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Nowhere to Run, Nowhere to Hide

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Published : August 20th, 2013
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( 34 votes, 3.9/5 ) , 6 commentaries
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Category : Gold and Silver

     The Federal Reserve answers only to God, but Ben Bernanke’s must not have known that his boss was such a prankster. All of a sudden here is the interest rate of 10-year Treasury paper rising like an angry carbuncle on Ben’s pale tuchus just when he thought he could sit back and watch the mud wrestling contest between Larry Summers and Janet Yellen.

     Poor Ben, sedulous student of the Great Depression, who didn’t notice that the country had changed from a nation of farmers and factory workers to a nation of pole dancers and waiters, now awaits his sublime moment of Hooverization. Like poor President Hoover, he gets to hang around the pilot house half a year after he runs the garbage barge of US finance aground on the shoals of wishful thinking and accounting fraud.

     Everyone who has to pay attention to the order of things in the universe — meaning those not stewed on crank or drank, or waiting on line for a SNAP card, or leafing through the tattoo catalog, or waiting for a Kim Kardashian gangbang guest shot on Duck Dynasty, or lost in the alt reality of their cell phone — is suddenly very nervous about the order of things in this little corner of the universe. Sag Harbor is starting to live up to its name and down along the Hamptons the tide has gone out to feed a Tsunami of margin calls that soon will give the phrase “under water” a whole new life in the twisted mythology of capital. The immortal Bill Gross even sent out an SOS on Twitter at the end of the week. No wonder folks have got the heebie-jeebies.

     The fear is that the central banks have finally lost control of a situation that they have only pretended to control since 2007, when the grotesque racket of mortgage re-bundling caused a psychotic break in the banking system. The prescribed therapy for that was half a decade of ZIRP and maxing out the national credit card. The ugly truth now emerging through this fog of psychosis is that the bond market probably can’t be saved, and without it all other paper markets are toast, including the stock markets and very possibly the entire fiat currency system.

     In the background, of course, is the energy melodrama. How can anybody with half a brain suppose that the late turbo-industrial economy could “recover” with oil priced at $107 a barrel? Anyway, all the “recovery” memes floating around the collective media zeitgeist are based on a handful of doctored and massaged GDP numbers universally known to be false. In short, the USA can’t run the current setup on oil over $100 a barrel and has been trying to compensate for that basic fact by lending itself money. So has virtually every other advanced economy, and now they are all in trouble so there is nowhere to run, nowhere to hide — and for us, nowhere to export our financial quandaries to.

     Japan is the most interesting corpse in the pathology lab. It shot its wad twenty years ago and has been self-cannibalizing ever since. It has no oil or gas of its own, and now it has a runaway nuclear meltdown that is getting only slightly less attention than its financial meltdown. I used to think that Japan had no choice except to go medieval. Now I wonder if there will be anything there in ten years but a depopulated archipelago of steaming radioactive kelp. They can’t possibly buy more US treasury paper and must desperately need to dump their accumulated holdings, and when they do they will start a financial chain reaction that will flense the pretense of value from all the world’s sovereign debt paper. It may already be happening.

     If you prepare for anything, prepare for a world without financial pretense. Credibility is caught in that riptide developing off the Hamptons. When the water goes out, all you will see is ugly things wriggling in the mud, and when the water comes rushing back in again, all you will see is a spectacle of drowning bankers. The only higher ground to go to will be your local community, if you have one, and even there it will be a struggle to make sense of what has happened to the world.

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James Howard 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 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.
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Rather than repeat the trumpeting euphoria of the news media and artificial government reports, Kunstler tells it like it is. If you can't stand to look at yourself naked in the mirror then don't read his articles. If you want to see beyond the veil of mythical economics, pay attention to him.
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Let's see, this week, if Kunstler has anything to contribute to solving America's problems. It is possible the man has some ideas that I've overlooked, and I think some here have been overeager to criticize him.

First he says,"the country had changed from a nation of farmers and factory workers to a nation of pole dancers and waiters, now awaits his sublime moment of Hooverization." Well, that may be an exaggeration, but it does have some merit. Now the next logical step would be to name the casual factor for that change, which Kunstler does not do -- although he does mention Hooverization, which was nothing more than rationing items because of WWI. So that certainly is not a cause of our current malaise. He could have name the real cause -- FDR's progressive programs and increasing government involvement in our daily lives, an involvement which has increased under Obama (whom he voted for) -- but doesn't.

Then Kunstler goes into a rant about the Duck Dynasty TV show, Kim Kardashsian, and tattoos -- things currently on the scene that we can, apparently, never recover from. And if that were not enough, the cost of oil is the Coup de gras. Now, apparently if the cost of oil could be lowered -- according to Kunstler's logic -- the current situation (tattoos and all) could well be salvaged. Well, the cost of oil could well be lowered if only the environmental lobby could be broken, something both parties (but especially the Democrats) have been unwilling to do. The trite, but yet powerful phase "Drill, baby, Drill" could well be our salvation.

