A Christmas Carol 2011
By James Howard Kunstler
on December 26, 2011 7:52 AM
Slouched in woe beside the Christmas tree, a lot of Americans missed the point of 2011: Santa Claus had already emptied his goodie sack before the night of wonders and miracles arrived and was back at the North Pole checking the balance sheet to see if he could raise a little cash selling some remaining assets off to the Blackstone Group or maybe work a leveraged buyout deal with Kohlberg Kravis Roberts. A few elves would have to join the unemployment line, but they could probably get by on half-rations of food stamps. Or maybe Henry Kravis could feed them reindeer steaks... at a discount, as long as they last.
It's remarkable how the year's great mega-holiday blowout suspends time and circumstance. I didn't see how the European banks were going to make it to December 25, but then, heading into the shopping frenzy home-stretch, swap lines opened up between the US Federal Reserve and the European Central Bank and around $600-odd billion in ZIRP loans flowed to over 200 Euro banks. Maybe that will cover the next two weeks of aggregate debt rollovers, and then what? They can't even look forward to President's Day over there - unless we rented out the George Washington and Abe Lincoln brands to them.
Who is still not impressed with the ability of these central banks, and their owner-operators, to keep re-circulating immense loads of notional money? Alas, every wash-rinse repeat cycle leaves the certificates a little paler and thinner, and it won't be long before they just appear to be blank paper. But rackets as grand and insolent as these would not be possible, except in a culture so estranged from truth that anything goes over without notice. I wonder about that scene around the American Christmas tree, though - the empty space between the floor and the lowest boughs where the gaily-wrapped presents used to appear.
I reckon it will take a few weeks, perhaps through the whole winter, for a sense of swindle to set in among the rooked. You may notice a pervasive undertone of grumbling in the background - and winter is the right time for that - like the eerie, ominous chords of ice groaning in the darkness on a still night around the frozen lake. But eventually come the tumults and torrents of spring. I suppose what baffles many of us in the ethers of bloggery is the apparent failure of that demographic slice acquainted with thinking to register any objection to the travesties and organized brigandage's of these times. At any other time in the life of this republic, such folk with active frontal lobes would have identified arrant criminal activity for what it is. Apparently, the nostrums of Paul Krugman are as powerfully narcotic as the raptures of Nascar.
I'm afraid events are a little too far gone now. There was some hope that Mr. Obama would restore the rule of law, but he has gone even farther in the opposite direction by disabling even the levers of truth - and in so genial a style that nobody noticed that, either. That thinking demographic slice of the public I averred to must have mortgaged their souls the past three years just to keep on keeping on. Hence, when the truly rooked wake from their zombie sleepwalk, there will be hell to pay for sure. Sometimes an intellectual governor on events no longer even avails, as was the case in the French Revolution. When the lawyers, political theorists, and philosophers got into the act, the blood really flowed.
Will that happen here, in the months and years ahead? I do think so. We've grown ourselves a toxic aristocracy of privilege and mega-wealth as cheeky (or worse) than the fops and strumpets of Versailles. I confess, I feel a bit lusty for some Grand Guignol action myself. There are stock figures in The New York Observer's weekly "Shindigger" column who I would enjoy seeing treated after the manner of Vlad III, Prince of Wallachia, the celebrated "impaler." And what better place for it than Zuccotti Park, a much more intimate venue than the agoraphobia-inducing Place de la Concord. You see what happens: in the absence of the rule of law even prudent men turn to the reptile agencies of mind.
The truly interesting thing about America's romance with our Wild West was that there was always an Unwild East to return to - if you survived adventuring in one piece. Well, first the frontier closed about 100 years ago, and now we wake on Christmas morning to discover that the whole land, from sea to shining sea, has gone feral with rot. Enjoy this nebulous week of suspended animation while it lasts. I'll be back next Monday with the 2012 forecast.
