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Sheesh. Was I ever wrong last year about those
stock market indexes. I called for Dow 4000 and look
where the darn thing ended up: 11,577.50. Some of those fabled
"green shoots" must have grown clean through my brain-pan while I
slept off 2010's New Year's Eve festivities.The
damage was so severe, apparently, that I missed the takeover of Wall Street
by front-running high frequency computer programs battling for supremacy of
the algo-space which, along with massive insider
trading, daily tweaks stage-managed by the Federal Reserve via their trusted
allies in large banks, and relentless propagandistic cheerleading on the
theme of if-you-wish-it-so-it-will-be, kept the Dow Jones and Standard
& Poors indexes in a frothy state of perma-levitation through the year.
The outstanding question from the get-go of 2011 is just this: can a
political economy be kept floating along like a Winnie-the-Pooh balloon on
gusts of sheer fakery? To me, the simple answer is no. The people running
things in the USA have tried everything from pervasive accounting fraud to
complete opacity in trading procedures to looting the republic's future. The
consensus trance of "recovery" makes itself manifest through every
conduit of public utterance - cable TV news, The New York Times, the
pronouncements of every last elected official - even though the Gross
Domestic Product index omits items such as food, gasoline, and heating oil in
its calibrations, while heaping on fictional "hedonic" adjustments.
What's left of the American economy is a web of financial rackets
divorced from the production of real wealth, dependent on an elaborate
computerized three-card-monte edifice of swindling.
Those groans and creakings you hear are the agonies
of this ediface swaying under its burden of lies,
while underneath it the ground of history shifts.
A secondary outstanding question - I get it all the time - is whether
the people running things know how fake this picture is, and how horrifying
the view behind-the-curtain is. Does President Obama understand the relation
of our energy predicament to the workings of our economy? How could he not?
Certainly he has had a conversation or two with Energy Secretary (and eminent
physicist) Steven Chu over the past two years. Mr. Chu should have explained
to the president that a decline in the primary energy resource used by an
industrial society portends a decline in living standards, which can be
expressed in an economy, for instance, by people having less money, or by people having lots of money that is
increasingly worthless. This concept may lie outside the strict purview of
physics, but surely somebody like Paul Volker was at hand in the White House
to connect the dots - and perhaps explain further that anything in the
picture beyond that equation amounts to a looting operation by people
positioned to systematically cream off the dwindling equity base of a roughly
200-year-old venture.
By the way, to aver to "people running things" is not
evidence of a persecution complex. Lots of people are in positions to make
decisions. The president may be a hero, a con man, a victim of history, a
bungler, a hostage to events - but you can be sure that he makes real
decisions that affect people's lives every day. Where I depart from darker views
is the idea that there is some shadow gang of hidden puppeteers behind the
visible leadership - the Council on Foreign Relations, the Trilateral
Commission, the Bilderbergers - bent on a
quasi-religious crusade to impose "one-world government," or some
kind of totalistic domination scheme out of comic book politics. I denounce
such views as childish, deranged distractions from a reality that is
challenging enough without the intrusion of paranoid fantasies.
If there are "bad guys" or string-pullers on the scene, then
they are figures in plain sight, like Jamie Dimon
and Lloyd Blankfein at the big banks, or John
Paulson in his hedge fund, or the many figures who have moved back and forth
between Wall Street and government in recent years, and their machinations
are pretty well understood, and explicated daily by diligent observers on the
scene - from William Black to Yves Smith, to Simon Johnson, to Janet Tavakoli, and many many others.
The legerdemain of the Federal Reserve in
shoveling money to dominant banks has fooled only those who exhaust their
attention on The Real Housewives of Beverly Hills, Lady Gaga, and the
National Basketball Association.
The larger riddle of life-in-our-time surrounds the absence of the rule
of law in money matters. To say that people are actually running things out
there doesn't mean that are running them effectively or optimally. The US
Department of Justice, for example, appears to be led by a zombie,
Attorney-General Eric Holder, somebody of this world but no longer
quite in it, who is pioneering a new method of Zen law enforcement
based on a maximum of doing and saying of nothing. Of course, my ongoing
theory since the national election of 2008 is that Barack Obama has been
warned repeatedly by many credible figures that any move to disturb the
operations of banking would bring down such a wrathful ruin on this nation
that he had no choice but to keep his hands off the levers of enforcement. In
fact, it's the only theory that explains adequately the yawning gap between
reality and the representation of it by those assumed to hold authority.
