Clusterfuck Nation tag:kunstler.com,2009-05-21:/blog//1 2010-07-30T21:29:05Z Comment on Current Events by the Author of "The Long Emergency" Movable Type 4.32-en What Is It? tag:kunstler.com,2010:/blog//1.94 2010-07-26T13:26:00Z 2010-07-30T21:29:05Z James Howard Kunstler      The New York Times ran a story of curious import this morning: "Mel Gibson Loses Support Abroad." Well, gosh, that's disappointing.  And just when we needed him, too. Concern over this pressing matter probably reflects the general mood of the nation these dog days of summer - and these soggy days, indeed, are like living in a dog's mouth - so no wonder the USA has lost its mind, as evidenced by the fact that so many people who ought to know better, in the immortal words of Jim Cramer, don't know anything.
     Case in point: I visited the Slate Political Gabfest podcast yesterday. These otherwise excellent, entertaining, highly educated folk (David Plotz, Emily Bazelon, and Daniel Gross, in for vacationing John Dickerson) were discussing the ramifications of the economic situation on the upcoming elections. They were quite clear about not being able to articulate the nature of this economic situation, "...this recession, or whatever you want to call it..." in Ms. Bazelon's words.  What's the point of sending these people to Ivy League colleges if they can't make sense of their world.
     Let's call this whatever-you-want-to-call-it a compressive deflationary contraction, because that's exactly what it is, an accelerating systemic collapse of activity due to over-investments in hyper-complexity (thank you Joseph Tainter). A number of things are going on in our society that can be described with precision. We've generated too many future claims on wealth that does not exist and has poor prospects of ever being generated. That's what unpayable debt is. We have such a mighty mountain of it that the Federal Reserve can "create" new digital dollars until the cows come home (and learn how to play chamber music), but they will never create enough new money to outpace the disappearance of existing notional money in the form of welshed-on loans. Hence, money will continue to disappear out of the economic system indefinitely, citizens will grow poorer steadily, companies will go out of business, and governments at all levels will not have money to do what they have been organized to do.
     This compressive deflationary collapse is not the kind of cyclical "downturn" that we are familiar with during the two-hundred-year-long adventure with industrial expansion - that is, the kind of cyclical downturn caused by the usual exhalations of markets attempting to adjust the flows of supply and demand. This is a structural implosion of markets that have been functionally destroyed by pervasive fraud and swindling in the absence of real productive activity. 
     The loss of productive activity preceded the fraud and swindling beginning in the 1960s when other nations recovered from the traumas of the world wars and started to out-compete the USA in the production of goods. Personally, I doubt this was the result of any kind of conspiracy, but rather a comprehensible historical narrative that worked to America's disadvantage. Tough noogies for us. The fatal trouble began when we attempted to compensate for this loss of value-creation by ramping up the financial sector to a credit orgy so that every individual and every enterprise and every government could enjoy ever-increasing levels of wealth in a system that no longer really produced wealth.
     This was accomplished in the financial sector by "innovating" new tradable securities based on getting something for nothing. That is what the aggregate mischief on Wall Street and its vassal operations was all about.  The essence of the fraud was the "securitization" of debt, because the collateral was either inadequate or altogether missing. That's how you get something for nothing. The swindling came in when these worthless certificates were pawned off on credulous "marks" such as pension funds and other assorted investors.
Tragically, everybody in a position to object to these shenanigans failed to issue any warnings or ring the alarm bells - and this includes the entire matrix of adult authority in banking, government (including the law), academia, and a hapless news media. Everyone pretended that the orgy of mortgage-backed securities, collateralized debt and loan obligations, structured investment vehicles, credit default swaps, and other chimeras of capital amounted to things of real value.
     Certainly the editors and pundits in the media simply didn't understand the rackets they undertook to report. You can bet that the players on Wall Street made every effort to mystify the media with arcane language, and they succeeded beyond their wildest dreams. (Making multiple billions of dollars by trading worthless certificates based on getting something for nothing must be the ultimate definition of succeeding beyond one's wildest dreams.) It's harder to account for the dimness of the news media. I doubt they were in on the caper. More likely there is a correlation between their low pay and their low capacity. But I wouldn't discount the fog of assumptions and expectations about the way the world is supposed to work that can disable even people of intelligence.
     I'm as certain as the day is long that the folks on Wall Street, from the myrmidons in the trading pits to the demigods like John Thain, with his thousand-dollar trash basket, knew that they were trafficking in tainted paper. Many of them deserve to be locked up in the federal penitentiary for years on end, and they probably never will because president Barack Obama lacked the courage to set the dogs of justice after them and now it is too late.
     The most confused of any putative authorities are the academic economists, lost in the wilderness of their models and equations and their quaint expectations of the way things ought to go if you can tweak numbers. These are the people who believe with the faith of little children that if you can measure anything you can control it. They will go down in history as the greatest convocation of clowns ever assembled, surpassing all the collected alchemists, priests, and vizeers employed in the 1500 years following the fall of Rome.
     It's harder to tell whether the elected officials and their appointees in sensitive places like the Securities and Exchange Commission and the FBI had a clue as to the scale of misconduct in the financial sector, or if they were bought off plain and simple, or just too stupid to understand what was going on all around them. The term "regulatory capture" provides valuable insight. How could Christopher Cox at the SEC fail to notice the stupendous malfeasance in the mortgage-related securities rackets. Why isn't he working for fifty cents a day in the laundry of Allenwood Federal Correctional Facility? Why is the grifter of Countrywide mortgage favors, Christopher Dodd, still free to guzzle the fabled bean soup in the Senate lunch room? I could go on in this vein for two hundred pages, but you get the drift.
     The collective failure of authority, whether of intention or oversight or mental deficiency boggles the mind. And it leaves us where we are: in a compressive deflationary contraction, a.k.a. the long emergency.  This is not a cyclical recession. It's the end of one thing and the beginning of another thing, another phase of history in which people will have to learn to live differently or perish. I'm convinced that just about very elected official who can be swept out of office will be swept out of office - even if their replacements turn out to be a very unsavory gang of sadists and morons who will certainly make things worse.
     But these dog days of summer nobody will be paying attention, even as the markets themselves roll over and puke, as I rather imagine they will between now and Halloween, if not next week.
     P.S. I have not come to any conclusions about the fate of the Macondo blow-out and the claims of Matthew Simmons, though I have certainly got a lot of mail about it, some of it very intelligent. The BP oil spill has vanished from the news headlines again as the world waits for the final push at the relief wells. We do know that we are entering the heart of the hurricane season and that will make for some excitement.
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. Pre-order via Amazon.

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]]> What If He's Right? tag:kunstler.com,2010:/blog//1.93 2010-07-19T12:18:05Z 2010-07-19T12:37:05Z James Howard Kunstler
       Just when America was celebrating the provisional end of BP's Macondo oil blowout, and getting back to important issues like Kim Kardashian's body-suit collection, along comes Matthew Simmons with a rather strange and alarming outcry on doings in the Gulf of Mexico that contradicts the mood of renewed festivity, as well as just about every shred of reportage from any media outlet, mainstream or otherwise.
     Matt Simmons Houston-based company has been the leading investment bank to the US oil industry for a long time, financing exploration and drilling in places like the Gulf of Mexico. Simmons, 68, recently retired from day-to-day management of the company. For much of the decade he has been what may be described as a peak oil activist. His 2005 book, Twilight in the Desert, warned the public that Saudi Arabia's oil production had reached its limits and, more generally, that an oil-dependent world was entering a zone of serious trouble over its primary resource. He took this aggressive stance despite risking the ire of the people he did business with. 
        Matt Simmons is a sober individual and a very nice man (I've met him twice over the years), a button-downed corporate executive who's been around the oil business for forty years. His knowledge is deep and comprehensive.  From the beginning of the BP Macondo blowout incident in April, he's taken the far out position that the well-bore is fatally compromised and that BP has been consistently lying about their operations to stop the flow of oil. Perhaps most radically, Simmons claims that an oil "gusher" is pouring into the Gulf some distance from the drilling site itself.
       Last week, Simmons came on Dylan Ratigan's MSNBC financial show, but he did a longer interview over at the King World News website. (click here for Eric King's interview with Simmons). Simmons's current warning about the situation focuses on the gigantic "lake" of crude oil that is pooling under great pressure 4000 to 5000 feet down in the "basement" of the Gulf's waters.  More particularly, he is concerned that a tropical storm will bring this oil up - as tropical storms and hurricanes usually do with deeper cold water - and with it clouds of methane gas that will move toward the Gulf shore and kill a lot of people. (I really don't know the science on this and welcome any reader to correct me, but I suppose that the oil "lake" deep under the Gulf waters contains a lot of methane gas dissolved at pressure, and that as the oil rises toward the ocean's surface, and lower pressures, the gas will bubble out of solution.)
       Simmons makes two additional points that are pretty radical: he says that several states along the Gulf ought to begin systematic evacuations in counties along the shore now. From his experience in Houston with Hurricane Rita (2005), he says a last-minute evacuation is bound to be a disaster -- the highways jammed hopelessly, drivers ran out of gas, and then the gas stations ran out of gas. Based on where the nation's collective state-of-mind is these days, I can't imagine that any Gulf state governor or mayor will heed this warning and begin preparing an evacuation now. (The practical problems are obvious for householders but what if it really is a matter of life and death?)
        Secondly, Simmons maintains - as he has from near the beginning of the blowout - that the US military should take over operations from BP and ought to set off a "small" nuclear device down in the well-bore to fuse the rock into glass and seal the site permanently. Simmons says, based on his experience growing up in Utah near the government's underground nuclear testing sites in neighboring Nevada, where scores of very large atomic bombs were set off for years with no measurable consequences above ground, that a small nuclear explosion down in the Macondo well is unlikely to have any effect above the undersea rock surface. I have no idea, personally if this is true.
     Matt Simmons is taking a position so "out there" that even the radical peak oil website TheOilDrum.com won't comment on his remarks (at least not as of early Monday morning July 19). I don't know how to evaluate Simmons's contentions myself, except to say that I don't believe Simmons is a nut, or that he's lost his marbles. We also must suppose that someone in his position is able to talk with an awful lot of the best people in the oil industry.  Simmons has put his reputation on the line. A lot of bystanders and commentators are treating him as a fool.  Simmons himself is painfully aware of his lonely stance and seems, in his public appearances, to be a very regretful messenger.
       In the past twenty-four hours, BP has reported some possible leaks coming out of the seabed some distance from the well-bore. Nobody has been able to confirm yet exactly what is happening down there.  One other thing Simmons said is that BP should be barred from the media airwaves since, he says, they have lied consistently in order to cover up their criminal negligence and culpability. The company itself cannot be saved because the claims against it are much greater than the value of its assets - but the people running the company could be sent to jail, so the incentive to keep lying remains high.
       Jesse at the Jesse's Café Américain website makes an excellent point that if Matt Simmons is correct, and it turns out that the US government has been played by BP, then remaining public trust in the competence and legitimacy of government could evaporate. This is not a happy thing to contemplate at a time when the state of the nation and its economy are so fragile. What follows could make the current political situation seem like little more than, well, than a tea party, compared to the politics-to-come.
        Readers here at Clusterfuck Nation are probably well aware of my past declarations of being allergic to conspiracy theories and crazy ideas generally. I'm not really equipped to evaluate Matt Simmons's warnings about the exact nature of the Macondo blowout and what might happen in the months ahead. But I am confident, having met the guy and corresponded with him and read his books, that he is a straight shooter. I'm sure that he is sincere in proclaiming his extreme discomfort with the position he's taken.  Listen and decide for yourselves. (Simmons interview with Eric King)
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.

