. People can commit crimes in Skokie and
be back home in Racine before supper (if supper is
anything besides a pepperoni stick and some Hostess Ho-Hos
in the car). Fewer police will be on guard due to budget shortfalls.
I think we'll
see a variety-pack of political disturbance led first by people who are just
plain pissed off at government and corporations and seek to damage property
belonging to these entities. The ideologically-driven will offer up
"revolutionary" action to redefine some lost national sense of
purpose. Some of the most dangerous players such as the political racialists,
the posse comitatus types, the totalitarian
populists, have been out-of-sight for years. They'll come out of the woodwork
and join the contest over dwindling resources. Both the Left and the Right
are capable of violence. But since the Left is ostensibly already in power,
the Right is in a better position to mount a real challenge to
office-holders. Their ideas may be savage and ridiculous, but they could
easily sweep the 2010 elections - unless we see the rise of a third party (or
perhaps several parties). No sign of that yet. Personally, I'd like to see
figures like Christopher Dodd and Barney Frank sent packing, though I'm a
registered Democrat. In the year ahead, the sense of contraction will be
palpable and huge. Losses will be obvious. No amount of jive-talking will
convince the public that they are experiencing "recovery." Everything familiar and comforting
will begin receding toward the horizon.
Markets and Money
I'll take another
leap of faith and say that 6600 was not the bottom for the Dow. I've said Dow
4000 for three years in a row.
Okay, my timing has been off.
But I still believe this is its destination. Given the currency situation, and the
dilemma of no-growth Ponzi economies, I'll call it
again for this year: Dow 4000. There, I said it. Laugh if you will....
I'm with those who see the
dollar strengthening for at least the first half of 2010, and other assets
falling in value, especially the stock markets. The dollar could wither later
on in the year and maybe take a turn into high inflation as US treasury
interest rates shoot up in an environment of a global bond glut. That doesn't mean the stock markets
will bounce back because the US economy will only sink into greater disorder
when interest rates rise.
Right now there are ample signs of trouble with the Euro. It made a
stunning downward move the past two weeks. European banks took the biggest hit in
the Dubai default. Now they face
the prospect of sovereign default in Greece, the Baltic nations (Estonia,
Latvia, Lithuania), the Balkan nations (Serbia, et
al), Spain, Portugal, Italy, Ireland, Iceland and the former soviet bloc
of Eastern Europe. England is a train wreck of its own (though not tied into
the Euro), and even France may be in trouble. That leaves very few European nations
standing. Namely Germany and Scandanavia (and I just plain don't know about Austria).
What will Europe do? Really, what
will Germany do? Probably reconstruct something like the German Deutschmark
only call it something else... the Alt.Euro? As
one wag said on the Net: sovereign debt is the new sub-prime! The Euro is in
a deeper slog right now than the US dollar (even with our fantastic
problems), so I see the dollar rising in relation to the Euro, at least for a
while. I'd park cash in three month treasury bills - don't expect any return
- for safety in the first half of 2010. I wouldn't touch long-term US debt
paper with a carbon-fiber sixty foot pole.
I'm
still not among those who see China rising into a position of supremacy. In fact, they have many reasons of
their own to tank, including the loss of the major market for their
manufactured goods, vast ecological problems, de-stabilizing demographic
shifts within the nation, and probably a food crisis in 2010 (more about this
later).
Though a seemingly
more stable nation than the US, with a disciplined population and a strong
common culture with shared values, Japan's financial disarray runs so deep
that it could crash its government even before ours. It has no fossil fuels of its own
whatsoever. And in a de-industrializing
world, how can an industrial economy sustain itself? Japan might become a
showcase for The Long Emergency. On the other hand, if it gets there
first and makes the necessary adjustments, which is possible given their
discipline and common culture, they may become THE society to emulate!