Whether we can overcome these obstacles to action and move this
crippled society to a re-set of daily life consistent with what the planet
provides is a whole other question. My guess is that we will eventually be
dragged kicking and screaming to this re-set, which I have described in my
book The Long Emergency and my novels World made By Hand and The
Witch of Hebron. That outcome is rather severe, basically a
"time-out" of unlimited duration from the orgy of techno-comforts
that have defined existence in "developed" societies for many
decades. It implies a massive loss of things that people will not let go of,
and so the political games around money matters really all amount to one
thing: a campaign to sustain the unsustainable at all costs. It
obviously requires monumental levels of mass self-deception, of pretending,
of fakery, of lying, of denial. The psychology of all this is another thing
that is thoroughly understood, but such is the collective anxiety about our
situation that knowing how-and-why we behave a particular way does not alter
our behavior.
These have been my preoccupations in recent months, and they mostly
revolve around what happens in the USA, but there is a wider world out there
and I sense that the more clarifying actions will arise out there in the year
ahead. Perhaps the most striking thing about the scene last year (and several
preceding it) is the eerie absence of major disruptive events on the world
stage. This suggests a dangerous build-up of tensions that are bound to
release - and releases of this kind are often destructive, like the energy
stored along tectonic fault lines. In fact, I'm describing many points of
tension, which have the potential of setting each other off in chains of
destruction. And in this fractal disposition of energy flows anything can
happen.
The
Forecast
The paradigm we've called Globalism is falling apart now. Followers of
Tom Friedman (The Earth Is Flat) tried to put across the story that
Globalism would become a permanent feature of the human condition, an idea I
regarded all along as utter nonsense. Rather, Globalism was a set of
transient economic relations characterized by particular conditions of a
certain era (the post-WW2 cheap energy era), and that when history moved on,
Globalism would dissolve. As is the case now, first in the unraveling of
global financial arrangements - a terrifying matrix of irresolvable mutual
obligations that are destined to be repudiated in an ugly way. Everybody owes
too much money to everybody else. A worldwide game of financial musical
chairs is currently eliminating various nation-players too weak to plant
their asses in the diminishing chair-space. Iceland
dropped out first, then Greece, then Ireland, and so it goes. Entering 2011,
the trouble is that the world is out of runt countries to shove to the
sidelines. There are Portugal and Belgium to go, and from these on all you've
got are nations too big to fail and too broke to keep going, the most
conspicuous being Spain.
The Euro took center stage in the global financial fiasco in 2010. I
don't really see how that medium-of-exchange endures when so many of the exchangees are economic basket-cases beating a path back
to pre-1850 modes of existence (if they're lucky). The serial bail-outs
engineered by the European Central Bank have been shams based on an imaginary
"fund" that really only amounts to more promises of back-stops by
bankrupt countries to other bankrupt countries. In the grand gesture last
fall, around the collapse of Ireland, promises were made by the ECB to give
the appearance that the usual suspects (the PIIGS) would cover their
quarterly debt service obligations to March of this year. No real money was
involved, only assurances, which will soon be revealed as empty. Bottom-line:
another graver round of debt crisis in Euro-land in the first quarter if 2011.
It can only be resolved two ways: by 1.) countries defaulting,
dropping out of the Euro monetary system, returning to a currency of their
own and activities that reality will admit; and 2.) Germany, France, and
Holland taking the others in like poor relatives and paying their living
expenses. I really don't see Number 2 working out. The voters in the bigger
three economies will revolt. Of course, the Number 1 route implies the
destruction of a whole bunch of European banks, perhaps all of them, and
their shareholders positions, and big trouble for the wealthier Euro member
countries - ultimately leading to the same place: a lower standard of
living, even in Germany, for all its frugality and efficiency.
The United Kingdom is in a strange class of its own. It uses the pound
sterling, not the Euro, yet the City of London (their equivalent of Wall
Street) is the banking capital of Europe (and the Middle East and Africa).
For a while now, the City has been the UK's sole economic generator, lately
specializing in swindles and Ponzi schemes, just
like America. There's not much else left in "Old Blighty,"
not much coal mining, or shipbuilding, or making those fabulous tin soldiers
we got for Christmas in 1956. If the City goes up the spout, the UK has no
economy left at all. On paper, the UK is epically insolvent and, unlike Spain
with its Euros, the UK can't even hold the rest of Europe hostage. It just
sinks. Living standards crater, people freeze to death and go hungry, and the
interesting politics commence in all their
multicultural splendor. Prince Charles will not get out much in 2011, but he
has a lot of nice estates to hole up in.