Monday, December 12, 2011
The Cookie Crumbles
By James Howard Kunstler
on December 12, 2011 9:28 AM
on December 12, 2011 9:28 AM
A lot can happen in two weeks, which is what remains before the glorious orgy of gifts, sugar plums, and roast goose. Imagine what a global bank run would do for that ole holiday spirit - not to mention the GDPs of the world. Oh, weeping celestial choirs! I suppose we generally assume that God Almighty himself would move heaven and Earth to prevent such a dire convergence of Christmas and a banking collapse, but perhaps the Old Diety is asleep at the switch like the US Department of Justice, the SEC, and a whole alphabet load of other watchful regulators in this, our only known universe.
Reality is a harsh mistress. She insists that you pay attention and then, having done so, take care of business. Politics, on the other hand, is more like stage magic. The man in the tuxedo is always trying to divert your attention. The world has run out of money, that is credible money of the type that represents real wealth, and yet is up to its ears in paper representations of putative wealth-like stuff: mortgages, credit default swaps, Gold ETFs, synthetic CDOs, naked shorts, bonds of all sorts. And now, alas, at Christmas time, the world has gotten a margin call and needs to fork over a whole lot of collateral in order to demonstrate that the global system of financial obligations is legit. Only the collateral turns out to be all this dubious paper, really just a bouquet of promises to pay in distant future Tuesdays for trillions of hamburgers today.
Nobody who observed the proceedings in last week's European Union talks came away from that spectacle feeling reassured. Brussels is like a ventriloquist's dummy sitting on Germany's knee. Germany cannot just step up and act like the Boss of Europe. Too many bad memories of an earlier instance, when a gang of maniacs wearing uniforms studded with grinning totenkopf insignia turned the whole region into a charnel house. So, Germany has to pretend to speak through Brussels. The message was: listen up all y'all nations of the Eurozone! Prepare to live on a whole lot less than you're used to! Do not exceed your borrowing and spending! Or else!
Yes, the lingering question: or else...what?
It is safe to say that nobody believed this mummery. Anyway, Great Britain (a.k.a. Old Blighty) simply checked out. The sceptered isle is now Europe's dog-house. They stayed out of the Euro currency for a reason: so that their equivalent of Wall Street, the City of London, could short the shit out of it when the time came, a strategy that begins to look absolutely brilliant - except considering what Old Blighty is otherwise left with as an economy: Scotch whiskey, mints, and a whole lot of Hallel grocery shops, with the Royals as window dressing. (I'd sooner invest in Argentina, with its amber waves of grain.)
The old animosities are leaking out of Pandora's History Box. Stolid Angela Merkel is stepping on Nikolas Sarkozy's size 14 ½ neck - how long before he starts to buck and holler? The astrologasters cannot come up with any math that shows Italy can meet its forthcoming debt payments. But they are only the leaders of a deadbeat posse that includes virtually everybody else in EuroClub, except perhaps Holland, Germany, and Finland. Could they really start beating up on each other with armies again? It would appear unthinkable. But that is exactly why the First World War destroyed the morale of Western Civ in 1914, too, after the Long Peace that followed the Napoleonic Wars. You're standing there on a lovely street corner in Verdun and the unthinkable whaps you upside the head. So much for the quality of advanced thinking in the Modern Age. Maybe its Poland's turns to rule the world?
In any case, the storyline is as much about the banks as the nations they are in. The banks are at the point where they can conduct business with each other only by pretending that exchanges of value are taking place. Nobody sees any lines of depositors forming on the sidewalks outside their branch offices, but then again nobody can see the digital zeros and ones streaming through the fiber-optic cable, either, and that's certainly where the action is. For the moment that action has a direct line into the perceived greater safety of Wall Street. Oh, yeah, follow Jim Cramer's advice and buy buy buy. Invest in a nation of lawless slobs with a two-second attention span oscillating between Nascar and the Real Housewives of Beverly Hills.
Did you catch President Obama on 60 Minutes last night. Charming fellow. Sincere and even purposeful, too. But displaying a big patch of cluelessness, like virtually everybody else in a position of authority in this benighted land. The President intimates that we will surely return to the turbo economy of a fast-receding yore. He is missing something big there. We are not going back to that. The fiesta is over. And his job is not to try to go back there, because it is impossible. His job was to lead an epochal re-set of the economy to a very different disposition of things, smaller, finer, more local. It is so far outside the box he's in that light-years cannot even begin to describe the distances involved. And I completely dismiss his claim that the reason no prosecution of Wall Street misconduct happened was because, however odious their schemes and scams were, they were technically legal.