I'm also not
convinced that so-called "emerging markets" are places where money
will dependably earn interest, profits, or dividends. Contraction will be everywhere. I even
think the price of gold will retrace somewhere between $750 and $1000 for a
while, though precious metals will hold substantial value under any
conditions short of Hobbesian chaos. People flock
to gold out of uncertainty, not just a bet on inflation. My guess is that
gold and silver will eventually head back up in value to heights previously
never imagined, and it would be wise to own some. I do not believe that the
federal government could confiscate personal gold again the way it did in
1933. There are too many pissed off people with too many guns out there - and
I'm sure there is a correlation between owners of guns with owners of gold
and levels of pissed-offness. A botched attempt to take gold away
from citizens would only emphasize the impotence of the federal government,
leading to further erosion of legitimacy.
Bottom line for
markets and money in 2010: so many things will be out of whack that making
money work via the traditional routes of compound interest or dividends will
be nearly impossible. There's money to be made in shorting and arbitrage and
speculation, but that requires nerves of steel and lots and lots of
luck. Those dependent on income
from regular investment will be hurt badly. For most of us, capital preservation
will be as good as it gets - and there's always the chance the dollar will
enter the hyper-inflationary twilight zone and wipe out everything and
everyone connected with it.
Peak Oil
It's still out
there, very much out there, a huge unseen presence in the story, the true
ghost-in-the-machine, eating away at economies every day. It slipped offstage in 2009 after the
oil spike of 2008 ($147/barrel) over-corrected in early 2009 to the low
$30s/barrel. Now it's retraced
about halfway back to the mid-$70s.
One way of looking at the situation is as follows. Oil priced above $75 begins to squeeze
the US economy; oil priced over $85 tends to crush the US economy. You can see where we are now with oil
prices closing on Christmas Eve at $78/barrel.
Among the many
wishful delusions operating currently is the idea that the Bakken oil play in Dakota / Montana will save Happy
Motoring for America, and that the Appalachian shale gas plays will kick in
to make us energy independent for a century to come. Americans are likely to be
disappointed by these things.
Both Bakken and the shale gas are based on techniques for
using horizontal drilling through "tight" rock strata that is
fractured with pressurized water. It works, but it's not at all cheap,
creates plenty of environmental mischief, and may end up being only
marginally productive. At best, Bakken is predicted
to produce around 400,000 barrels of oil a day. That's not much in a nation that uses
close to 20 million barrels a day.
Shale gas works too, though the wells deplete
shockingly fast and will require the massive deployment of new drilling rigs
(do we even have the steel for this?). I doubt it can be produced for under
$10 a unit (mm/BTUs) and currently the price of gas is in the $5 range. In
any case, we're not going to run the US motor vehicle fleet on natural gas,
despite wishful thinking.
Several other story elements
in the oil drama have remained on track to make our lives more
difficult. Oil export rates
continue to decline more steeply than oil field depletion rates. Exporters like Iran, Mexico, Saudi
Arabia, Venezuela, are using evermore of the oil they produce (often as
state-subsidized cheap gasoline), even as their production rates go
down. So, they have less oil to
sell to importers like the USA - and we import more than 60 percent of the
oil we use. Mexico's Pemex is in such a sorry
state, with its principal Cantarell field
production falling off a cliff, that the USA's number three source of
imported oil may be able to sell us nothing whatsoever in just 24
months. Is there any public
discussion about this in the USA?
No. Do we have a plan? No.
A new wrinkle in the story
developing especially since the financial crisis happened,
is the shortage of capital for new oil exploration and production - meaning
that we have even poorer prospects of offsetting world-wide oil
depletion. The capital shortage
will also affect development in the Bakken play and
the Marcellus shale gas range.
Industrial
economies are still at the mercy of peak oil. This basic fact of life means that we
can't expect the regular cyclical growth in productive activity that formed
the baseline parameters for modern capital finance - meaning that we can't
run on revolving credit anymore because growth simply isn't there to create
real surplus wealth to pay down debt.