In any case, the Euro banking mess surely will infect American banks,
which secretly paid to bail out European banks through TARP in the 2008 crash
and has been shoveling money into them ever since. Global banking operations
are hopelessly intertwined and hopelessly damaged now, and any problem on the
Euro bank scene could easily be the tipping point for a global retreat by all
countries to defend their own barricades of money, in whatever form money
shakes out as, not to mention whatever's left of real productive activity,
meaning the end of free trade as we've known it. This might temporarily favor
the US dollar as a refuge for the desperate, but the holistic equation of
money factored into trade in vital resources like oil, metals, and grains
suggests, once again, just a different route to reduced living standards anyway you slice it.
There's been chatter all year about Russia surreptitiously laying in
stores of gold in order to base the ruble on it and make that the go-to
currency for soundness and safety. I don't have any information that this is
factually occurring. At this point in history, sound, gold-based money would
be a wise thing for any nation that wanted to function above the barter
level. Russia is a big place with, historically, pretty sturdy gold resources
of its own, not to mention oil and gas reserves (which, for now, they seem
content to piss away for other people's paper). These fossil fuel reserves of
theirs promise to leave them in an advantageous position vis-à-vis
Germany and the rest of Europe for some time to come, but they could also
become the object of a dangerous envy and for military mischief in a part of
the world that likes to imagine that war is a barbaric relic.
I'm still not among those who view China as the onrushing new
hegemonic world power. Their banks are more reckless than the western banks
because they really don't have to account to anyone for lending (or getting
paid back). The government IS the banks. Some jaboney
in Guangzhou wants to start a company that manufactures licorice dildos and
borrows sixty million yuan through a guy he knows
at the regional office of the PBOC (for a piece of the action). The business
doesn't work out, say, because the Australian wheat harvest failed and the
first guy couldn't get enough wheat paste to make the darn licorice. Oh, and
that sixty million yuan on the books? The dog ate
the books (then we had the dog for lunch). Meanwhile, that sixty million is
circulating, driving up prices. It doesn't sound all that different from the
western banks, but they don't even have casual watchdogs in their
government-run news media, let alone an FDIC.
The result for the moment in China is pretty serious price inflation.
Officials are jacking up some wages more than 25 percent at a crack. Their
building bubble (whole new empty cities!) makes the state of Arizona look
like the doll house section of Toys R Us. The massive lending failure it
represents has not yet thundered through the Chinese banking system, such as
it is, and may never in the western sense of a true clearing (though you
could argue that the clearing process is a world-wide anachronism). But it
will be expressed in other ways: possibly hyperinflation, crashing
living standards (all roads lead there now), and ultimately political trouble
in a nation with an unelected government that can really only change via
popular uprising of some kind or another.
Among the consequences of all this mischief would be to the sort of
interbank lending that makes letters-of-credit possible (promises to transfer
large sums of money for large shipments of goods), and without letters of
credit global trade withers. The last time this happened, in 2008, the Baltic
Dry Index, which measures shipping tonnage, slipped down off the charts. When
this occurs, the resource countries can't move any of their stuff. Australia,
for instance, which I visited recently, jokes to itself about being
"China's mining operation." Without letters of credit they won't
move any of their coal and copper - or wheat (and ten years of drought plus
one season of Biblical flooding has put the schnitz
on their grain exports to principal clients, the Middle East and China) - all
of which adds up to trouble Down Under. In the bigger picture nothing moves
anywhere, not plastic salad shooters from China to the Altoona WalMart or buckwheat from Russia to Senegal or even oil
from Abu Dhabi to Westville, New Jersey. People go hungry and get cold.
What lubricates free trade is the reasonable expectation of getting
paid, and that's heading out the window. Maybe nations will make
"special" arrangements with each other for this or that commodity
outside the banking system but that's desperation-level trade, not something
that will lead to more cell phone customers and burgeoning middle classes. In
fact, I'd call 2011 as the turning point in the global growth of the middle
class. We've maxed out, passed the high point. The entry gates are closing
and the eviction squads are prepping for action. The cracks in the floor are
widening and lots more people will fall through while the ladders for
climbing up will be withdrawn over the parapets. There just isn't enough
stuff left in the world, even while the movement of remaining stuff gets
stuck in political bottlenecks.
