Rest in Peace Mumu, great friend and companion...
Monday, February 11, 2013
State of the Union
The fog of
chatter about Federal Reserve money-printing shenanigans, currency wars,
fiscal intransigence, exchange rates, and alphabetized rescue
operations conceals the central reality of the historical moment: that
all industrial economies now face epic contraction, even rip-roaring
China in its absurd and spectacular bid to become the latest drive-in
utopia. The so-called advanced nations of the world are all sliding
toward something less than they wish to be, and the so-called developing
nations will backslide further into poverty and anarchy where
development will never happen.
The implacable contraction
underway is the simple result of growing scarcity of cheap oil, the
master resource. Thus, in a world where fantasy has replaced analysis,
the propaganda channels brim with false news of America's coming "energy
independence" and the rebirth of domestic manufacturing, the coming
electric car fleet, and space tourism. There is also chatter among the
paranoid that an imagined elite has deliberately engineered American
collapse for fun and profit, with sideshows about the Department of
Homeland Security promoting social upheaval in order to make a show of
putting it down. This is all bullshit concealing the futile machinations
of people so unfortunate as to hold political office in an unraveling
they can't control. Where control is no longer possible, paranoid
fantasies fill the vacuum of wishing for control.
One
thing you can be sure of: the current sociopolitical weather will
change. A front will blow through and sweep the fog away. So many
circles of hazard are spinning around events that some fast-turning
object will come off its axis and start smashing all the fantasies. When
that happens, it will be every community for itself, and where there
are no real communities -- for instance, the vast matrix of suburban
noplaces that America emergently composed itself out of in a tragic
quest to become its own televised fantasy -- we'll discover the dark
side of the "liberty" that so-called conservatives endlessly invoke, in
all its screaming eagle iconography.
Not since the Civil
War (1861 - 65) has anything bad of this scale happened within the
United States itself and the public is unprepared despite our total
immersion in the on-screen ersatz heroics of avatars such as Dwayne
Johnson. The terrible convulsion of the 1860s was preceded by a
political time much like ours is now, with figures (calling them leaders
is inaccurate) of no conviction backpedaling furiously toward strife.
Remember these things if you tune in to watch President Obama move
his lips on Tuesday amid the incessant applause in the House chamber.
He'll speak the words "climate change" and the hall will rock with
thunderous handclapping -- but it won't mean anything because both the
president and the people have no intention of changing the way we live.
Mr. Obama will cheerlead for economic growth and he will be talking out
of his ass. It's the nature of this contraction that economic growth is
absent. You can have plenty of economic activity -- especially if you
re-form (literally) the systems we depend on, such as farming, commerce,
medicine, and transportation -- but it won't be expressed favorably in
the GDP stats or the balance sheets of CitiGroup and Morgan Stanley.
At the core of this contraction is the disappearing act of real
capital -- that is, accumulated wealth -- for the excellent reason that
we are squandering what remains of it in the futile effort to keep
living the way we do. But it will be vanishing fast, contrary to the
view of such fantasists as David Leonhardt, Washington bureau chief of The New York Times -- catch him on the current Slate Political Gabfest -- who thinks that the Growth Fairy is about to land on the south lawn of the White House.
The State of the Union Address is happening in a peculiar quiet
moment when all the financial brushfires of the time have been reduced
temporarily to a smolder that conceals the full involvement of the roots
under the surface. Our economic system is burning down. Nobody wants to
talk about the system that will have to replace it, which I call a
world made by hand.
The fortunate few will be those who
have already established themselves in an authentic community of helping
hands, who have some tools -- and I don't mean Adobe Photoshop or the
latest iPhone app -- and laid in some bits of silver and gold.
Monday, February 04, 2013
Cattle Drive
How
hilarious is the Federal Reserve's cattle drive of cash money (i.e.
"liquidity") into the stock markets? I'll tell you: if that cash is
outflow from bonds that pay ZIRP interest rates, then this attempt to
stampede investment into the stock market is only going to succeed in
ravaging the bond market and by extension the credibility of the dollar,
the US banking cartel, and then the world financial system as a whole.
