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Forget about “Recovery”

      At the risk of confirming my critics’ dumbest charge — that I am a “doomer” — the mandate of clarity requires me to ask:
to what state of affairs do we expect to recover? If the answer is a
return to an economy based on building ever more suburban sprawl, on
credit card over-spending, on routine securitized debt shenanigans in
banking, and on consistently lying to ourselves about what reality
demands of us, then we are a mortally deluded nation. We’re done with
that, we’re beyond that now, we’ve crossed the frontier and left that
all behind, and we’d better get our heads straight about it.
      I maintain that there are countless constructive tasks waiting to
occupy us on a long national “to do” list for rebuilding a national
economy, but they are way different than the ones currently
preoccupying government and the mainstream media. The Obama White
House, Congress, and The New York Times
are hung up on exercises in futility — “rescuing” banks and insurance
companies that cannot be rescued (because they are hopelessly trapped
in “black hole” credit default swaps contracts), and re-starting a
“consumer” binge that was completely crazy in the first place, based,
as it was, on a something-for-nothing standard-of-living.
     Meanwhile, if the buzz on the blogosphere is a measure of anything
— and I think it is — then a new consensus is forming out there about
where to start doing things differently. Unfortunately after less than
two months in office, President Obama finds himself awkwardly
behind-the-curve on this. It begins with the understanding that a
general bank rescue is hopeless and, going a step further, that the
people who caused the train wreck of “innovative” securities have to be
prosecuted. The public’s collective voice on this is muted but growing.
It has been muted by the general air of blackmail that the banks have
used to enthrall policy and opinion — the “too big to fail” idea — in
effect holding the nation’s future for ransom.
      Last week, New York State Attorney General Andrew Cuomo hauled
Bank of America chief Ken Lewis into his office to explain who,
exactly, received an aggregate several billion dollars in bonuses late
in 2008 after the US Treasury forked over billions of dollars in TARP
money to his bank. That was a good start. Mr. Lewis, being lawyered-up
to the max, had the temerity to reply that answering the question would
compromise his ability to keep talented people in his employ. For that
impertinence alone, Mr. Lewis ought to be dragged over fifteen miles of
broken chardonnay bottles behind a GMC Yukon — but that is not how we
do things in American jurisprudence. To be more realistic, a simple
indictment would be in order, and then Mr. Lewis can answer this
question, and a few others, in the comfort of an air-conditioned
courtroom. Ultimately, that might lead to Mr. Lewis becoming the wife
of a bodybuilder in one of New York State’s houses of correction — a
just outcome that would go far in rejiggering the nation’s expectations
about how people in authority ought to behave. And such an outcome
might lead to the conviction of many other brides-to-be from the Wall
Street debutante pool.
      Now it has come to light, just last week in the wake of AIG’s
latest bail-out, that previous AIG bail-out money to the tune of $50
billion was distributed to a set of banks including Goldman Sachs
(former employer of then Treasury Secretary Hank Paulson and then New
York Federal Reserve Governor Tim Geithner), plus Morgan Stanley,
Merrill Lynch, Mr. Lewis’s Bank of America, and a long list of European
banks with operations in the USA. Since the transactions took place in
New York State, the investigation of these irregularities alone could
solve the unemployment problem here if NY Attorney General Cuomo were
given a free hand in hiring staff to depose everyone involved —
including the hiring of caterers to bring in coffee and meals for
round-the-clock proceedings.
      All of this raises another awkward question:
where is United States Attorney General Eric Holder in this situation?
Surely the federal statutes offer some grounds for inquiring about the
misuse of Treasury funds — and many other issues arising from Wall
Street’s stupendous orgy of misbehavior. What I’m hearing out in the
blogosphere is a growing clamor to call people to account before we are
really able to move on to the massive task-list that awaits us in
rebuilding our economy.
      The bigger question for now is
whether any of these authorities will act effectively before the public
simply goes apeshit and starts burning down Greenwich, Connecticut. The
dangerous shift in public mood is liable to occur with shocking
swiftness, in the manner of “phase change,” where one moment you see a
bewildered bunch of flabby clown-citizens vacuously enraptured by
“American Idol,” and the next moment they are transformed into a
vicious mob hoisting flaming brands to the window treatments of a hedge
funder’s McMansion. The moment of opportunity for avoiding that outcome
is looking sickeningly slim right now.
      Another thing that President Obama can set into motion anytime —
and pull himself back to the head of the curve of leadership — is to
either by executive order or by proposal to congress, shut down the
credit default swap system for a period of time while procedures are
drawn up to place all these dubious contracts in a “clearing” market,
where the holders of them will have to come clean about what they’re
sitting on. The lack of this procedure is allowing zombie banks to hold
the United States hostage for never-ending bail-out ransoms. None of
these banks are going to survive another six months anyway, so the
basic blackmail motif that the whole money system will collapse if
ransoms are not paid is a bluff that has to be called sooner or later
in any case. So Mr. Obama might as well get on with it.
      Once these two matters are dealt with — an earnest start-up of
prosecutions and disabling the credit default swap blackmail racket —
then perhaps a stressed-out and impoverished public might be induced to
not go apeshit and instead get on with the mighty task of rebuilding
our nation along lines that have a plausible future.

My 2008 novel of the post-oil future, World Made By Hand, is available in paperback  at all booksellers.

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About James Howard Kunstler

View all posts by James Howard Kunstler
James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency and the four-book series of World Made By Hand novels, set in a post economic crash American future. His most recent book is Living in the Long Emergency; Global Crisis, the Failure of the Futurists, and the Early Adapters Who Are Showing Us the Way Forward. Jim lives on a homestead in Washington County, New. York, where he tends his garden and communes with his chickens.

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