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]]> Where Have We been? Where Are We Going? tag:kunstler.com,2010:/blog//1.92 2010-07-12T13:24:09Z 2010-07-12T14:14:09Z James Howard Kunstler


       On a hot Saturday in mid-July in my corner of the country, when everyone else is cavorting on Million Dollar Beach at Lake George, or plying the aisles of the home Depot, or riding their motorcycles in faux-outlaw hordes, I like to slip away to the neglected places where nobody goes.  I seek out the places of industrial ruin - there are many around here in the upper Hudson Valley, and they are mostly right along the river itself, because there are many spots where the water tumbles and falls in a way that human beings could capture that power and direct it to useful work.
       I always bring my French easel, a wooden contraption ingeniously designed to fold up into a box, to which I have bolted on backpack straps. To me, these ruins of America's industrial past are as compelling as the ruins of ancient Rome were to Thomas Cole and his painter-contemporaries, who took refuge in history at the exact moment that their own new nation began racing into its industrial future.
      I've been haunting this particular site in Hudson Falls, New York, all summer so far. Originally called Bakers Falls, it evolved over a hundred-odd years into an extremely complex set of dams, spillways, intakes, revetments, channels, gangways, and hydroelectric bric-a-brac all worked into the crumbly shale that forms the original cliff. From a vantage on the west side of the river, you can clearly read the layered history of industry as though it was a section of sedimentary rock from the Mesozoic.

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     One thing above all amazes me about these American industrial ruins: they're not really very old. My grandfather was already reading law and drinking beer when some of this stuff was brand-new (or not even here yet!). Unlike Rome's long, dawdling descent from greatness, America's industrial fall seems to have happened in the space of a handclap. I suppose it was in the nature of the fossil fuel fiesta that these activities could only last as long as the basic energy resource was so cheap you hardly needed to figure it into the cost of doing business. Which is not to say that the human element didn't change, too, since obviously it did - as America went from a cheap labor nation of immigrants eager to join in the security of factory regimentation, to adversarial relations between unionized workers and business owners, and finally to game over, as off-shoring and out-sourcing savaged American manufacturing.

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     These factories at what was first called Bakers Falls began in 1858 as an iron machine works, intended to produce the frames for water wheels. Soon they quit that in favor of making replacement parts for the growing paper-making industry that made use of the pulpwood from the Adirondack Mountains. Activities related to this went on clear through the 1960s, about a century in all, until things fell apart in the upper Hudson Valley and business mysteriously went elsewhere.
     I'm sure it was a mystery to many of the people around here who got a living from these factories, who felt strong, willing, and able to trade their labor for a decent paycheck. How could the world not need them anymore?  American political leadership explained it rather poorly to them. This was a new economy, they said. From now on making a living in America would be all about being clever at cooking up "innovations" that the rest of the people in the world could use in order to churn things out for us at twenty cents an hour. America's young people, they said, should go to college, even if it meant taking on a lifetime of loan obligations. Or enroll at the local community college to learn "computer technology," the coming thing.
     What really happened to places like Hudson Falls is now painfully visible on-the-ground, in the streets, and in the shopfront windows, which are either vacant or occupied by the most marginal businesses - martial arts studios (training for what? Gang war? Insurrection? Afghanistan?), second-hand shops, and the ubiquitous pizza joints for a cheese-hungry populace. The once dignified business blocks at the small center of town - itself perched on a bluff with a panoramic view west - are vacant and falling into gross disrepair. The owner class of citizen, still inveighed against in progressive radio circles, are so gone that their ghosts seem to have packed up and left, too. But then so is every other class of people above the nether-class - that is, people engaged in something other than subsidized idleness and crime, people who's only obligation in life is waking up in the morning. (No wonder the nation is obsessed with zombies these days.) I passed a wedding late in the afternoon on my way out of town.  The bride had a tattoo the size of bumper-sticker on her décolletage. The groomsmen were dressed in black baby shorts and backwards hats. You want to weep for their offspring.
      I only saw them on the way out.  All the rest of the long day, I was blessedly alone under a fierce sun on the far side of the river, in close observation of the visual details of history and the quality of the day.  It is hard to imagine the determination and ingenuity (not to mention strength and sweat) it took to pile up all these buildings right next to this raging river, or to fling a concrete dam across it. I don't see how we could do that now, since we seem collectively incapable of accomplishing anything anymore - except some phony new political disposition of foot-dragging, evasion of responsibility, or refusal to confront reality.

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     The reality I spend these days rambling the river with is the reality of a nation riding a great wave of entropy into the unknown. Only at this stage of the ride can we indulge in our Goth fantasies of the charming vampire nether-life. Believe me, when things really get dark we will all be wishing desperately for something more like lambs-in-the-meadow and the kindly touch of a loving hand and the dim memory of what it was like to care about anything or anyone. 
      Where we are now, to me, is the real dark time, the proverbial moment before the dawn. The depravity of our culture, Disney merchandise, cool ranch Doritos, and all, is something that people of the future will marvel at for centuries to come. The purity of our surrender will fascinate them. They will conclude that we looked into the abyss... and decided that we liked what we saw in there.
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.

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]]> My Tea Party tag:kunstler.com,2010:/blog//1.91 2010-07-05T13:19:54Z 2010-07-05T13:46:04Z James Howard Kunstler      Now that congress has passed a fake financial reform bill that will accomplish absolutely nothing to correct a recently engrained culture of swindling, I want to start my own tea party. I don't want to associate it with the other tea parties that have already formed because I am allergic to much of the idiot ideology they express - especially the bent for merging Christian fundamentalism with governance.
     One of the few things I agree on with the existing tea parties is that the Republicans and Democrats have made themselves hopeless hostages of political money and bargained away their legitimacy. In line with my general belief that American life must downscale or die, I'm not wholly persuaded that federalism can survive in any case - but assuming it will lumber on for a while anyway, the two major parties cannot retain their monopoly on power. Indeed, it is in the natural order of things that this country must periodically endure a realignment of political ideas and political power. This tends to occur during moments of cultural convulsion, and that is exactly the moment we are in as the sun sets on the fossil fuel based industrial extravaganza and we enter a crisis of intense resource austerity.
     The other tea parties have been silent on the war because of the ties between Christian fundamentalism and military chauvinism. This is due, I suspect, to the tea parties first emanating out of Dixieland, where an old Scots-Irish "cracker" belligerence persists in a romantic view of violence - and where, coincidentally, there happen to be so many US military bases, and families dependent on careers connected with them. The confusions of hellfire Christian theology with governance form an overlayment on this, so you end up with a political culture favoring military adventures abroad and pushing citizens around at home on matters of social behavior (while mouthing a lot of disingenuous nonsense about "liberty").
     I don't like that political culture and I'm not in favor of continuing our adventures on the fringes of the Middle East. The half-assed occupation of Afghanistan cannot be resolved in a way consistent with our fantasies and wishes. To put it as simply as possible, we can't control the terrain there and we can't control the behavior of the population. Our campaign to turn that remote and impoverished land into a governable democratic state is an exercise in futility that we can't afford. No doubt there are strategic wishes pinned to it - mainly a wish to influence and moderate neighboring Pakistan - but that appears to be back-firing with the minting of evermore Islamic maniacs seeking to blow up anything that presents a target, including their own women and children.
     Iraq is a somewhat different story, but I suspect the bottom line is that we can't afford to run a police station there forever. In the worst-case of our leaving, Iran might attempt to step in and control the place (and its oil), but that would only produce a bloody collision of Arab and Persian culture - and the side effect of that might actually be to our benefit. Anyway, my tea party would shut down that operation ahead of schedule.
     My tea party would reduce legal immigration to a tiny trickle and get serious about enforcing sanctions against people who are here without permission. A New York Times editorial last week expressed the Democratic-progressive view in typically tortured style, saying of the recent Arizona law:

..it makes a crime out of being a foreigner in the state without papers -- in most cases a civil violation of federal law. This is an invitation to racial profiling, an impediment to effective policing and a usurpation of federal authority....