The past 20 years we've seen the institutions of capital finance
pretend to create growth where there is no growth by expanding financial
casino games of chance and extracting profits, commissions, and bonuses from
the management of these games - mortgage backed securities, collateralized
debt obligations, credit default swaps, and all the rest of the tricks
dreamed up as America's industrial economy was shipped off to the Third
World. But that set of rackets
had a limited life span and they ran into a wall in October 2008. Since then
it's all come down to a shell game: hide the giant pea of defaulted debt
under a giant walnut shell.
Yet
another part of the story is the wish that the failing fossil fuel industrial
economy would segue seamlessly into an alt-energy industrial economy. This just isn't happening, despite the
warm, fuzzy TV commercials about electric cars and "green"
technology. The sad truth of the
matter is that we face the need to fundamentally restructure the way we live
and what we do in North America, and probably along the lines of much more
modest expectations, and with very different practical arrangements in
everything from the very nature of work to household configurations,
transportation, farming, capital formation, and the shape-and-scale of our
settlements. This is not just a
matter of re-tuning what we have now.
It means letting go of much of it, especially our investments in
suburbia and motoring - something that the American public still isn't ready
to face. They may never be ready
to face this and that is why we may never make a successful transition to
whatever the next economy is.
Rather, we will undertake a campaign to sustain the unsustainable and
sink into poverty and disorder as we fight over the table scraps of the old
economy... and when the smoke clears nothing new will have been built.
President Obama has spent his first year in office, and billions of
dollars, trying to prop up the floundering car-makers and more generally the
motoring system with "stimulus" for "shovel-ready"
highway projects. This is exactly
the kind of campaign to sustain the unsustainable that I mean. Motoring is in the process of failing
and now for reasons that even we peak oilers didn't anticipate a year ago.
It's no longer just about the price of gasoline. The crisis of capital is making car
loans much harder to get, and if Americans can't buy cars on installment
loans, they are not going to buy cars, and eventually they will not be
driving cars they can't buy. The same crisis of capital is now depriving the
states, counties, and municipalities of the means to maintain the massive
paved highway and street system in this country. Just a few years of not
attending to that will leave the system unworkable.
Meanwhile President
Obama has given next-to-zero money or attention to public transit, to
repairing the passenger railroad system in particular. I maintain that if we don't repair
this system, Americans will not be traveling very far from home in a decade
or so. Therefore, Mr. Obama's actions vis-à-vis transportation are not an intelligent response to our situation. And for very similar reasons, the
proposal for a totally electric motor vehicle fleet, as a so-called
"solution" to the liquid fuels problem, is equally unintelligent
and tragic. Of course something else that Mr. Obama has barely paid
lip-service to is the desperate need to retool our living places as walkable communities. The government now, at all levels,
virtually mandates suburban arrangements of the most extremely car-dependent
kind. Changing this has to move near the top of a national emergency priority
list, if we have one.
Even with somewhat
lower oil prices in 2009, the airlines still hemorrhaged losses in the
billions, and if the oil price remains in the current zone some of them will
fall back into bankruptcy in 2010.
Oil prices may go down again in response to crippled economies, but
then so will passengers looking to fly anywhere, especially the business
fliers that the airlines have depended on to fill the higher-priced seats. I
believe United will be the first one to go down in 2010, a hateful moron of a
company that deserves to die.
My forecast for oil
prices this year is extreme volatility.
A strengthening dollar might send oil prices down (though that
relationship has temporarily broken down this December as both oil prices and
the dollar went up in tandem for the first time in memory). So could the cratering of the stock markets, or a general apprehension
of a floundering economy. But the
oil export situation also means there is less and less wiggle room every
month for supply to keep pace with demand, even in struggling economies if
they are dependent on foreign imports. Another part of the story that we
don't pay attention to is the potential for oil scarcities, shortages, and
hoarding. We may see the reemergence of those trends in 2010 for the first
times since 1979.