One place I'd look for trouble on this is India. They have no energy
resources of their own. They face climate change associated grain harvest
failures. They may have to shut down a lot of call centers. Tata motors might
take it on the chin as the growth of mass motoring recedes to the elephant's
graveyard of dashed hopes. As India's prospects dim in 2011, look for
political animus to focus on their perennial adversary next door, Pakistan.
In its fury at losing economic momentum, India might turn the next
"insult" from Pakistan into a real smackdown.
Pakistan is renowned for having the world's most unstable nuclear arsenal -
something around a hundred warheads or bombs - but who knows whether they can
actually deliver one to a target? India, on the other hand, probably can. If
Pakistan really does something to piss off India - another hotel massacre
type stunt, say - look for India to turn Islamabad, Lahore, and Karachi into
incense burners. Islam elsewhere around the world then goes absolutely apeshit, of course.
I don't know what the hell Japan is going to do in 2011 (and I doubt
anybody else does). It has no energy resources either, and if global banking
seizes up, well.... It has stoically gone broke by slow degrees for twenty
years. It may opt out of modernity altogether - it tried to before once and
got suckered back in. Letting go is not the worst outcome. The rest of the
world can slug it out in the boardrooms and bunkers. Let the bond vigilantes
eat Norway and Illinois. Fuck the car-making industry - that ole sun sure ain't rising anymore. Japan will
quietly bury their old folks and turn back to Shogun where you can still get
a nice hot bath and eat some raw clam sushi and hack around with interesting
swords. Pray that the Chinese don't roll in with an army of occupation. Raise
silkworms. Make nice things out of clay and rice paper. What's not to like?
I've heard people say that North Korea is China's stalking horse in
some kind of world domination scenario out of the James Bond script locker.
That doesn't really add up to me. North Korea is like a nineteen-year-old
autistic nephew jacked up on vodka, LSD, and crystal meth, with seventeen
pounds of Semtex taped to his chest and grenade in
each paw. You wouldn't give such a creature the run of the neighborhood,
would you? Of course not. You'd whack it in the head with a shovel, drag it
down the coal chute, and starve it to death. My forecast for 2011 includes
such a schooling by China to that reckless rogue
state. South Korea becomes a vassal of China's eventually, but not in 2011.
They just gaze at the world scene in wonder and nausea and try to puzzle out
what happened to that global economy they depended on.
The
Middle East
This sorry-ass corner of the world, a neighborhood of camel-herders
turned lottery-winners, has the most potential for blowing up than any other
region except Korea. One way or another, they're all on the downside of oil
production, even poor beat-up Iraq, with its El Dorado of presumed reserves.
They're all wildly overpopulated, given their unfortunate geography, scarce
water resources, and blast furnace climates. They're all chronically enraged
over some sectarian hermeneutic or old tribal grudge, or swindle in the souk.
And then there's Israel, settlement of my people since 1945
(traditionally, for millennia), but a very troubled polity in which a cult of
religious fanatics every bit as extreme as their counterparts in surrounding
nations are taking over by sheer population explosion. This suggests
something less than a happy ending. The inversions of history can be very
cruel. A people of great learning and philosophical liberalism comes to
shelter there after an earthshaking genocide, and then commits suicide in a fugue
of ideological nuttery. I don't have a religious
bone in my body and I pray for Israel's survival under the circumstances. Or
maybe the dwindling sane among them can come to Nebraska now. I'm not joking.
I know it's not the exact spot on the planet assigned by Yahweh, but it is
reasonably buffered against Israel's modern political enemies and
increasingly available from a real estate point-of-view as the descendents of
the original sodbusters pack up and leave to become film-makers in LA.
Which of what numerous booby traps and flashpoints might blow in
the Middle East in 2011? An obvious one is Hezbollah in Lebanon, next door to
Israel. They've been collecting Iranian rockets by the truck-load since their
last active jihad against Israel in 2006. That's a lot of rockets in a lot of
years. Their fingers might be getting itchy. That leads to some questions
about Iran itself but also some strange corollary politics of the region,
namely the curious mood of Shia Islam where that
sect is concentrated on the rim of the Arabian Peninsula along the Persian
Gulf and down into Yemen, comprising nearly half the population of that
country. Consider that King Abdullah of Saudi Arabia is going on 87 years
old. Sure, he has access to pretty good medical care, but he's been sick and
immortality just isn't in the cards. His official successor Crown Prince
Sultan is pushing 83. What I'm driving at is the possibility of turmoil in
Saudi Arabia aggravated by Shia provocations
emanating from Yemen against the Wahhabist-inflected
Al Saud dynasty. Anyway you look at it there is going to be a fight for
control of the Arabian Peninsula and its oil riches, and the family that has
been in charge since the oil first began to flow in the 20th century could
easily get kicked out. It might not get replaced by anything nearly as
stable, or as friendly to western interests. It might not get replaced at
all. The region could remain fragmented indefinitely, and that would not bode
well for the oil trade. If there is a breakdown in order in Arabia, a lot of
hardware could get smashed up in the process, too. Oil terminals, pipelines,
drilling rigs.