    The fine distinction they want to apply in this matter between civil and criminal law is the same as NPR's house style of referring to illegal immigrants as "undocumented" - leaving the impression that the only problem for these people is a some bureaucratic glitch rather than a transgression of law. The truth is that neither party really wants to do anything about the extraordinary influx of Mexican nationals because they want to pander to a growing segment of Hispanic voters (or secondarily want to maintain the pool of cheap labor for US businesses). My party does not believe in unbounded multi-culturalism. My party also views the lawlessness of the current situation to be corrosive of the rule-of-law generally. My party views the global population overshoot problem as a condition that requires a more rigorous defense of US territory, sovereign resources, and even whatever remains of American common culture.
     My tea party would systematically dismantle Too-Big-To-Fail banks into smaller units subject to real reforms that would prevent any further "socialization" of losses by financial buccaneers. In effect, my party would re-enact the Glass-Steagall laws - and get rid of the 3000-page bundle of prevaricating crap in the current "Fin-Reg" law, which has been constructed with all the guile and mendacity of a collateralized debt obligation. My party would seek the return of banking to its function as a utility, while letting investment freebooters gamble with their own funds without any government back-up. (You'll see the investment houses get small fast that way.)
     My tea party would get the government out of the housing business. The main effect of 70 years of federal intervention for the sake of "affordable" housing has been to drive the price of housing up far beyond the ability of normal people to afford a place to live. And the current policies devised during the bubble crackup crisis have only served to prevent the price of houses from returning to a level where people might be willing to buy them. Of course, the whole process has also encouraged local governments to jack up property taxes to a level that can only be described as intolerable (in the 1776 sense of the word).
     My party would undertake a rebuilding of the US passenger railroad system - not a flashy new "high speed" system, which we cannot afford, but the system that is lying out there rusting in the rain waiting to be fixed. This is imperative because we are on the verge of very disruptive problems with our oil supply which are going to put our beloved Happy Motoring matrix out-of-business. We also face the end of mass commercial aviation (even if flying remains an option for the wealthy). A restored passenger rail system will not solve all the problems connected with the demise of mass motoring, but it will help a lot, and would be an aid to the necessary re-activation of our small towns and cities as suburbia inevitably loses its value and utility.
     The leaders of my tea party from the president on down would make a concerted effort to inform the public in straight talk about the real problems that we face involving peak oil and debt. My tea party would promote reality-based politics rather than techno-grandiose fantasies and wishful thinking. My tea party would encourage the necessary downscaling of all the critical activities of American daily life, including the re-localization of food production, the rebuilding of local commercial networks, the revitalization of the small towns and cities, and the difficult transition out of extreme car dependency. My tea party will do everything possible to construct a coherent consensus about what is happening to us and what we can do about it. My tea party is based on the true spirit of 1776 - the binding together of common interests and common culture - not the destruction of them as in the spirit of 1861.
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.

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]]> Say What? tag:kunstler.com,2010:/blog//1.90 2010-06-28T12:43:16Z 2010-06-28T13:09:51Z James Howard Kunstler      
     I think America missed something. It must be the time of year, what with inhaling all those fumes from the charcoal starter... and fueling up the Jet-skis so as to turn a perfectly good mountain lake into something like a Cuisinart on the guacamole setting... and the rousing evenings in the Nascar parking lots hitting palmetto bugs with your wiffle bat... and all that anxious waiting for a 10W-40 hard rain to fall on the Gulf Coast states - but President Obama made a very interesting remark when the financial regulation package passed in the senate the other day. He said the bill would make sure that "Main Street is never again held responsible for Wall Street's mistakes."
     Whoosh....
     That was the sound of something going over America's head. Something about the size of Rodan the Flying Reptile. And frankly I don't think the president even meant to be coy or deceptive. It just means he doesn't get it either. Never again....
     Never again?
     What the fuck?
     Why even this time?  Why isn't there an army of federal attorneys out there, their teeth bristling with subpoenas, beating the bushes in every lane and skyscraper floor of lower Manhattan (and Fairfield County, Connecticut, not to mention a thousand office parks around the USA) to roust out the grifters and swindlers who took Main Street to the cleaners this time. 
     The audacity of cluelessness! And the hilarity of "next time."
     Earth to President Obama: there isn't going to be a next time. This time was enough to git 'er done. Wall Street - in particular the biggest "banks" - packaged up and sold enough swindles to unwind 2500 years of western civilization. You simply cannot imagine the amount of bad financial paper out there right now in every vault and portfolio on the planet. Enough, really, to sink any company even pretending to trade in things more abstract than a mud brick or an hour of labor. What's more, the cross-collateralized obligations between them are so vast and intricate that all the standing timber in North America could not be fashioned into enough pick-up sticks to represent the hideous death-dealing tangle of frauds waiting for the wing-beat of a single black swan to come crashing down.
     Go out and get a copy of Michael Lewis's recent book The Big Short for a close-up view on one micro-corner of the investment world. You will discover that the people fabricating things like synthetic collateralized debt obligations (CDOs) had no idea what the fuck they were doing - besides deliberately creating documents that nobody would ever understand, that would never be unraveled by teams of law clerks or secret words or magic incantations or prayers to some dark hirsute deity, and were guaranteed to place in jeopardy every operation of the world economy above the barter level. Sorry to invoke the hoary old metaphor about the horse being out of the barn - but the larger problem is what the horse left behind in a great steaming mound clear up to the rafters. There was nothing to understand in all this crap, except that betting against it was a good idea, and then only for those who placed the earliest bets - because everybody else is going to get just as screwed as those who stuffed their vaults and portfolios with Triple-A rated horseshit.
    What banks and governments have been doing for the past eighteen months is a dumbshow meant to distract the public from the fact that the world financial system has been effectively destroyed. There isn't enough money left in the known reaches of the universe to pay off the outstanding claims. In fact, not even close. Everything that proceeds from this fiasco will be in service of impoverishing most of the population and, incidentally, probably bringing down governments and, with them, convenient social usufructs such as due process of law and civil order. What remains - what you're watching right now on CNN or Fox - is just a representation of the former structures of civilized life, what Joe Bageant refers to as "the hologram," a kind of 3-D picture you can see around, that looks like reality, but is actually immaterial, a collective hallucination. It's comfortable living in a hologram - until you discover that you're in one.
     In the summertime, when there are weenies to grill and Jet-skis to commit suicide on, the public is usually having too much fun to pay attention to anything. Maybe this is how come summertime is also when lots of bad shit happens, or gets ready to happen. The guns of August... blitzkrieg... 9-11... the death of Lehman Brothers....
     A few other social notes this week: Something else the public (and, of course, the news media) missed in the General McChrystal affair. It wasn't just that the general badmouthed his civilian superiors. It was that he was not the other thing that an army officer should be: a gentleman. He was a lout who reveled in everything lowest in his own culture. He was a man so disturbed by having to spend a night in Paris at a good restaurant with civilized people that it seems to have driven him plumb batshit. General George Patton - a man renowned for his own profane intemperance - would have boxed Stanley McChrystal's ears for his sheer childishness and assigned him to Graves Registration. When the USA falls apart in a few years, let's hope General McChrystal doesn't ride over the horizon on a white horse with an army of Af-stan vets flexing their neck tattoos behind him.
     Oh, and something else: notice that the Deepwater Horizon oil gusher has vanished from the front pages of The New York Times and even The Huffington Post. Nobody gives a shit anymore. Bring it on.
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.

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]]> Mismanaging Contraction tag:kunstler.com,2010:/blog//1.89 2010-06-21T12:53:54Z 2010-06-21T13:02:58Z James Howard Kunstler

     Lesson of the Macondo:  Blowout preventers don't prevent blowouts. This comes as a shock to people attuned to the on-schedule arrival of techno-miracles. Now, all the acronym-studded invocations of techno-mastery by men wearing interesting hats will not avail to put the schnitz on an epic horror show in the Gulf of Mexico. 
     President Obama's speech to the nation a week ago was designed as a kind of blowout preventer for the legitimacy of the federal government. It did little to stop the hemorrhaging of confidence in political leadership.  A nation foundering in a crippled vessel in the horse latitudes of collective purpose on a sea of red ink looks to its captain - who puffs a few platitudes into the tattered sails and retreats belowdecks to pace and stew. This is a society truly lost at sea, where even the friendly dolphins are turning belly-up and the dying seabirds stare accusingly under their cloaks of crude oil. The feeling grows that we can't do anything right. Will someone please turn off the TV?
     In 2008, the voters turned to a lanky newcomer from Illinois to rescue itself from just the sort of technocrat jerkoffs who had run the nation into a ditch with their invocations of "mission accomplished" and "Good job, Brownie." Change was in the air. Alas, consistent with the apparent fact that history rhymes but doesn't repeat, Barack Obama proved to be the reincarnation of Millard Fillmore, not Abe Lincoln. Sometimes history works in free verse and this stanza was off by a few syllables. It turns out that change was exactly the one thing not really in the air. America does not want change, except from the cash register at WalMart. 
     The last time America faced a convulsion as profound as the present one was the late 1850s. The internal contradiction of slavery was driving the nation crazy. The Whig party had been running things for a couple of decades. The Whigs were the party of Daniel Webster and Henry Clay. They tried everything possible to finesse the expansion of US territory around the inflammatory issue of slavery. Fillmore came along just in time for the Compromise of 1850, which was intended to settle things and did absolutely nothing to settle things. By the time the election of 1852 happened, Both Webster and Clay were old men preparing to meet their maker and the Whig party absolutely fell apart. Scroll forward a few years and we're in the slaughterhouse of The Civil War.
     A hundred and sixty years later now, and the USA faces a new and very different set of internal contradictions. We've ramped up a living arrangement that has no future, just as slavery had no future. We're uncomfortable with the mandates of reality, which is trying to tell us we have to live differently. The American people don't want to hear this. The president doesn't want to tell them. It's possible that he is not tuned into the reality radio station that is broadcasting its mandates. You'd think the Macondo Blowout horror show was coming across loud and clear. 
      Right after President Obama gave his vapid speech last week, he traveled to Ohio to brag about how much federal stimulus money was going into "shovel-ready" highway projects there. I sincerely believe that the last thing we need right now in this country is more and better highways. Every president since Jimmy Carter has acknowledged that there's a problem with our extreme oil dependency, but none of them have made the short leap to understand that we have a more fundamental problem with car dependency. Someone paying attention to the mandates of reality would get the choo-choo trains running from Dayton to Columbus to Cincinnati to Cleveland - and he would tell General Motors to get into the business of making railroad cars so we don't have to import them from Canada.
      Reality is telling us to downscale and get different fast. Quit doing everything possible to prop up the drive-in false utopia and all its accessories. Get local. Tighten up. We have no intention of doing that. The idiocy that passes as informed opinion wants the US money managers to kick out the jambs handing out more money created out of thin air to promote a fantasy called "recovery." To what purpose? To keep the tailgate parties going down at the Nascar ovals? Over at The New York Times Monday morning, the fatuous Paul Krugman says that "stinting on spending now threatens the economic recovery." Earth to Krugman: we're mismanaging contraction. Further expansion is just not in the cards right now for the human race. We don't need more people on the planet and we don't have the means to accommodate them. There will be no 'recovery" to "growth" - especially by means of pumping more oil into the system. There is no techno-miracle alt-fuel panoply waiting in the wings to take over from oil. And there is no research-and-development program that will make it happen, no matter how many acronym-studded incantations we drone out.
     I admit that contraction is a hard reality - but so is the recognition that we don't get to live forever, something every child begins to grapple with around age seven. The inability to face comprehensive contraction will only insure that its side effects are more debilitating.
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.