After jumping and dumping on Japan -- no oil, no nuclear future, no nothing -- Kunstler then extrapolates that to the rest of the world and sees no way out.

We are doomed, doomed! I tried to find something meaningful, but couldn't.
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When reading JHK posts, I often get the impression of a cynical Chicken Little or Kermit the Frog, "the sky is falling you a-holes, ahhhhhhh." Waving arms with middle fingers extended. He obvously hates modern America, and longs for the early 1800's.

However, I did enjoy the last paragraph's metaphor of the tide of $$$$'s that will inundate our shores when the Credibility Bubble bursts on the bond market.
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Wow JC, you really lost track of time.
Hoover was in office 1929-1933
WWI ended in 1918
So it was WWI rationing? All this time I thought it was a leveraged real estate boom and subsequent bust. Roaring 20's ring a bell?

Hoover got the bad rap while FDR continued the same failed programs of Hoover's and got written up as the savior of the common man.

Then you jump on JHK for pointing out that Joe Average is smoking and joking as he heads down the chute going into the financial slaughterhouse's kill room. Joe Average throws away disposable income and saves nothing. Joe Average then demands the nation owes him and his scat a middle-class living. The national debt has become onerous and continues to grow so Joe Average can get another tattoo paid for out of the national purse.

You can never recover monies wasted on entertainment. I will defend Joe Average's right to spend his own earnings on crap. But I despise the idea of picking up his financial insurance premium payments aka safety net programs for tattoos, latest model cell phones, HDTV and premium cable TV subscriptions.

I'll agree on the need to muzzle the environmental community gangsters. However more domestic drilling won't solve the problems facing the US.
1. It takes large amounts of money to move, set up and drill. Money many of the remaining small drilling companies lack.
2. It takes additional infrastructure to move the oil from the head to the existing collection/distribution network. That is more money that isn't available.
3. Even if we streamline the permit process and reduce it to just a few months from application to awarding, it will still take 3-5 years to drill, develop and link new wells into the system. The money for that is covered under #1 and #2 above.
4. The time lag from decision to oil in the pipeline is all expenses, no income and I contend it will take too long to alleviate our financial problems.
5. Don't forget for one minute the long-term effects on oil companies, governments and the public over the Deepwater Horizon event. BP is still financially reeling from the costs and there is no shortage of other court lawsuits still in the wings.
6. Even if we could increase oil production by 50% (doubtful), history demonstrates that the debt won't get paid down, but rather that new programs will be initiated with an ever faster rise in the deficit and accumulated debt of not just the nation, but its sorry ass membership. People and governments borrow and spend based upon their expected long-term earning potential.* History proves one thing, few ever learn from it.

Now, "Drill, baby, Drill" was the mating call of our (Alaska's) albatross tied around McCain's scrawny neck. Palin was/is Alaska's jokester/merry prankster. She is a quitter. And McCain selected her as his running mate. So trotting out that phrase from the court jester isn't going to sway this Alaskan to your opinion.

I don't think there is any necessity for a black swan event to knock over this house of cards. A lame duck with PMS would be more than enough. And it will be global in extent. There is just too much inter-connectivity amongst the various banking empires and governments. That is why the Fed bailed out not just US banks, but foreign banks as well. Do you really honestly think the Fed has been saving a bigger gun just in case? The walls of Jericho are crumbling and Bernanke is out of paper mache to hold it up. A below average food crop yield will be more than enough to finish this game. T-bills will be dumped and the US will be expected to repatriate them. And Joe Average will scream, "I was cheated", and burn everyone out. Read some unsanitized history! For those with ADD, look no further back than the Arab Spring.

*The most consistently successful hold their standard of living at a low level throughout their lifetime and invest the steadily increasing discretionary income in profitable enterprises.
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Truth will not sway a thoroughly cleansed mind. They just keep ignoring it

"When you lay out all possible pathways, no matter how ridiculous or counterintuitive they may seem, and sort the multitude of data, events, and actions upon their appropriate piles, a new reality may emerge to compete against your own bias. It is your ability to believe and amend your belief system, which separates you from the masses." — TSP —

“The task is not so much to see what no one yet has seen, but to think what no body yet has thought about that which everyone sees.” — Arthur Schopenhauer, 1818 —
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Truth will not sway a thoroughly cleansed mind. They just keep ignoring it "When you lay out all possible pathways, no matter how ridiculous or counterintuitive they may seem, and sort the multitude of data, events, and actions upon their appropriate pi  Read more
prljr - 8/21/2013 at 7:22 PM GMT
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