I've also heard the idea expressed - though it did not originate from
me - that such a Shia
instigation on the Arabian side of the Gulf could stimulate instability
throughout the Persian Gulf region, even extending into the capital of Shi'ism, Iran. I mention it because I thought it was an
interesting out-of-the-box idea and will leave it to you to chew over. Bottom
line for the Middle East: all kinds of world-inflaming mischief possible
there in 2011.
Over 2010, the anxiety over Iran's nuclear ambitions was allayed
somewhat by the appearance of the Stuxnet computer
worm, a piece of "malware" allegedly of Israeli origin that went in
and gummed up the computers at Iran's Bushehr
nuclear facility before it even officially opened for business. It's not
altogether great news because it suggests the opening round of world-wide
computer hacking wars, which could shut down whole societies and economies in
the years ahead - a subject that will no doubt preoccupy the blogosphere
until the moment it is brought down by a computer worm. But, at least, Iran's
nuclear program might be neutralized - and kept gummed up through the
foreseeable future.
Actually, while we're on the subject of matters Islamic, lets just get straight to the issue of America's wars.
The Afghanistan project is hopeless and therefore stupid. There are two main
objectives in Afghanistan: to control the terrain and to control the
population. We can't do either. We have no chance of ever accomplishing
either. Apart from that there are some other undeclared strategic purposes.
One is to make a baloney sandwich out of Iran, so to speak, with American
troops garrisoned on both the east and west sides of that nation with its
nuclear ambitions and its hostility to us and our friends. Another is to keep
an eye on the train wreck called Pakistan. Actually, it's way more up close
and personal than that. We launch drone aircraft attacks on supposed
"bad guys" there from our positions in Afghanistan. By the way, the
targets may indeed be bad guys. The trouble is there is an
inexhaustible supply of them, so whacking a couple of dozen a year is not
exactly a victory.
There's idle chatter about Afghanistan containing nice reserves of
lithium and other vital resources that would allow the US to run WalMart on batteries, but the geography of the remote,
landlocked country rules out any orderly exploitation of these materials.
It's said to cost over $400-a-gallon just to supply our troops there with
gasoline to run their Humvees. We're not going to
get any ores out of there at those rates, so strategically the idea is
absurd. Our official policy is to get our troops out of Afghanistan in 2011.
I have no idea whether we actually will, or will find some way to fudge it.
But it's certain that we can't finance these adventures indefinitely.
Iraq has all but faded from the American news-scape.
They've quit fighting amongst themselves for a while, but the government is a
thing constructed out of baling wire, spit, duct tape, and old Mars bars
wrappers. US troops are not getting killed there lately, but it must cost a
lot to keep them there. I imagine we will keep somebody there for quite a
while into the future, even if we whittle down the numbers. After all, the
original purpose of the venture - contrary to conventional thinking about
democracy, or even Iraq's oil - was to establish a police precinct in the
Middle East right between the two baddest boyz in that hood Saudi Arabia and Iran. If monkey
business does break out on the Arabian Peninsula, or along the shores of the
Persian Gulf, then Iraq could easily turn back into a hot battleground again.
For the USA, it's just another sizable vein among many oozing our lifeblood. Situation uncertain for 2011.
Back
on the Home Front
News flash: That extension of the Bush tax cuts? It's already been
gobbled up at the gas pumps, at least for those citizens of the USA who have
to pay attention to stuff like the price of gasoline and groceries. Oil
closed over $91-a-barrel on New Years Eve. That
means it's well into the price zone where it crushes economic activity of the
type were used to: everything from the sales of Dunkin' Donuts to the
subscriber base of cable TV to hotel stays in Disney theme parks.The shaggy beast people call "recovery"
is Bigfoot, a creature often reported and never actually captured. I began
this long forecast by implying that we were quite out of our gourds
collectively. Since one of my cardinal beliefs is the idea that delusional
thinking rises in exact proportion to economic hardship, I can only conclude
that the national state of mind will deteriorate further.
