"Forecast 2011 – Gird Your Loins for Lower Living Standards"
"Forecast 2011 –
Gird Your Loins for Lower Living Standards"
By James Howard Kunstler
"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.
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 Year’s 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!"
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!"
- http://usawatchdog.com/
0 Response to ""Forecast 2011 – Gird Your Loins for Lower Living Standards""
Post a Comment