Geopolitics
The retracement of
oil prices in 2009 took place against a background of relative quiet on the
geopolitical scene. With economies
around the world sinking into even deeper extremis in 2010, friction and
instability are more likely. The more likely locales for this are the places
where most of the world's remaining oil is: the Middle East and Central Asia.
The American army is already there, in Iraq and Afghanistan, with an overt
pledge to up-the-ante in Afghanistan. It's hard to imagine a happy ending in
all this. It's increasingly hard to even imagine a strategic justification
for it. My current (weakly-held)
notion is that America wants to make a baloney sandwich out of Iran, with
American armies in Iraq and Afghanistan as the Wonder Bread, to "keep
the pressure on" Iran. Well, after quite a few years, it doesn't seem to
be moderating or influencing Iran's behavior in any way. Meanwhile, Pakistan
becomes more chaotic every week and our presence in the Islamic world
stimulates more Islamic extremist hatred against the USA. Speaking of
Pakistan, there is the matter of its neighbor and adversary, India. If there
is another terror attack by Pakistan on the order of last year's against
various targets in Mumbai, I believe the response by India is liable to be
severe next time, leading to God-knows-what, considering both countries have
plenty of atom bombs.
Otherwise, the
idea that we can control indigenous tribal populations in some of Asia's most
forbidding terrain seems laughable. I don't have to rehearse the whole
"graveyard of empires" routine here. But what possible
geo-strategic advantage is in this for us? What would it matter if we pacified
all the Taliban or al Qaeda in Afghanistan? Most of the hardest core maniacs
are next door in Pakistan. Even
if we turned Afghanistan into Idaho-East, with Kabul as the next Sun Valley,
complete with Ralph Lauren shops and Mario Batali
bistros, Pakistan would remain every bit as chaotic and dangerous in terms of
supplying the world with terrorists. And how long would we expect to remain
in Afghanistan pacifying the population?
Five years? Ten Years?
Forever? It's a ridiculous project. Loose talk on the web suggests our hidden
agenda there was to protect a Conoco pipeline out of Tajikistan, but that
seems equally absurd on several grounds.
I can't see Afghanistan as anything but a sucking chest wound for
dollars, soldiers' lives, and American prestige.
What's more, our
presence there seems likely to stimulate more terror incidents here in the
USA. We've been supernaturally lucky since 2001 that there hasn't been
another incident of mass murder, even something as easy and straightforward
as a shopping mall massacre or a bomb in a subway. Our luck is bound to run out. There are too many "soft"
targets and our borders are too squishy. Small arms and explosives are easy
to get in the USA. I predict that
2010 may be the year our luck does run out. Even before the start of the year
we've seen the attempted Christmas bombing of Northwest-KLM flight 253
(Amsterdam to Detroit). One consequence of this is that it will only make air
travel more unpleasant for everybody in the USA as new rules are instated
limiting bathroom trips and blankets in the final hour of flight.
As far as the
USA is concerned, I think we have more to worry about from Mexico than
Afghanistan. In 2009, the Mexican government slipped ever deeper into impotence
against the giant criminal cartels there. As the Cantarell
oil field waters out, revenue from Pemex to the
national government will wither away and so will the government's ability to
control anything there. The next president of Mexico may be an ambitious
gangster straight out of the drug cartels, Pancho
Villa on steroids.
Another
potential world locale for conflict may be Europe as the European Union
begins to implode under the strains of the monetary system. The weaker
nations default on their obligations and Germany, especially, looks to
insulate itself from the damage.
Except for the fiasco in Yugoslavia's breakup years ago, Europe has
been strikingly peaceful for half a century. For most of us now living who have
visited there, it is almost impossible to imagine how violent and crazy the
continent was in the early twentieth century. I wonder what might happen
there now, with more than a few nations failing economically and the dogs of
extreme politics perhaps loosed again.
History is ironical.
Perhaps this time the Germans will be the good guys, while England
goes apeshit with its BNP. Wouldn't that be something?