Anyway, I'm already looking forward to the nominating conventions of next summer, when angry mobs of the swindled and desperate descend on Charlotte and Tampa like ravaging locusts. Won't that be a wake up call!
And now to bake all my Christmas Cookies.
Monday, December 05, 2011
By James Howard Kunstler
on December 4, 2011 6:23 PM
on December 4, 2011 6:23 PM
Question du jour: why is Jon Corzine still at large? In what fabulous Manhattan restaurants has he been enjoying plates of cockscombs and lobster with sauce hydromel and cinghiale ai frutti di bosco, while less well-connected citizens of this degenerate republic have to order their suppers from the dumpster in the WalMart parking lot where they have been living lately.
Is there still an Attorney General in this country? Will somebody please follow Eric Holder down a hallway and see if he leaves a trail of sawdust on the floor. Or did congress just retract all the fraud statutes by stealth in the same way that the Federal Reserve handed out $7.7 trillion in bailouts back in 2008 (much more than the generally accepted figure of the $800 billion TARP) without anyone finding out until three years later when some Bloomberg reporters rooted the numbers out of a Freedom of Information Act (FOIA) filing. And by the way, what is the US Federal Reserve doing handing out billions of dollars to the Royal Bank of Scotland? Was Scotland admitted to the Union by stealth, too? Or did Jamie Dimon just buy it as a birthday present for Barack Obama, who likes golf.
This is what life in the USA is like nowadays: shit happens and shit un-happens, and you find out about it years later. Only a desperate and hopelessly degenerate nation would choose to live this way, in a law-optional society, in which money means everything, and yet nobody even knows what money is (or where it goes, and what it does when it goes there.)
Jon Corzine has not revealed the destination of the loot (somewhere between $600 million and $2.5 billion, estimated) that vanished from the "segregated" accounts of his many clients at MF Global. The rumor is that it went to cover a rude margin call from Jamie Dimon's bank, JP Morgan, after JC took some unfortunate positions in European sovereign bonds in a bad month. Beyond the question of why Mr. Corzine is not in jail (as a flight risk, just like DSK) is how come the Department of Justice has not so much as issued a statement saying that they were looking into the matter, so as to reassure both the victims and the financial markets that this is not a culture that just makes shit up as it goes along - i.e. that we have predictable rules and formal procedures for doing stuff.
The clowns and villains who run America have accomplished something really epic: they have vanquished meaning. Nobody knows what anything means anymore. Anything goes now. All bets are off. It's not reassuring. It leads to bad things happening like blood in the streets. When nothing means anything anymore, some people will actually strive, make an effort, to reestablish meaning in practical economic and political life, because civilized life is impossible without it. So, in those historic moments when civilization is suspended, people will work like hell to restore meaning. Sometimes though, like Germany in the 1930s, you discover that the suspension of civilization is itself intoxicating, and you ride with that for a while.
Things are really flying apart now, and just in time for Santa Claus. The European bond rollovers are about to come in fast and furious during the season of Advent and nobody can make their interest payments. They will be skipped or postponed and promised for "next Tuesday," and yet the bizarro universe of credit default swaps will not be triggered - is there a counter-party on God's green earth who could afford a pay-out? Of course not. It was all a charade. So we'll just learn that there actually is no "insurance" on all this paper. Yesterday's "hair-cut" will be tomorrow's "throat cut" as the middle innings of suspended civilization play out.There are heroes as-yet-sung-and-unsung in America, people who prefer reality over reality-TV, people with a taste for meaning in life, which often requires the recognition that some things are true and some not so true, and you're better off with what's true. What appears to be true is that the old order is finished and a new disposition of things is coming along. The Long Emergency will beat a path straight to the Great Re-set. Sign up for it. Roll up your sleeves. There is so much to do in this country. If you are young, especially, it's all waiting for you.