If bond-dumpers rush into stocks, then who are the next bond buyers
at ZIRP? The USA can't keep going without continuous bond selling.
Somebody has to buy the darn things. The Federal Reserve is now buying
around 70 percent of US issue -- a lot of it via secondary market
pass-thru shenanigans involving "Primary dealers" (a.k.a. Too Big To
Fail banks, who get to cream off a premium when they flip bonds to the
Fed -- tidy little racket). If the other 30 percent of issue can't find
willing buyers at ZIRP then interest rates will have to go up. If
interest rates go up, then interest paid out on bonds (that is "debt
service") by the US government will go up catastrophically, because the
aggregate debt is so colossal and most of the debt is short term,
meaning that in a post-ZIRP world the interest rate ratchets up
automatically every 13 weeks as bonds roll over. The US will then only
be able to pretend that it can service the debt at higher interest
rates. Everybody in the world will recognize this -- surely only
increasing the velocity of the stampede away from bonds. The question
is: how long can pretending to service debt go on before it is just
called by it's real name: default? Or, if countered with additional
furious computer "money" creation: hyperinflation? Either way, of
course, you end up broke.
This cattle drive into stocks
is strictly a political gambit. The cattle are being driven to the
slaughterhouse. It's discretionary strategic national financial suicide.
They're driving up the stock markets for cosmetic purposes, to make it
appear that an economic recovery is going on, and with the aim of
setting in motion a self-reinforcing financial feeding frenzy in this
rush to "equities." By the way, in case my manner seems didactic today I
am attempting to define my terms as I go along because most other
financial bloggers seem to assume that ordinary people understand all
their jargon, which I am quite sure they do not.
Returning to my point... the Fed and their auditors on Wall Street and
in government, are jacking up the stock markets in the hopes of stirring
up "animal spirits," as the financial psychologists say, to put over
the story that it equals a vibrant economy -- which is nonsense, of
course, to anyone who shoots a casual glance at the economic wreckage
all around them. Anyway, since the stock market action these days is
dominated by high frequency trading robots running on algorithms, where
exactly would animal spirits even factor in? If anything the
absence of real animal spirits in this action also implies the absence
of its counterpart, animal survival instinct, of which human
intelligence is an order. What can come of stirring up animal spirits
among robots? A train wreck is exactly what.
Now, I ask
you: at a moment in history when vast interlinked global financial
markets have never been so unstable, so primed for unintended
consequences courtesy of the diminishing returns of technology, so ripe
for a massive, cascading "accident," is it a prudent thing to fuck
around with such crude PsyOps?
One other factor outside
pure financials assures that US economic performance will remain
impaired (that is, the kind of economic activity we regard as "normal"
(suburban sprawl building, credit card "consumer" spending): the price
of oil, which is inching up to the $100-a-barrel hashmark. Apparently
that shale oil bonanza we hear so much about has not left the USA
swimming in cheap oil. As a general principle, it's probably safe to say
that an oil price above $80 crushes the US economy. It drives up the
cost structure of just about everything we make, do, or sell here, but
of course the primary things that go up in price are food and motor
fuel.
Hence, it's tragically ironic that -- getting back
to official financial PsyOps -- that one of the primary motives for the
Fed keeping interest rates super-low in the first place (apart from
enabling wild fiscal irresponsibility in government) has been to promote
the housing sector -- because in the reality of our time "housing"
translates into building more suburban sprawl. How smart is it to
promote more suburban sprawl at a moment in history when there's no more
cheap oil?
It is this kind of stupendous foolishness that is putting the USA on the path of an epochal systemic collapse.
Superbowl addendum:
Did
anyone notice how violent and psychotic the Superbowl advertising was
this year? An Oreo commercial that depicted a mob of nerds destroying a
library -- huh? The Doritos spot where "Daddy" and his male buddies
transform themselves into an insane clown posse of cross-dressers. The Fast and Furious 6
trailer featuring the destruction of every vehicle known to man and a
few office buildings, too. The third-quarter power failure was a neat
harbinger of things-to-come in the Most Exceptional United States of
America. Party on, peeps!
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