Ponzi

ZZZZZZZZZZZ….

gc2smFrom the keyboard of James Howard Kunstler
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Freda burning money_1280

 

Originally Published on Clusterfuck Nation  August 8, 2016

 


Wake the fuck up! Today we turn from the sordid dumbshow of Election 2016 to the parlous mysteries of finance and economics behind our sick politics. Most of the commentary in the mainstream special needs news media is based on the incorrect notion that the current disposition of things is sure to continue and therefore all we have to do is manage the familiar dynamics of the operating system in place. For instance, Grand Vizier Paul Krugman in today’s New York Timespimping for the US to issue ever-greater debt to repair US infrastructure. Does it seem like a sound idea? Borrow tons more money to get American running gear back in order so we can return to a growth economy. (There’s even a Trumpian gloss to it.)

Here’s the catch: the “growth economy” of which they chatter is done. You can stick a fork in it. The techno-industrial fantasia is drawing to a close. We are heading into a long term contraction of activity, productivity, and population and the salient question is how disorderly will the long emergency of the journey be to that new disposition of things?

The wish to keep all our rackets running is understandable. They have provided a lot of comfort, convenience, and luxury. But we are no longer in Alexander Hamilton’s world of cornucopian American abundance, just needing to borrow a little from the future to get at the gargantuan riches of a wilderness empire. We’ve been there and done that, and our present-day techno-narcissistic wish to replace all that spent material abundance with a Pokemon Go virtual reality economy is sure to lead to epochal disenchantment.

Borrowing from the future only works when you have some real prospect of paying the future back. The institutions that govern borrowing have been pretending for some time that our debts can be paid back. The untruth of this can be easily traced to the revocation of FASB (the Financial Accounting Standards Board) Rule 157 in 2009, which said that banks no longer had to report the market value of the loans on their books, but rather could make up any old number that made things appear to pencil out. In other words FASB decided that standards were optional. But that is only one cog in the great wheel of fraud that has rotated mercilessly with the seasons since the Fall of 2008.

What we face is discontinuity, the end of old spent dynamics and the beginning of new dynamics. Monetary deflation has been underway for years because that’s what happens when debts can’t be repaid: money vanishes. Now we will encounter the other dimensions of deflation: the contraction of manufacturing, trade, wages, and all the familiar markers of expansion in the waning techno-industrial era. The many dodges and stratagems tried by the supreme central bankers to work around contraction only produce ever greater distortions in markets, currencies, and the distribution of dwindling capital, leading to a grand battle over the table-scraps of history, i.e. the rise of radical politics world-wide, including Islamic Jihadism, and the western response in Trump, LePen, and the nascent Germanic right-wing. These current manifestations may be mild versions of what’s coming.

Nobody in power can come to grips with the reality of our situation. We have to salvage what we can and get smaller, becoming a more modest presence here, or the planet itself is going to hit the delete button on us. It rubs against the current religion of progress, which has replaced the other old cultic practices. The choice now is between time-out or game over, and the debate over these things is absent from the arena.

The aforesaid distortions in markets, currencies, and capital are spinning out in an ever broader, centrifugal gyre, coinciding, as chance would have it, with the most peculiar election in modern times. The incoherence and deceit on both sides is far beyond even the extravagant American norms of dauntless political bullshit. We literally have no idea what we’re doing in this country, or what we’re actually wishing for. The financial structures of everyday life look more fragile than ever. Gravity always wins.

 


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 Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

New U.S. Recession Already Here

From the keyboard of Thomas Lewis
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First published at The Daily Impact  May 14, 2015
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MICROSOFT

 


We hear every day from the bean counters whose jobs require them to play in the Don’t-Worry-Be-Happy Band, whose favorite numbers (by which I mean their favorites, not ours) are “Recovery is Bustin’ Out All Over,” “Happy Days are Here Again,” and “When I am a Rich Man.” The other, independent bean counters are hard to hear amid the blaring brass, but if you pay attention you can hear what they’re yelling: the next recession has already started.

When the federal government reported yesterday on the growth of retail sales last month, there wasn’t any. Growth, that is. April sales overall were flat compared with March, with declines in autos, department stores, electronics & appliances, furniture and food & beverages. The strongest growth was in internet, sporting goods, restaurants & bars, and health store sales. Overall sales increased year to year, but by less than one per cent, the slowest growth since 2008. Wait, wasn’t that the year the last recession hit stride? What a coincidence.

This is hardly the first or only indication that the U.S. economy is in serious trouble. Federal agencies have reported just in the past week or so that consumer confidence is plummeting, and household spending is expected to nosedive. Last month, statistics on the gross domestic product in the first quarter of the year showed consumer spending to be weaker than at any time since World War II, except for the fourth quarter of 2008. Another coincidence.