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]]> Fierce Urgency tag:kunstler.com,2010:/blog//1.88 2010-06-14T10:40:50Z 2010-06-14T15:29:40Z James Howard Kunstler
     The exquisite morbidity of the BP oil spill has concentrated the collective national mind like few other events in this ongoing long emergency. How many times a day does it occur to you -- perhaps while sitting in traffic, or oogling some girl in a nearby cubicle, or cruising the freezer stacks in the supermarket -- that one mile deep in the Gulf of Mexico that crude is just blasting away into the deep blue sea? Anyway, it troubles my hours. But what if it hadn't happened? What if the nation's attention was not fixed on the "fierce urgency" of this disaster and we were left with all the tiresome familiar problems of politics and economy?
     After the financial storms of May, people in the knife-and-fork-using nations may feel that all our troubles with money have been sorted out and settled. Greece had an apoplexy and Europe somehow survived -- at least so far. Spain fell to its knees and apparently remains there, in mid-aria, waiting for an orchestra to strike up the next measure. Portugal is trying to hide in plain sight, like a beach-goer who has lost swimsuit in the surf. Hungary choked on something last week and was left sitting at the table with its face in a plate of goulash. Iceland has been put on, well, on ice after stiffing its British account holders. The Brits have discovered that they have enough money to run their country in the style of Edward the Confessor. France is weeping over all the Spanish, Greek, and Portuguese bad paper in its bank vaults. Italy, having become a wholly-owned subsidiary of Silvio Berlusconi, is eating a sparse lunch under the grape arbors. The Baltic states are sinking into a northern peat bog of penury.... And Germany remains upright, wondering how it can wiggle out of this sad-ass collective of fazed cookies.
     June so far is a strange ebb tide of of events relating to the world's money, but when the water goes out like that, you know it's sure to return before long, and the peaceful mud-flats of June may vanish under a summer tsunami. I know I'm not alone in the creepy feeling that really nothing has been sorted out and the world is waiting to get hammered six days to Sunday by the consequences of living too large for too long. The markets have been stranded, too, gyrating on the peculiar life-support of robot-traders -- since all the humans have packed up and left the scene for higher ground. The corporate creaming-off of anything not nailed down in America continues apace, with the cream ending up as icing on the petit fours passed around the twilight lawns of East Hampton.
     President Obama may be lucky that he has something he can pretend to be decisive about in the BP oil spill. It's allowed him to completely avoid taking a public stand on crucial parts of the financial reform legislation working its way through congress like a stinking bolus. For instance, where does Mr. Obama stand on the reform of credit default swap activities? This dark realm of swindling has come close to choking the American money system to death -- and might yet do the job -- but the president hasn't offered up a word of leadership on it. My guess is that the gestures of reform will leave reform completely unfinished by the time the high water of events starts rushing back in. All the structural fault-lines will remain as even more decay sets in and new cracks appear. Something is gonna give this summer.
     It all comes down to one thing: the world is mismanaging contraction.  The world will not solve the problems of massive over-complexity with more complexity. But scaling down is apparently not an option, though it will happen whether we participate or not.  The USA is like Herman Melville's Bartleby the Scrivener who, when asked to do anything, replied, "I prefer not to." His preference led him to a pauper's grave. 
      The future attempts to regulate undersea oil drilling will send many companies to do their thing in other parts of the world where nobody gives a shit what you do offshore as long as you pony up the royalties to the grifters in charge onshore. America is going to lose a whole lot more of its own oil production. Smaller companies may shut down altogether from the cost of complying with new safety rules and an inability to get insurance. The oil from deep water in the Gulf of Mexico was how we hoped we would offset the ongoing depletions in Alaska. We're going to have to import even more oil than the two-thirds-plus we already depend on. One thing President Obama -- nor anyone else with an audience or a constituency -- will speak a word about is our massive, incessant purposeless motoring. 
     Pretty soon, the oil missing from the Gulf will leave a message at the 7-Eleven stops in Dallas and Chattanooga, and before the year is out the cardboard signs that say "Out Of Gas" may hang on the pumps. A great hue and cry will rise out of the Nascar ovals and righteous lady politicians with decoupaged hair-doos will invoke the New World Order and the Book of Revelation in their rise to power. Reasonable men with moderate views will dither on the sidelines, afraid to offend one faction or another.
     Sometime this summer that ebb tide of events is going to reverse and we'll have more to contend with than just the shrieking wildlife suffocating in orange gunk, and the ruined spawning grounds of the shrimp, and the lost livelihoods of the sportfishing charter guides, and the tarball covered beaches and devalued real estate. We decided to de-complexify the hard way, the way that brings about as much pain and disorder as possible until we discover that the long emergency beats a path straight into a world made by hand. 

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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.

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]]> Which Horizon? tag:kunstler.com,2010:/blog//1.87 2010-06-07T10:18:19Z 2010-06-07T15:39:55Z James Howard Kunstler
     Did the nation heave a sigh of relief when BP announced that their latest gambit to "cap" the Deepwater Horizon gusher will result in hosing up fifty percent of the leaking oil? If so, the nation may be sighing too soon since the other half of the oil will still collect in underwater plumes and hover all around the Gulf Coast like those baleful mother ships in the most recent generation of alien invasion movies. I shudder to imagine the tonnage of dead wildlife flotsam that will wash up with the tide for years to come. It will seem like a "necklace of death" for several states, though even that may not be enough to distract them from the more gratifying raptures of Nascar and NFL football. 
     For the moment we can only speculate on what the still-unresolved incident will mean for America's oil supply. The zeal to prosecute BP for something like criminal negligence has bestirred a Department of Justice comatose during the rape-and-pillage of the US financial system. BP may be driven out of business, but then what? The net effect of the oil spill, one way or another, will be the gradual shut-down of oil drilling activity in the Gulf of Mexico. New government supervision will make operations very costly, if not non-viable, and the surviving companies will probably pack up for the west coast of Africa where supervision is almost non-existent.  Anyway you cut it, the US will produce less oil and import more -- and have to rely on the political stability of places like Angola and Nigeria, not to mention the simmering Middle East.
     So far, also, the US has done nothing in the way of holding a serious national political discussion about the the most important part of the story: our pathological dependency on cars. I don't know if this will ever happen, even right up to the moment when the lines form at the filling stations. For years, anyway, the few public figures such as Boone Pickens who give the appearance of concern about our oil problem, end up down the rabbit hole of denial when they get behind schemes to run the whole US car-and-truck fleet on something besides gasoline.
     This unfortunate techno-narcissism shows that almost nobody wants to think about living with fewer cars driving fewer miles. We're going to be dragged there kicking and screaming, but that's our destination, like it or not. All the effort now going into developing alt-fuels and "green" cars is just a form of "bargaining" on the Kubler-Ross transect of grief.
     Traveling around the US, it's easy to understand our failure to come to grips with reality. The nation is fully outfitted for extreme car dependency. You go to places like Atlanta and Minneapolis and you understand how deep we're into this. We spent all our collective national treasure -- and quite a bit beyond that in the form of debt -- building the roadway systems and the suburban furnishings for that mode of existence.  We incorporated it into our national identity as the American Way of Life. Now, we don't know what else to do except defend it at all costs, especially by waving the talismanic magic wand of techno-innovation.
     The obvious remedy for the oil-and-car problem would be to live in walkable towns and neighborhoods served by the kind of public transit that people are not ashamed to ride in. But it may be too late for that. We're going to be a much poorer society from now on. We squandered the financial resources for that transition on too many other things. We're stuck with our investments in houses and their commercial accessories, built where they were built, and no Jolly Green Giant is going to pick them up and move them closer together in an artful way that adds up to real towns. A reorganization of American life will occur, but now it will be on much less deliberate terms, a much messier and more destructive operation, a default to the smaller scale by extreme necessity, with a lot of losses along the way. The Deepwater Horizon incident only hastens the process. 
     Anyway, the collapse of suburbia is running neck and neck (and hand-by-hand) with the collapse of capital. Angela Merkel, flicked US Treasury Secretary Timothy Geithner off like a flea over the weekend at the G-20 meeting in Sitges, Spain. Germany doesn't want to hear about bailouts and stimuli anymore. Germany is looking to reinstate something like a "normal" economy based on producing things of value and paying for things when you have the capital to do it. Germany is pulling the plug on the debt-o-rama banking rackets -- at least insofar as these rackets leave Germany holding the bag for a growing list of deadbeat nations. I don't see how the Euro survives. the remarkable appearance of prosperity in places like Greece and Spain turned out to be a combination of borrowed money and all-time-high tourist flows. Both of these "resources" are heading way down. There's a dwindling supply of middle-class candidates for tourism, especially in the US and the UK, and the Europeans have woken up painfully to the recognition that existing debt is unserviceable. National dominos are wobbling left and right, from Hungary to Latvia to Portugal....
     Even the severe steps initiated by Germany may not be enough to keep the lights burning in Europe since the continent has little oil and nat-gas of its own. Europe's experiments with wind power have been valiant (and France's nuclear venture has been daring), but neither of these things will offset the problems associated with peak oil, especially if trouble starts in the Middle East. It was chastening for me to bike around Berlin a week ago and realize that even nations with sturdy cities and good railroads can fall into political chaos. Berlin was a charming place when Hitler arrived on the scene and twelve years later it was a smoldering heap of shattered brick and glass.
     The American Way of Life is not so charming, but its very sprawling character may prevent a political maniac from controlling enough of a base to hold all the states and regions together in a thrall of fascism -- and there are all those firearms to think about. I maintain that the trend is down for centralized power here, in the direction of impotency and decreasing competence at anything. I don't subscribe to the paranoid themes of Big Brother government domination, the surveillance state and related fantasies. It'll be more Home Alone meets Risky Business -- a dangerous place with no adult supervision.
     The New York Times ran a front-page story on Sunday suggesting that maybe there was something to this nutty idea of Americans preparing for trouble in the months and years ahead, paying down debts, putting some food aside, thinking about where to ride out a socio-economic storm. Their attitude was patronizing of course, and where the actual issues of our oil predicament were concerned, the editors went straight to their "go-to-guy" Daniel Yergin and his public relations shop, Cambridge Energy Research Associates, the official PR whore of the oil industry. The Times obviously finds it amusing that some Americans see a collapse on the horizon. The Times is so deep into its own collapse that it doesn't even remember how to cover a story.