One big new subplot
in world politics this year may be the global food shortage that is shaping
up as a result of spectacular crop failures in most of the major farming
regions of the world. The
American grain belt was hit by cold and wet weather and the harvest was a
disaster, especially for soybeans, of which the USA produces at least
three-quarters of the world's supply.
Crops have also failed in Northern China's wheat-growing region, in
Australia, Argentina, and India. The result may range from extremely high
food prices in the developed world to starvation in other places, leading to
grave political instability and desperate fights over resources. We'll have
an idea where this is leading by springtime. It maybe
the most potent sub-plot in the story for 2010.
Conclusions
The Long Emergency
is officially underway. Reality
is telling us very clearly to prepare for a new way of life in the USA. We're
in desperate need of decomplexifying,
re-localizing, downscaling, and re-humanizing American life. It doesn't mean that we will be a
lesser people or that we will not recognize our own culture. In some respects, I think it means we
must return to some traditional American life-ways that we abandoned for the
cheap oil life of convenience, comfort, obesity, and social atomization.
The successful
people in America moving forward will be those who attach themselves to cohesive
local communities, places with integral local economies and sturdy social
networks, especially places that can produce a significant amount of their
own food. I don't think that we'll be living in a world without money, some
medium of exchange above barter, but it may not come in the form of dollars.
My guess is that for a while it may be gold and silver, or possibly
certificates issued by bank-like institutions representing gold-on-hand. In
any case, I doubt we'll arrive there this year. This is more likely to be the
year of grand monetary disorders and continued shocking economic contraction.
Political upheaval
can get underway pretty quickly, without a whole lot of warning. I'm still waiting to hear the
announced 2009 bonuses for the employees of the TBTF banks. All they said before Christmas was
that thirty top Goldman Sachs employees would be paid in stock instead of
money this year, but no other big banks have made a peep yet. I suppose they'll have to in the four
days before New Years. I still
think that could be the moment that shoves some disgruntled Americans into
the arena of protest and revolt.
Beyond that, though, there is plenty room for emotions to run wild and
for behavior to get weird.
President Obama will have to make some pretty drastic moves to salvage
his credibility. I see no sign of any intention to seriously investigate or
prosecute financial crimes. Yet the evidence of misdeeds piles higher and
higher - just this week new comprehensive reports of Goldman Sachs's irregularities
in shorting their own issues of mortgage-backed securities, and a report on
the Treasury Department's issuance of treasuries to "back-door"
dumpers of toxic mortgage backed securities. And on Christmas Eve, when
nobody was looking, the Treasury lifted the ceiling on Fannie Mae and Freddie
Mac's backstop money to infinity. Even people like me who try to pay close
attention to what's going on have lost track of all the various TARPs, TALFs,
bailouts, stimuli, ZIRP loans, and handovers to every bank and its uncle in
the land.
Good luck to readers
in 2010. To paraphrase Tiny Tim: God help us, every one....
James Howard Kunstler
www.kunstler.com/
Also
by James Howard Kunstler
My new novel of the post-oil future, World Made By Hand, is
available at all booksellers.
James Kunstler has worked
as a reporter and feature writer for a number of newspapers, and finally as a
staff writer for Rolling Stone Magazine. In 1975, he dropped out to write
books on a full-time basis.
His latest nonfiction book, "The Long
Emergency," describes the changes that American society faces in the 21st
century. Discerning an imminent future of protracted socioeconomic crisis, Kunstler foresees the progressive dilapidation of
subdivisions and strip malls, the depopulation of the American Southwest,
and, amid a world at war over oil, military invasions of the West Coast; when
the convulsion subsides, Americans will live in smaller places and eat
locally grown food.
You can purchase your own copy here
: The Long
Emergency .
You can get more from James Howard Kunstler -
including his artwork, information about his other novels, and his blog - at
his Web site : http://www.kunstler.com/
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