The GDP report, whose bottom line was a dismayingly tiny growth of 0.2%, included another stunner. During the first quarter, privately held, unsold inventories of stuff increased by  $122 billion. Without the activity generated by putting all that stuff in storage somewhere, the GDP would have been down by 3% and all hell would have broken loose. The question now is, with consumer spending anemic and getting weaker, who is going to buy all that crap?

If American consumers suddenly decide to go shopping, by the end of this year they will have more than 6,000 fewer stores in which to do it. That’s how many store closings have been announced so far, including Radio Shack (1784), Office Depot/OfficeMax/Staples (625), Dollar Tree/Family Dollar (340), Barnes & Noble (223) Walgreen’s (200), Sears (77), see the full list here.

When the economy sputtered in January the apologists said don’t worry, it’s just a blip, lower gas prices will fix everything. When it was worse in February they said don’t worry, it’s the bad weather, spring will come and fix everything (but wait — doesn’t the small print on those guesstimates say “seasonally adjusted?”). When March missed expectations they said don’t you worry, April will blow your socks off. It’s mid-May and everyone’s socks are still on.

Without taking into consideration the collapse of oil fracking, now ongoing; or the frightening flight of money from the bond markets, now ongoing;  or the imminent eruption of the overheated casino stock market, expected any minute; the economy’s fundamentals indicate that recession, at least, has begun. So it’s too late to ask whether we’re going to have one. What we need to ask now is, how bad is it going to be?

Quick — another chorus of “Happy Days.”

 

 


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

 

This Week in Doom Feb. 15, 2015

That-Was-The-Week-That-W-That-Was-The-Week-473964Off the keyboard of Surly1
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640px-South_Sea_Bubble_Cards-Tree

Originally published on the Doomstead Diner on February 16, 2015


“We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”

– Charles Mackay


In  Extraordinary Popular Delusions and the Madness of Crowds published in 1841, Charles Mackay identified a common thread of individual and collective idiocy running through past fads such as alchemy, witchhunts, prophecies, fortune-telling, magnetizers, phrenology, poisoning, the admiration of thieves, the imputation of mystic powers to relics, haunted houses, crusades – and financial bubbles.

Ostensibly Mackay wrote his book with a 19th-century sense of confidence that such superstitions had been consigned to the ashheap of history by intelligence, experience and the habits of mind honed by the enlightenment. He observed that men think in herds and go mad in herds, and “only recover their senses slowly one by one.” For the most part, he has been proven right. Intelligent people typically do not invest faith in obvious superstitions like alchemy, ghosts, fortune-telling, witchcraft or crusades. Unless you count those little adventures in Iraq and Afghanistan. (And Iraq again, as President BHO makes the Klown Kar Kongress an offer they will have trouble refusing.)

Today we sophisticates look down our collective noses at the bubble blowers of the past,  and view those of the Mississippi Company, South Sea Company and  the Tulip mania as aberrations of simpler less sophisticated folk. Today, resistant to superstition, we cling to the rabbit’s foot of denial for man’s responsibility for climate change, and take the knee toward the totem that central banks can relieve an unpayable global debt with more debt.

Mackay writes of a Parisian hunchback who supposedly profited by renting out his hump as a writing desk during the height of the Mississippi Company mania. Lean up against my hump and consider the latest evidences of our surrender to the embrace of comfortable superstitions.


Peak Water?

A sign (in black) that reads “Tap without Water” is seen inside an ice-cream shop at the Pinheiros neighbourhood in Sao Paulo February 10, 2015.

 Climate change is no hypothetical to the residents of São Paulo, Brazil, currently in the grips of an historic 80 year drought.

The reason for the drought is complicated: a mix of climate change, Amazonian deforestation, water mismanagement and Pereira’s theory that the massive expansion of cities like Sao Paulo with very little green spaces left has created a kind of heat island which sucks up moisture. That, Pereira says, actually diverts water from the surrounding countryside where the reservoirs are. He says he fears a future where there will be riots over water.

The Cantaeira reservoir system provides half Sao Paulo’s drinking water. It’s now down to only 6 percent of capacity.

Other regions are also affected, and soaring food prices leave many struggling to adapt. Many report having no water every day from 12 midday to 8 a.m.  Last year, Brazil famously hosted the World Cup, an effort that displaced other priorities, deferring action on what is now an environmental  disaster.

According to one report, Brazilians have already begun to create strategies to deal with shortages.

Brazilians are hoarding water in their apartments, drilling homemade wells and taking other emergency measures to prepare for forced rationing that appears likely and could leave taps dry for up to five days a week because of a drought.