]]> Welcome Home To Slum Nation tag:kunstler.com,2010:/blog//1.86 2010-05-31T11:02:02Z 2010-06-05T15:18:59Z James Howard Kunstler
     It's sad to be a citizen of a nation that can't do anything right. While BP was fumbling its "kill shot" into the Deepwater Horizon hole, and the dying pelicans were flopping in the poisoned marshlands, and rumors seeped across the Internet that nothing short of an atom bomb would avail to stop the underwater oil gusher -- not to mention, meanwhile, all the other problems out there, such as the ongoing melt-away of of capital in every corner of the world -- I found myself in Berlin, Germany, touring the city on a rented bicycle (after a 4,500-mil airplane ride, it is true).
     When last I was in Berlin in 1997, the town was still reeling from the shock of reunification. Only a few tentative businesses had started up on the former communist side, and most of the route of the infamous wall remained a yawning, weedy scrape-off zone. Now the repair of the city is well-advanced, though I give very mixed reviews to some of the premier projects.
     Back in '97, my biggest surprise was, holy shit, the place is in color. After almost fifty years of watching Hitler documentaries I'd assumed the city only existed in black-and-white. By extension, of course, I realized that Hitler himself had been in living color, and that's where a really vivid sense of the horror set in. In '97, the scars of World War Two still showed all over the east side, where an acne of bullet holes and artillery craters defaced virtually every older building. They said the communists had been too poor for cosmetic renovation -- or else the Russian overlords took a certain sadistic pride in their wartime handiwork and wanted to keep the hostage denizens of the east cowed with never-ending reminders of their subjugation. A necrotic odor of defeat lingered in the streets there. The west side, meanwhile, was all jaunty with shopping and techno-pop teens and the normal hoopla of a money economy.
     The the Battle of Berlin, fought mainly by the Russians, had left most of the important civic stuff inside the communist zone of the city -- major museums, the opera and symphony, Humboldt University, the Brandenburg gate and the grand avenue called the Unter Den Linden leading off it, the site of the old royal palace, most of the old government buildings (their shells at least), and, of course, the chief souvenirs of Hitlerdom, especially the dreadful bunker of the final days. It was all in pretty shabby shape when I was there in '97. Hitler's bunker, which had proved too sturdy to blow up even with controlled demolitions, was finally just filled with sand by the Russians, and looked like a mere weedy mound in a vacant lot. The spot was apparently deemed too spiritually toxic to do anything with it. The nearby Potsdamer Platz, once Berlin's Times Square, was a vast set of holes in the ground with a bizarre network of primary-colored pipes emanating from them to drain groundwater preceding foundation work. And finally there was Sir Norman Foster's rebuilding of the Reichstag, just then getting underway in a rubble-strewn plain.
     All those projects are about finished. The area around the Brandenburg Gate, once a forlorn encampment of morose ragtag Russians hawking fake amber plastic necklaces, now swarms with tourists. Likewise the Reichstag and its landscaped front and rear courts. The Unter Den Linden is almost too crowded to walk down. And the whole region around the old communist Alexander Platz -- originally designed by the commies to look like a Jetson's shopping mall, minus the shopping of course -- seems to have become the consumer electronics mecca of Europe. Sad to say, those holes in the ground around the Potsdamer Platz grew up to be a set of inglorious glass box towers, each trying to out-do the next in sleek corporate narcissism, while the streets themselves look like something the state of Georgia DOT would come up with -- intersecting six-laners, a demolition derby in a suburban office park.
     When I was there in '97, I was struck by how utterly all remnants of Hitler had been erased. I suppose it was a form of post traumatic stress syndrome. Quite a bit of memory has been recovered since then, and new monuments abound, from the Peter Eisenman-designed Memorial to the Murdered Jews of Europe -- very solemnly eloquent -- to a smaller memorial to Hitler's gay victims in the big park called the Tiergarten. Plaques explaining one Nazi horror after another are now liberally deployed around the old city center, and Herman Goering's Air Force Ministry was left standing as the last example of Third Reich art deco -- a form of extreme stripped down neo-classicism with all femininity removed, no curves, no ornaments. The site of Hitler's bunker is no longer a weed patch, but perhaps appropriately one of the city's rather rare surface parking lots, with a plaque telling the tale and tourist docents pointing out (I swear I heard this) that "...Hitler's bedroom lay about where that white Audi is parked...."
     It seemed to me that, altogether, the German expression of regret appears deeply sincere now and absolutely straightforward, with no side-trips into the realm of excuses or attempted explanations. With the German social mentality now restored to normality -- laughter in the busy streets and all dark thoughts of race vengeance banished -- one was prompted to reflect on just how such a civilized folk could fall into a mass psychosis like Naziism. And by extension, it was hard to evade the question as to how the USA might not lurch into something worse. The Germans were punished pretty severely for losing (and starting!) the First World War. Depression and hyper-inflation drove them to their knees. I daresay, too, that something about industrialization meshed with their ethnic neuroses to very bad effect (though this is a subject that would take a book to lay out). Anyway, it drove them batshit. They followed a madman through the gates of hell and made a smoking ruin of their home place.
     America today is arguably a far less civilized land, and even more neurotic, than the Germany of the 1930s. We live in places so extreme in ugliness, squalor, and dysfunction that just going to the store leaves a sentient American reeling in angst and anomie. Our popular culture would embarrass a race of hebephrenics. We think that neck tattoos are cool. A lot of our pop music is overtly homicidal. Our richest citizens have managed to define a new banality of evil. Our middle classes are subject to humiliations so baroque that sadomasochism even fails to encompass the finer points. And we don't even need help from other nations to run our own economic affairs into the ground -- we're digging our national grave with a kind of antic glee, complete with all the lurid stagecraft that Las Vegas, Hollywood, and Madison Avenue can muster.
     Biking around Berlin -- especially the non-tourist neighborhoods, and the beautiful, shaded paths beside the little river Spree, where young people sat enjoying the simple tranquility of the waterside on a spring day -- I could only imagine the scene back home at the Indianapolis Speedway (or the dozens of Nascar ovals around Dixie) -- the frantic idiocy of America-on-wheels, the fat slobs in beer can hats grilling cheez dogs in the parking lots, letting loose their asinine rebel yells as though this made men of them, and above it all the deafening noise of a people literally driving themselves to death and madness.
     Meanwhile, the evil plume of crude oil in the Gulf of Mexico grows ever-larger by the hour and every living thing in that quarter of the sea faces slow death. That's our memorial-in-the-making to ourselves. I feel sorry for Barack Obama in this situation. Dmitry Orlov is right: this is our Chernobyl. This is the cherry-on-top of all our feckless foolishness. Memorial Day this year is the welcome mat to our hard time. We'll be lucky if some honorable as-yet-unknown colonel in the wadis of Afghanistan comes home to overthrow president Glenn Beck, or whichever lethal moron ends up in power after 2012. We'll be a very different America then, with no going back.
     Coming home to the USA was like re-entering a special kind of mega-slum where nothing that can be screwed up is left un-screwed up. My Delta flight was two hours late, of course. Amusingly, the explanation given was that new runways were under construction at JFK airport -- like, Delta just discovered it that morning, or somehow they've been unable to work that into their scheduling process after months and months. The things we tell ourselves are so absurd that even the late George Carlin couldn't make them up. We stopped on the tarmac at JFK because they didn't have a gate for us.  We passengers were put onto some kind of people-mover contraption. The engine failed so we we sat in this steel box in 90-degree heat until they fetched another one. Then there was the journey through a set of dim tunnels to customs, and another journey up a steep ramp shared by motor vehicles and their exhalations to the terminal exit. Welcome home to Slum Nation.

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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.