We're already looking like a nation of ax murderers and cannibals with
our tattoo fetish, strange costumes (baby clothes for young men; hooker
get-ups for the ladies, which should tell you that adulthood is the new final
frontier of the American Dream), and our retarded patois of like-like-like
and go-go-go speech - all set in a porn-saturated total immersion huckster
hologram (thanks Joe Bageant) of visually
incoherent, civically-impoverished, and economically spavined suburbia. I'm
sorry, but we just look like a nation of goners. Surely the levels of
clinical depression are high out there, and a lot of our fellow citizens are
suffering profoundly inside - but is acting like killer-clowns the only
option?
In 2011 everything just gets harder for the masses of Americans not on
the payrolls of banks or hedge funds. The middle class is a state-of-being
that recedes deeper into the mists of history while resentment builds
ominously. Something could convert it into anger in a flash - I still think
the announcement of the annual banker bonuses could bring it out (but I
thought that last year, too) - or maybe it will just keep simmering. We'll
get an idea by summertime.
In the absence of productive activity we have Federal Reserve money
injected everywhere in the economy like botox in a
Real Housewife of Beverly Hills, and to about as much effect. QE-1 didn't do
anything because existing notional wealth disappeared at a much greater rate
than computer bits the Fed could hope to replace it with. (Money is loaned
into existence and defaulted out of existence.) Officially sanctioned (by the
FASB) accounting tricks that permit the concealment or suppression of real
asset prices, along with a complete failure of regulation and law enforcement
in lending procedures allowed the nation to just barely stay open for
business through 2010. QE-2 is slated to run in monthly installments of US
bond purchases (through "primary dealer" banks, at a premium) for
the first half of the year. But housing prices continue to fall, meaning the
collateral behind the "toxic" securities that the Fed stuffed its
vaults with keeps losing value, meaning the Fed is functionally bankrupt,
meaning actually that its member banks are toast - because the Fed is not an
actual bank itself but a consortium. How long can an institution pretend it
exists?
We can look forward to an entire year of trouble with foreclosures and
everything they entail legally, from robo-signing
lawsuits to title quarrels, even as defaults mount to a climax. The courts
are losing legitimacy like everything else in America. In Florida, according
to Matt Taibbi, there isn't even anything
resembling perfunctory legal protocol, as it is known in societies where
people eat with forks and spoons. In 2011 we'll see the introduction of new
instruments in the foreclosure courts: firearms. It will be a
bad sign.
Sooner or later all this dishonesty will terminate in collapsing
living standards, loss of public services, growing civil disorder, and
political crisis. You can get there via deflation (no money) or via inflation
(plenty of worthless money) but the destination is the same. I don't see how
America fails to begin arriving at that destination before Halloween 2011.
Europe may get there by springtime, anyway, dragging the rest of the
developed world into a vortex.
The reality of Peak Oil glowers in the background all the time. These
epic disturbances in money and banking are expressions of it, but they will
also feed back into the oil industry imposing a generalized shortage of
capital that will make the decline of oil production ever worse - since new
fields will not go into production and exploration will stop - and will also
impede the movement of inventory around the world. These dynamics will feed
back into economies and hurt every kind of business, probably destroying demand
for oil which will lead to further shortages of capital in the industry and
lead to even lower oil supplies. Finally, economies may be so devastated that
oil could sink to something like $25-a-barrel - the catch being that no one
will have any money to pay for it. More likely through 2011, we'll see rising
prices joined by regional scarcities. The US is a prime candidate for
scarcities since we import more than two thirds of our oil and a lot of that
comes from countries that have an ax to grind with us. The aforementioned
potential for disarray in the Middle East would only make matters much worse.
The fate of the stock market is actually trivial in the context of
constricted energy supplies and chaotic behavior in currencies. Anyway, the
stock market is the primary object of the Fed's pumping because in the past
its symbolic value has been crucial to the project of self-deception, of
presenting to ourselves the appearance of an economy that is okay - because,
in a therapeutic culture, feeling okay about something is the same as being
okay. Just don't lose sight of the fact that a pumped and gamed stock market
has no relation to economic well-being. It may go up forever now, and if so
then it will just be another thing that needs to be swept away in the re-set
to a reality-based economic system.