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]]> Out of Darkness tag:kunstler.com,2010:/blog//1.85 2010-05-24T10:55:59Z 2010-05-24T17:57:31Z James Howard Kunstler
     If the Devil created an anti-city, a place where people would feel least human, Atlanta would surely be that place -- despite the prayerful babble of tongues emanating from the evangelical roller rinks at every freeway off-ramp. One might think: Los Angeles, but that city at least came up with the amenity of valet parking, mostly lacking in Atlanta, where the suffocating heat slows the journey of blood from heart to brain.
     My homeys, the New Urbanists, held their annual meeting at the "downtown" Hilton there this past week -- a most mysterious selection, perhaps due to an x-treme discount on room rates in a time of austerity. The New Urbanists first came together about twenty years ago as a campaign to reform the tragic fiasco of suburbia. By taking this on they were often labeled as enemies of the American Way Of Life and Christian Decency, but they are a valiant band. I'd guess that architects composed about two-thirds of the org and the rest included developers, planning officials, a few college professors and journalists. They were all out of the mainstream, especially of architecture, whose stock-in-trade had become the emperors new clothes.
     The basic idea behind the New Urbanism was that the quality and character of the places where we spend our lives matters, and that the surrender of the entire American landscape to Happy Motoring was an historic aberration that had to be corrected if the USA was going to continue as a viable project. Among other things, they noticed that if people live in places that aren't worth caring about, sooner or later they end up being a nation not worth defending -- and this is on top of the daily personal punishments suffered by hundreds of millions of people dwelling in a geography of nowhere.
     At the time they first got going, the idea of peak oil barely existed outside a small circle of geologists, so the battles were fought mostly on other grounds. They were up against a lot. The collective American identity was invested in the idea of the suburban utopia, and the sheer dollar investments in the infrastructure of it all -- everything from the interstate highways to the housing subdivisions to the strip malls -- was so massive that nobody wanted to think about changing it. What's more, a massive system had evolved for delivering what came to be labeled as suburban sprawl, especially the laws that regulated land-use, so that in most places in the USA it was illegal to build anything else but sprawl.
     The New Urbanists were fiercely opposed, usually for stupid reasons by stupid people, but also by the mandarin architecture establishment, especially in the grad schools, where mysticism supported a set of theological rackets in the service of celebrity cults divorced from the public nature of things that get built. In the local planning boards, the New Urbanists were accused of being communists; in the ivory towers they were accused of being slaves to worn-out traditions -- like walking from home to work. They certainly proved one principle of the human condition: that even the best ideas will generate opposition.
     The New Urbanists had to work within this system. They had to find allies among developers who aspired to create better places, and they had to get under the hood of regulatory system to rewrite the laws in thousands of municipalities. They got a lot of projects built, new neighborhoods and even whole new towns. Many of these places came out beautifully. Some of them were badly compromised in the fight to get them built. Some of them were rip-offs that amounted to little more than the usual suburban schlock with a little window-dressing.
      It's a bitter irony that the most ambitious New Urbanist projects were made possible within the context of the housing bubble economy. For about a decade money seemed to grow on trees. Most of that money went into conventional suburban crapola and a small percentage of it went into New Urbanist projects, but when the bubble burst, it crushed all the players, regardless of the ultimate social value of what they produced.
     I heard a lot of stories during the meeting in Atlanta last week but one really stood out. It was about the money and revealed a lot about what is going on in our banking system these days. A New Urbanist developer had gotten a small project going for a traditional neighborhood. Despite the global financial clusterfuck, the developer was able to meet the payments of his commercial loan.  But the FDIC sent bank examiners around America and they told the small regional banks that if they had more than twenty percent of their loans in commercial real estate (CRE) they would be put out of business. The banks were ordered to reduce their loads of CRE by calling in the loans and liquidating the assets. Ironically, the banks only called in their "performing" loans, the ones that were being regularly paid off, because they were ignoring and even concealing the ones that weren't being paid. 
     The developer in question had his loan called in when the FDIC descended on his bank. He couldn't pay off the $3 million in one lump, of course. The FDIC's agents are going to seize and sell off his project if he can't get it refinanced in short order.  He can't get it refinanced because there is now such a shortage of capital in the banking system that no one can get a loan for anything. Also, since it is now well-known that the bank failed, the vultures are circling above his project hoping to buy it for a discount, so even the few private investors who have money won't throw him a lifeline. By the way, the FDIC agents told him they are doing this because they now expect that virtually all commercial real estate loans in the USA will fail in the months ahead. Pretty scary story, huh?  And he was one of the good guys.
      I suppose it was a tragic thing that the New Urbanists made themselves hostage to the same banking system that was behind suburban sprawl. Apart from the personal stories of misfortune among them, the movement is still alive. In fact, they have emerged the victors in the long contest over how America will build itself, because it is now self-evident that suburban sprawl is an epic failure. Whether Americans like it or not, whether their identity is tied up in the suburban fantasy or not, we are faced with circumstances that now compel us to live differently. 
     Among other things, the most forward-looking leaders in the New Urbanist movement now recognize that we have to reorganize the landscape for local food production, because industrial agriculture will be one of the prime victims of our oil predicament. The successful places in the future will be places that have a meaningful relationship with growing food close to home. The crisis in agriculture is looming right now -- with world grain reserves at their lowest level ever recorded in modern times -- and when it really does hit, the harvestmen of famine and death will be in the front ranks of it.
     This eighteenth Congress of the New Urbanism was held in the shadow of a banking system in extreme crisis and an epic ecological catastrophe brewing in the Gulf of Mexico. The three crisis of capital, energy, and global ecology will now determine what we do, not the polls or the marketing analyses or the whims of "consumers." The great achievement of the New Urbanists was not the projects they built during the final orgasm of the cheap energy orgy. It was the knowledge they retrieved from the dumpster of history. We really do know where to go from here.  Whether the people of the USA have the will to take themselves there now is another issue.
     Also in the background of this Congress was the bizarre organism of Atlanta, which represents in so many ways the behavior that can't continue in this country if we are going to remain civilized. A prankish destiny put us in the worst place at the worst time and the next time we meet America is going to be a different country.
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.

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]]> Something Happened tag:kunstler.com,2010:/blog//1.84 2010-05-17T10:42:33Z 2010-05-17T13:21:42Z James Howard Kunstler
     Everybody in the world is broke, except for maybe Lloyd Blankfein, and he may not end up broke so much as broken -- by a political meat-grinder that is revving up to turn the world's woes and swindles into a new kind of Long Emergency sausage, to be distributed among the roiling, angry masses as a synthetic substitute for nutriment. Call it a synthetic non-collateralized political obligation.
     Something snapped in the world last week and a lot of people around the world sensed it -- especially in the organs of news and opinion -- but this ominous twang was not very clearly identified.  It was, in fact, the sound of the financial becoming political. The macro-swindle of a worldwide Ponzi orgy now stands revealed and the vacuum left in its place is about to suck everything familiar into it -- standards-of-living, hopes, dreams, not to mention lives. The political action will be a desperate scramble to determine who and what is able to escape getting sucked into this black hole of annihilation. It's very suddenly shaping up to become an epic in human history.
     Meanwhile, a giant oil blob lies quivering in deep waters off the Gulf coast, like some awful amorphous Moby Dick full of malice waiting to sink Pequod America -- or at least the economies of five states. A few months from now, the BP corporation will wonder why it didn't go into something safe and predictable like the pants business instead of oil exploration. They will surely question the viability of conducting future business anywhere near the USA, and the USA will enter a wilderness of soul-searching about the drill-baby-drill strategy that only a few scant weeks ago seemed to be a settled matter. Tough to have your future hoped-for energy supplies evaporate at the same time that your hopes for future prosperity get sucked into a black hole.
     I've maintained for a long time that the folks down Dixie way are the the most dangerously crazy people in America and the Deepwater Horizon oil blob is not going to improve their outlook when it slops over their beaches and bayous. They'll blame Obama for it by syllogism. Anyway, they are only marginally more crazy than the rest of the folks in the USA. Those folks are warming up for an election season that is going to send a horde of exterminating angels into the halls of congress and the governor's mansions, and before too long those merchants of retribution are going to appoint their inquisitors. It's going to be a heckuva spectacle. In retrospect, Mary Shapiro's SEC will look like the Council of Trent. You can be sure that if ten gallons of gasoline remain to be found in America a few years from now, they will power the last GMC Sierra to drag the captains of Wall Street through the sawgrass prairies of Collier County, Florida.
     What has gone on in Europe the past few weeks is nothing more complicated than a waking-up to how broke they are. We're not quite there yet on this side of the Atlantic. They fired one last bazooka of wishfulness at the enveloping monster of debt and the monster laughed at them, and now they are standing in the windows of palatial edifice of the Euro Union waiting to see who will jump first. Here in the USA, we're still dazed and confused. What for a long time had looked like a game of musical chairs is morphing into something more like a national Chinese fire drill, a pointless running around in circles in the hope that sheer motion will be an adequate substitute for conscious action. In any case, both Europe and the USA are out of bazooka ammo now. Nobody can bail out so much as another lemonade stand. From here on governments really start to crumble.
     As in any time of severe turmoil, all political bets are off. There are insinuations in the press, for instance, that the communists will rise up in Greece and overthrow the elected government. That's rich, since communism was flushed down the human race's credibility toilet twenty years ago. The Greek opposition may even call themselves communists, but what on earth could they mean by that?  There are no "means of production" left in a country whose economy consists solely of cab-drivers, bellboys, and waiters. There's no "wealth" to redistribute, only the pain of collective economic loss when the tourists stop landing.
     Elsewhere in Europe, each national house is being outfitted with a procrustean bed of austerity. The various publics are not going to like lying in them. They ain't no Tempurpedics. History being the shape-shifting demon that it is, I imagine that this time around the Brits will be the ones who elect Nazis --or something like them -- while the still-chastened Germans find themselves in the odd position of becoming Europe's moral guardian -- its sole-surviving "good parent" figure, striving to maintain some residue of collective goodwill in Europe's once-ritzy gated community. Great historical figures always arise from unexpected places -- Corsica, Kentucky. Maybe some great unifying leader even now warms a seat in a Norwegian law school.
     God knows what the Europeans will make of the helter-skelter scene playing out here in the States. Perhaps some species of schadenfreude tinged with regret for the missing stream of tourists. My own guess is that there may not even be a president of the US after Mr. Obama. Rather, events will get so gnarly and disordered so fast that somebody like General Patraeus will have to step in for a while and keep the reincarnation of the Ku Klux Klan from trying to murder every non-Cracker from sea to shining sea. Of course, once that happens, we probably don't go back. It's not Imperial Rome (release 2.0) after that, either, because even the mighty US military will be too strapped for a means of support to continue operating.  Instead, it's the devolution of the US into functionally autonomous regions and states -- and even that scale of governance may be too great for the stringent economic realities of the years ahead.
     There remains, of course, the very great question of what the rest of people of the world -- the non-Western world -- do as the West spins into insolvency and tribulation. The Islamists will do everything possible to make things worse, and there's a lot they can do, from restricting their oil exports (maybe cutting them off altogether) to provoking the immigrant populations of Europe into political violence to possibly setting a few nukes off in their enemy's front yard.
     The Chinese will affect to referee the collapse of the West, but soon they'll be sucked into their own implosion of population overshoot and resource scarcity. India you can forget about out -- zero oil. Russia gets to kick back in glorious isolation and enjoy the methane fumes of the melting tundra. South America will heed the wise words of a forgotten 18th Century Viceroy of Mexico who explained his method of administration thusly: "Do little, and do it slowly!"
     The Long Emergency has now up-shifted to second gear. Wouldn't you know it, I have to go to Europe at the end of the month. And I'm supposed to get paid in Euros -- oh, snap! This week I'll be cavorting with my homeys, the Congress for the New Urbanism, at their annual jamboree in Atlanta (ugh!) and will be reporting on the doings there in this space next Monday.
  ________________
A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.

     
]]> And Chicks for Free? tag:kunstler.com,2010:/blog//1.83 2010-05-10T10:00:40Z 2010-05-10T13:24:05Z James Howard Kunstler
     The European Union came up with a trillion dollar bail-out for itself at the dawn's early light. Plus, each member gets a Latvian prostitute, gratis. The Germans will love this. It already goosed the Euro back above $1.30 -- just when they hoped a lower Euro would help them move a few more export goods off the shelves. I expect that Mrs Merkel is already catching an earful. A few hours earlier, her coalition of Christian Democrats and free Democrats got their joint ass kicked in a North Rhine - Westphalia local election....
     I mention these events reluctantly, knowing how averse we Americans are to news out of Old Europe, that boring backwater of sclerotic cafe lay-abouts, socialistic train service, and less-than man-sized portions of things that real men don't eat anyway.
     The question begging itself here, of course, is how Europe intends to come up with roughly a trillion in bail-out money. Sell Portugal to China? Cut Greece up into bait and catch whatever fish are left in the Mediterranean Sea? Frankly, I'm stumped. Talk about robbing Peter to pay Paul.... All the European nations are already so hopelessly enmeshed in chains of unfulfillable counter-party obligations that the bail-out might as well be a game of musical chairs played in the Large Hadron Particle Collider, set to the tunes of Karlheinz Stockhausen. The European bail-out is, in fact, an absurdity. I predict that the effect of the announcement will last all of one trading day on the stock markets.
      The truth is that the imbalances of global finance are so grotesque now that the whole money system is hanging together with nothing but spit and prayer. I get rafts of e-letters every week warning of a supposedly-coming global currency -- a companion idea to the notion of a one-world government. Both are idiotic fantasies. Events are taking the nations of the world in the other direction: towards break-up, down-sizing, down-scaling. Likewise, if major currencies such as the Euro and the dollar blow up, they're much more likely to be replaced by more local bank-notes backed by gold than by some hypothetical Amero or Globo-buck.
     At seven a.m. Eastern time, the European stock markets were zooming, and Bloomberg even carried a wonderfully mysterious headline saying Greek Bonds Rally. That was especially rich -- like, who in the fuck is going to load up on Greek bonds now? Is there a pension fund somewhere run by such dimwits that they would sell their positions in the Goldman Sachs issued Timberwolf CDO in order to get in on the new bargain in ten-year Greek sovereigns? I hope those pensioners are prepared to spend what remains of their lives selling chestnuts from pushcarts on the streets of Oslo, because they sure won't be clipping coupons in front of any World Cup telecast.
     As if life in the USA wasn't surreal enough last week. Once upon a time, the stock market was a  place where people with capital went to look for productive activity to invest in -- say, a company devoted to making soap flakes, an underpants factory. Now the market is a robot combat arena where algorithms battle for supremacy of the feedback loops.  Thursday's still-baffling fifteen-minute "crash" was an excellent demonstration of the diminishing returns of technology. People too-clever-by-half, aided greatly by computers, have now gamed the investment indexes so successfully that these markets no longer have anything to do with investment -- they're just about shaving micro-points of profit at high volumes by micro-milliseconds off mere differentials in... math! This is truly quant heaven, a place where only numbers matter and there is no correspondence to anything in the real world. In other words, last Thursday's bizarre action was a warning that the American stock markets have flown up their own aggregate ass.
     These algo-robots may be elegantly complex, but they are really no more than triggering mechanisms, and Thursday's -- whatever it was -- glitch, let's say, ought to be regarded as a mere preview of coming attractions for a full-on feature clusterfuck in which the putative contents of these stock markets get sucked into a black hole so vast that the trading desks will have to find a way to arbitrage infinity to ever again catch a glimpse of America's receding wealth. And it could all happen in a finger-snap.
      Why would anybody not heavily medicated stay invested in the stock markets? Well, the answer must be that they're not. The few still hanging around are the institutionals with nowhere else to go, the pitiful pension funds or the pathetic college endowment funds desperately chasing "yield" in a world where once-sturdier instruments yield zirp-o -- and these poor chumps are getting played and played out. The only other remaining marketeers are -- you guessed it -- the too-big-to-fail banks, the Federal Reserve, and possibly the US Treasury itself playing front-running games and algo stunts and black box buy-ups, and carry-trade rackets, and -- let's not forget -- outright swindles.
      We tend to forget that all this hugger-mugger once had a relation to real economies. The basic truth about real economies -- at least the industrial-strength ones -- is that they cannot be successfully managed on the basis of revolving debt in the context of no growth -- and no growth is exactly the bottom line of the peak oil story so revolving debt is finished for now. Speaking of oil, the Deepwater Horizon disaster (still ongoing) has gotten so boring to the editors of The New York Times that further news about it has been banished from the front page of the paper. Too depressing, I guess.
     In the meantime, though, rest assured that whatever else is going on out there, credit default swaps never sleep.
     ________________
A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.
      


      
]]> Worse Than 1789? tag:kunstler.com,2010:/blog//1.82 2010-05-02T14:46:28Z 2010-05-02T17:49:58Z James Howard Kunstler
     Senator Levin pretty much had Goldman Sach's Lloyd Blankfein dead in a casket with that now-notorious email from GS's head of sales and trading, Tom Montag, describing one of their billion-dollar investment "products" as "one shitty deal."  Levin seemed to delight in crossing the boundary into the realm of the unspeakable, knowing that even the so-called "family" newspapers and cable TV networks would have to report it. And just to make sure nobody missed the point, the senator repeated that phrase at least twenty times before the day was over. It was like the climactic scene in that old Hammer Films classic, The Horror of Dracula, where Professor Van Helsing moves from coffin to coffin pounding stakes through the hearts of Drac and all his fellow bloodsuckers.
     It's hardly the climax of our story, though.  Ours has barely started. It seems to me lately that the crack-up we've entered is liable to play out more gruesomely for our privileged elites than the orgy of bloodletting that attended the French Revolution. That historical moment was a sharp transition between old, settled social relations and the new political realities of imminent industrialization and a rising middle class. The elites in charge of things to that moment, an ossified aristocracy, responded to rising discontent with utter feckless stupidity. To make matters worse, a great many of them were hunkered down in the fantasy-land Royal Palace of Versailles, enjoying what was for practical purposes a non-stop mega house party. They must have thought they were safe twelve miles outside Paris.
     The French Revolution actually got off to a better start than it is remembered for. A progressive opposition put together a new legislature, the National Assembly. They undertook the writing of a constitution. But it all fell apart rather quickly since the dim-witted King and his cohorts didn't really get into that old changing times spirit and their lack of cooperation -- not to mention their decadence -- provoked the more violent factions of the common people to form that kraken of politics, the mob. What a goddamned mess it turned into -- a revolving cast of mob masters, each worse than the last, whipping up the crowds to ever more horrible enormities of human vivisection -- a political process that had gone hopelessly out of control. Despite the agile precedent of their friend, the new USA, quickly resolving its own rebellion into a functioning government of law, France opted for a bloody clusterfuck -- which went on for eight more years.
     The France of 1789 and the USA of today have a few important elements in common: a striking inability to sort out any national problems, an arrogant, depraved ruling elite resistant to reform, and an intellectual underclass motivated by blind fury. Some signal differences: most of our even theoretically best-intentioned "leaders" -- i.e. elected officials, business, education, and media figures -- are unable to articulate the problems we face, which go way beyond the mere distribution of political power or even wealth. (In fact much of the so-called Left, especially the faculty intellectuals, are preoccupied with esoteric sideshows around wealth, power, and the ridiculous "politics" of gender.)  Paul Krugman and David Brooks have no more of a clue about the implications of Peak Oil than Rush Limbaugh and Sarah Palin.
     The resounding message of Senator Levin's hearings on Goldman Sachs last week is that Wall Street is a shitty deal for America. Okay, now everybody knows it. Nobody has an excuse for not knowing it. The machinations ongoing over a financial reform bill seem to be leading to a rather feeble outcome. The only people who are excited by it are -- surprise! -- a bunch of economists, who will soon be relegated to the dumpster of discredited professions along with necromancers, alchemists, and magnetic mesmerists. My guess is that something lame will pass, it will be instantly denounced as yet another fraud, and then the next move is probably the stock market's. A return of volume will signal a return of cratering equities as all the indexes give up their hallucinated gains of the past year, and all the pension funds and college endowments and banks who flocked there in the desperate search for yield will find that they were hosed.
     By August, it's possible that the entire country except for the editorial board of the New York Times will be members in good standing of the Tea party, and it will have split into a dozen warring factions. By then, too many other destabilizing events will be in motion. The hangover of the British election will reveal the fatal insolvency of the UK, torpedoing the pound -- a huge event that would certainly trigger a cascading fiasco of credit default swap obligations. I don't see how the global financial system emerges from that in any form recognizable to someone watching the scene in the first week of May, 2010. In the background of all this, something wicked this way comes in the matter of oil prices and availability. The eco-disaster underway from the Deepwater Horizon oil spill is looking every hour more like an event horizon that will rock the whole industry and, with it, the developed world. At the moment, oil is over $86 a barrel (and gasoline over $3 for regular at the pumps).
     I continue to wonder how it will all go down this summer in the Hamptons where, like Versailles in 1789, the elite mega-wealthy of today cavort shamelessly in a semi-private fantasy-land of status vamping for the Vanity Fair shutterbugs. The Hamptons are not defensible -- unless you count privet hedge as an effective fortification. Any bloody-minded gang of unemployed, grievance-maddened mudlarks can creepy-crawl down the Sunrise Highway to Gin Lane with firearms bought at the WalMart (and modified to full-automatic in the garage).  What if hundreds -- thousands! -- of them get the same idea? Louis XVI and his homeys probably never thought the mobs would scale the ha-has of his fabulous estate, either.
      ________________
A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.