As usual, though - annually for several years, in fact - my target
number for the DJIA is 4000, which coincidentally may be exactly where gold
is going, too. In a true correction process, historically, the stock market's
indexed value meets the equivalent value of an ounce of gold. Gold floats up
on sheer uncertainty as much as fear of inflation. While it is certainly true
that you can't eat gold or heat your house with it, it's not likely to lose
its meaning as an ultimate repository of wealth. Humans will continue to
regard it as an alternative kind of money, maybe more real than paper money.
There isn't much of it in the world to begin with and the newer deposits get
lower in grade every year.
My personal belief is that things could get desperate enough in the
USA that we begin to circulate silver coins again to pay for stuff. That's
the World Made By Hand outcome anyway, though it is admittedly a
"made-up" story, a novel set in the not-distant future. Part of the
reason silver (and some gold) circulates in that fictional world is because
modern industry as we know it has ceased to function, so silver is not being
gobbled up by the electronics-makers and a thousand other manufacturing
activities. I don't see that happening as soon as 2011, but owning silver in
the form of pre-1965 coins is a good idea (if you can get them, which is
increasingly difficult as the recognition of our predicament grows), or any
other form of bullion you can get your mitts on.
A lot of people dread the political scene for 2011. Both major parties
are blameworthy for the horrible condition of the nation, and both will be
blamed, good and hard. Mr. Obama is thought to have made a grand finish of
2010 with his tax compromise and the Don't-Ask-Don't-Tell bill. But the tax
issue had already lost meaning in sheer purchasing power terms, and even
sympathetic voter blocs may grow impatient with the looming gay marriage pleading
while practical issues of economic survival loom even larger. I think the
glow of the lame duck congressional victories will wear off quickly in 2011.
The only thing left to Mr. Obama now is to start telling the truth, to stop
cheerleading for phony recovery to a consumer utopia that's gone for good,
and prepare the public for reality-based living. I don't know whether he has
it in him. We'll find out. Sometimes I wish he'd just come out and declare he
won't run again to give himself some freedom of action. Four years is enough
for a lot of things. Abraham Lincoln didn't get a full four - and he didn't
try to pretend that the Union wasn't coming apart, either.
The Republicans want to be seen as riding to the rescue, naturally,
but they will have the misfortune of coming on just in time to preside over
renewed financial fiasco. In the face of it, they'll militate for deals and
gimmicks every bit as raw as the TARP scam that Hank Paulson shoved through a
quivering congress in 2008 - and the party's remaining credibility will slide
down the drain, Ron Paul, Rand Paul, and all. I'll peg 2011 as the year that
other political factions beyond the Tea Party start coalescing in the vacuum
of legitimacy. Some new parties may actually be made up of non-morons with
something besides holy retribution on their minds.
Everybody is worried now about the fate of states, counties, and
municipalities. Just about all of them are broke one way or another. A state
and muni bond bail-out would only send interest
rates to the moon, meaning the absolute end to lending and servicing of
existing debt and, well, really all business as usual. I don't think it can
happen. It will be interesting to see what does happen to states and
localities if left to dangle slowly slowly in the
wind. If they can be induced into some kind of real bankruptcies they'll get
rid of a lot of dead weight - which will, very unfortunately, also mean lost
jobs, incomes, and homes, since so many people are on a government payroll of
one kind or another - but how else do you get out from under unendurable
promises to pay for people to play golf?
This would be a scenario not unlike the collapse of the Soviet system,
in which virtually everybody got fired at once. We may not survive it as well
as they did - after all, the collapse of the Soviet Union was historically
extraordinary in the sense that it generated almost no bloodshed. Imagine
that! (Read your Dmitry Orlov.) Americans are too
undisciplined, too heavily armed, and too deeply programmed in melodramatic
vengeance-seeking to pull something like that off. We'll be all over
each other like cheap suits. That might be the point where you have to send
the army in, and if a president won't do it because the constitution frowns
upon it, the army might send itself into the White House in the form of a
coup d'état. It's not something I'd like to see but let's face it:
shit happens. This republic has had a long run compared with all the others
that have ever existed and nothing lasts forever, even if your flag lapel pin
came from Tiffany and was blessed by the restless ghost of Abe Lincoln.
Good luck in 2011 everybody! And keep your hats on!
James
Howard Kunstler
www.kunstler.com/
James Howard Kunstler’s 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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