]]> A Still Moment tag:kunstler.com,2010:/blog//1.81 2010-04-25T17:53:41Z 2010-04-25T22:44:02Z James Howard Kunstler
     George W. Bush was onto something in the fall of 2008 when he remarked apropos of the Lehman collapse: "...this sucker could go down."
     It's my serene conviction, by the way, that this sucker actually is going down, right now, even as I clatter away at the keys -- perhaps in slow motion, so that not many other bystanders have noticed yet, and the few who have noticed are mostly too crosseyed with nausea to speak.
     It's perhaps useful to define even what we mean when we say "this sucker." Everybody knows what a sucker is, of course -- say, a Midwestern public employees' union pension fund snookered into buying a fat slice of equity tranche in a Goldman Sachs-engineered CDO. But "this sucker" is something else: a rather large cargo of commercial relations, entailed obligations, hopes, expectations, habits of daily life -- indeed millions of whole lives -- loaded onto the rather creaky vessel we call modern civilization. "This sucker" was such an apt term coming from someone whose understanding of civilization was like unto that of a boy who found a PlayStation under the Christmas tree.
    It's also perhaps useful to define what we mean by "going down." To my mind it means an awful lot of money disappears and nobody can pay for anything and an awful of things that have kept going on promises to pay and to get paid will stop keeping going. I don't think that the idea of money disappears -- that is, paper certificates representing claims on future work -- but there will be a lot less of it to go around.  Eventually the idea of money could go, too, at least in its current form as Federal Reserve notes. But mostly for some years it will just be a lot of people, companies, and governments who are broke.
     "Going down" will mean a society with no money and an infrastructure for daily life that requires gobs of money to run, and a populace too dazed, confused, and inflamed to do anything useful in the way of organizing new infrastructures for daily life for their new circumstances. In retrospect, the Great Depression of the 1930s will look like "The Philadelphia Story" compared to what we wake up to ten years from now.
     President Obama's speech at Cooper Union last week was a remarkable performance. It managed to appear forceful and serious without containing any really serious or forceful proposals to discipline a banking system that is running a hostage-and-ransom racket on civilization. If this is finally what the Obama Experience is all about than his detractors have been right all along: he is a tool. Finance reform aside, there are still plenty of laws left on the statute books that could be applied to the frauds and rackets that ran absolutely amok on Wall Street the past few years. I would still like to know why buying CDS "insurance" against your own issue of bonds deliberately engineered to default is NOT a form of insider trading, to put it as simply as possible.
     The SEC action against Goldman Sachs is likely to open a Pandora's box of troubles for that company, and perhaps all of the Too Big To Fail banks. But even so, I believe this sucker is going down before 99.9 percent of it is sorted out. Anyway, there was a lot about the SEC action that seemed curious, to put it mildly, from the timing of it, to the brevity of the document, to the strange fact that it emerged at all from an agency whose principal activity the past few years has been the viewing of internet porn, and which has otherwise behaved so indifferently in the face of numberless offenses to common decency, not to mention the public interest, that it might as well have been staffed by a thousand head of Holstein cows rather than licensed attorneys and graduates of accredited colleges.
     This sucker is going down because the train of bankruptcies underway has a remorseless self-reinforcing power to provoke more and more bankruptcies at every stop along the line as every promise to pay is welshed on. The mortgages will not be paid and securities will not pay their investors and the banks will choke on the bad paper promises in their vaults and the pension funds will not pay their beneficiaries and the states and counties and municipalities will go broke and not pay their employees and creditors, and the federal government will not be able to "print" new money in sufficient quantities fast enough to compensate for all the money not being paid up-and-down the line... and one morning we will wake up and discover that all those promises to pay were sham promises based on no productive activity whatsoever... and that will be a sad day. Perhaps the Dow Jones Industrial Average will hit 35,000 on that day.
     Nothing can stop this chain of bankruptcy. It's already baked in the cake. There is probably some wish on the part of those in charge, like Mr. Obama, to try everything possible to postpone it.  And there is likewise surely a huge effort underway in the banking sector right now to cream off as much cash as possible so that when this sucker does go down they will bethink themselves better positioned to survive the consequences.
    Personally, I believe that the damage was mostly done during the tenure of poor dim George W. Bush, and his predecessor Bill Clinton. I suspect that Mr. Obama learned at the height of 2008 election campaign -- during those days of the Lehman collapse and the TARP -- just how completely the government -- and the people of the USA -- were in fact hostage to the banking system, and that it has been his unfortunate role to pretend that there is some other fate to bargain for besides this sucker going down. It is probably why he continues to smoke so much. He must be lighting one Marlboro off the tip of another, one after another, in whatever inner sanctum he repairs to when the midnight chimes toll around the White House.  It's sad to think of this graceful, still rather young man going down in history as the chump-of-the-century, a reincarnation of Herbert Hoover on steroids, with sugar on top.
     Animosities brewing as they are among the white trash elements of the country, I just hope this sucker doesn't resolve into an ugly bout of attempted ethnic cleansing. Certainly Obama's racial make-up has inspired a revival of the Ku Klux spirit around the Nascar ovals. I'm sincerely worried that the misdeeds of people name Blankfein, Rubin, and Madoff could provoke a red-white-and-blue pogrom.
     The big mystery for the moment is how come a few good men of stature in important places have not stepped forward to say the right thing or do the right deed. How come no US congressperson challenged the knavish behavior of Republicans who condone malicious idiocy that they know to be false like the so-called "birther" activity. How come no putative "progressive" has called the Democrats on their disingenuous failure to call illegal immigrants what they are. How come no state attorney general has filed charges against TBTF bank misconduct even if the US attorney general lies in state over at the US DOJ. How come no political figure of any stripe has called for the resignation of Summers, Rubin, Gensler and other Goldman Sachs "sleepers" infesting high levels of government. How come Dylan Ratigan is the only visible figure in any major newsroom willing to identify the precise nature of the meta-swindle.
     When this sucker goes down, our primary task will be reorganizing American life on a much more local and de-complexified basis. It's a very big assignment and especially daunting against a possible background of political disorder. The losses will be epic and the changes severe, but it doesn't have to mean the end of recognizably American culture. There will be very little money around, and it may end up being a certificate backed by gold issued by a bank other than the Federal Reserve. Or maybe we'll just be swapping stuff for the makings of dinner.
     So many forces are roiling around 'out there' now that it's hard to believe that the authorities in government and banking can keep the illusion of normality going a whole lot longer. The possible litigation against Goldman Sachs-style frauds by a thousand aggrieved victims is enough to paralyze the system. Meanwhile, trillions in credit default swaps are ticking away like dirty bombs. Greece is going down, with Portugal, Spain, Ireland, and the UK standing by to go next. Nobody can pay their bills. Before long, the old folks won't get their checks. Then the poor folks. Lately, I wonder if there will even be an election six months from now.
  
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A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.

]]> Where's Rico? tag:kunstler.com,2010:/blog//1.80 2010-04-19T10:36:28Z 2010-04-19T12:37:00Z James Howard Kunstler
     It's interesting and instructive to read The New York Times' lead story this morning, Top Goldman Leaders Said to Have Overseen Mortgage Unit. While it pretends to report all the particulars of the huge scandal growing out of Friday's SEC action against Goldman Sachs, the story really comes off as an attempt to create an alibi for the so-called "bank." It pretends that some kind of an intellectual struggle was going on among GS executives as to whether the housing market was doing just fine or poised to tank -- therefore muddling the company's intent in setting up investment deals based on sketchy mortgages designed to blow up so that a favored big customer, John Paulson, could collect on the deal insurance known as credit default swaps.
     The truth is that anyone with half a brain could see the securitized mortgage fiasco coming from ten-thousand miles away. I said as much in Chapter Six ("Running on Fumes: the Hallucinated Economy") of my book The Long Emergency, which was published in 2005 but written well before that in 2002-4. And I had had no work experience whatsoever in banking generally or Wall Street investment banking in particular.
     One week before the SEC action against GS, the Pro Publica website published a story about virtually the same kind of mischief being run out of the Chicago-based hedge fund Magnetar led by a clever young fellow named Alec Litowitz. Like Goldman Sachs, Magnetar deliberately constructed investments (bundles of bundled mortgage-backed securities called collateralized debt obligations) that were certain to fail so that Magnetar could collect on credit default swaps that amounted to a bet against products they themselves had participated in creating. There was no question that Litowitz and his employees did this absolutely on purpose. Nor is there any question that they aggressively sold positions in these CDOs to credulous investors like Thrivent Financial for Lutherans and others.
     The question that now begs to be answered is: why is this activity not being investigated and prosecuted under the federal RICO statutes against racketeering? The Racketeer Influenced and Corrupt Organizations Act was designed to punish exactly this kind of behavior, whether the defendant's name ended in a vowel or not. How is it not a racket to deliberately and systematically construct investments designed to fail so you can collect what amounts to insurance against them -- and then to sell those financial instruments to customers without telling them that these investments were engineered to blow up? At the very least it amounts to a failure to disclose material information, which is the basis for distinguishing illegality. More to the point, it almost certainly amounts to prosecutable criminal fraud and insider trading.
     Dylan Ratigan at MSNBC asked pretty much this question on Friday when interviewing Connecticut attorney general Richard Blumenthal (because the AIG company, headquartered in his state, sold gobs of credit default swaps to Goldman Sachs for dodgy CDOs, leading to a giant government bailout and incidental huge payoffs to Goldman Sachs). Blumenthal's answer was lame, to put it mildly -- that recent federal rules tied his hands, he claimed. He could have at least publicly protested his hand-tying and applied pressure to the US Department of Justice to enforce the anti-racketeering law.
     So where is the DOJ's criminal division in all this?  The Goldman Sachs racket has been publicly known, in one form or another, for several years. I wrote in this space several times at least as far back as 2007 that Goldman was essentially shorting it's own issued securities, and I'm neither a lawyer or a finance professional. Anyone could see this from just reading the news. Magnetar's activity was so notorious that the very business of engineering dodgy CDO investments to collect insurance on their failure became known throughout the industry as "the Magnetar Play."
     The feigned cluelessness among some the highest-profile figures in these rackets is something to behold. For instance Citibank was among the companies that helped Magnetar put together their CDOs-designed-to-fail. Citi's chairman at the time, former US Treasury Secretary Robert Rubin, testifying before the new Financial Crisis Inquiry Commission said, "Almost all of us, including me, who were involved in the financial system -- that is to say financial firms, regulators, rating agencies, analysts and commentators -- missed the powerful combination of factors that led to this crisis and the serious possibility of a massive crisis." Bank of America's CEO, Brian Moynihan, told a congressional hearing, "No one involved in the housing system -- lenders, rating agencies, investors, insurers, consumers, regulators, and policy-makers -- foresaw a dramatic and rapid depreciation in home prices" [and therefore in investment instruments based on mortgages].
     Either they lie or they are profoundly stupid and incompetent. If the former, then they might be induced to spend some time talking to federal prosecutors; if the latter then the US financial system is too hopeless to survive and we will all soon be bartering hand tools and designer shoes for food. Evidence of the latter is ample, for instance, in Citigroup's loss of 70 percent share value during Robert Rubin's chairmanship -- for which, in the crash year of 2008 alone, he was paid $17 million plus $33 million in stock options.
     The Goldman Sachs SEC action and the related Magnetar story seems to be a pretty big deal and appear to be dragging public opinion to a crossroads where we acknowledge the deep structural corruption of the financial system or watch the legitimacy of both banking and government dissolve. At least, it throws gouts of gasoline on the political fires lit by Tea Partiers and even more extreme political factions. I don't see how President Obama can keep Robert Rubin at his elbow or the hosts of other Goldman Sachs alumni in their federal jobs. The whole episode is disgusting in the purest sense of the word. If Obama doesn't shake these people loose, and if he doesn't pick up the phone and direct his attorney general to execute the laws -- including the RICO law -- then all the moonbeams issuing from his renowned smile will not avail to keep him in office, or keep the financial underpinning of the USA from collapse.
 ________________
A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press. The title is The Witch of Hebron.

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