After January rains disappointed, and incentives to cut consumption fell short, São Paulo officials warned their next step could be to shut off customers’ water supply for as many as five days a week – a measure that would likely last until the next rainy season starts in October, if not longer.

Some form of water rationing is almost certainly in the cards for over 40 million people destined to be affected by the water shortages. But not to worry–wealthy Brazilians are installing large storage tanks into their apartment buildings or houses to spare them the worst hardships of rationing.

Consider for a moment the specter of millions of climate refugees moving in search of water. Then consider the likely outcomes when some of the world’s great rivers, nourished by glacier melt for thousands of years, suddenly run dry.


Resource Bubble? 

The recently released study “Planetary Boundaries: Guiding Human Development on a Changing Planet,” quickly garnered a certain amount of online notoriety. Prepared by eighteen scientists from various universities, it soberly announced that human civilization had crossed four of nine environmental boundaries.   It introduces the concept of the “planetary boundary” (PB), a framework that provides a science-based analysis of the risk that humans pose to a liveable earth:

The relatively stable, 11,700-year-long Holocene epoch is the only state of the Earth System (ES) that we know for certain can support contemporary human societies. There is increasing evidence that human activities are affecting ES functioning to a degree that threatens the resilience of the ES—its ability to persist in a Holocene-like state in the face of increasing human pressures and shocks. The PB framework is based on critical processes that regulate ES functioning. By combining improved scientific understanding of ES functioning with the precautionary principle, the PB framework identifies levels of anthropogenic perturbations below which the risk of destabilization of the ES is likely to remain low—a “safe operating space” for global societal development.

Those planetary boundaries are no surprise to readers of this blog: climate change, stratospheric ozone depletion, ocean acidification, biodiversity loss, biogeochemical flows, land-system change, and freshwater use.  Cue the bleating from the denialists.  As well-intentioned as this report is, it is likely to reside in the same drawer, ignored, where similar reports reside.  Find an excellent essay on this theme here.

As sea levels rise, floods have become more common on the base. Photographer’s Mate 1st Class Michael Pendergrass/U.S. Navy

And in a related story, the Pentagon understands what’s coming in terms of climate change even if our elected lawmakers do not. As residents of Norfolk, Contrary and I live at Ground Zero for sealevel rise and land subsidence. I have lived in the same home for 32 years. After 24 years of flood free living, the last eight have seen three instances when flood waters came to my front step.

Those who talk most about climate change — scientists, politicians, environmental activists — tend to frame the discussion in economic and moral terms. But last month, in a dramatic turn, President Obama talked about climate change in an explicitly military context: “The Pentagon says that climate change poses immediate risks to our national security,” he said in his State of the Union address. “We should act like it.”

On one level, this is just shrewd politics, a way of talking about climate change to people who don’t care about extinction rates among reptiles or food prices in eastern Africa. But it’s also a way of boxing in all the deniers in Congress who have blocked climate action — many of whom, it turns out, are big supporters of the military.

The Pentagon is examining its 704 coastal installations and sites in a big study to try to figure out which bases are most at risk. Eventually some tough decisions will have to be made about which ones to close, relocate or protect. Even speculating about the number of possible closures is too hot a topic for anyone in the Pentagon to touch right now.

Just as there are climate-change hot spots, there are also climate-denial hot spots — and Virginia is one of them. The Republican-dominated Virginia General Assembly has been hostile to discussion of climate change — one legislator called sea-level rise “a left-wing term.” Instead, the politically acceptable phrase in Virginia is “recurrent flooding.” 

Right up there with “legitimate rape” as part of the incantation du jour.


Forever Blowing Bubbles…

One of Collapse’s Greatest Hits is the imminent unwinding of the Ponzi scheme of debt foisted upon the peoples of the world by central bankers.  We saw a harbinger in 2007-8, with bank bailouts proffered by Congress over the heads of an insufficiently grateful populace, then later with quantitative easing (QE); and in the euro zone, loan restructurings offered to countries not named Germany at the gunpoint of austerity.  But somehow, planes, trains, and automobiles keep moving, the shelves are restocked, and the paychecks cashed. And we keep whistling in the dark because we all share a stake in the superstition that business-as-usual can go on forever; and  nobody, but nobody wants to address the fact that there is not enough collateral on this planet or the next to pay off global debt.

What do we really know? We know that oil prices have begun to ramp up after a steep dive, not unknown in the history of oil prices.  We know that since our entire business model is based on cheap energy, a fall in its price is likely to have a deflationary effect. Many who write about a coming economic collapse love to talk about the collapse of the U.S. dollar, yet the dollar is strengthening relative to other currencies.

Michael Snyder is one of those who scores these games at home and he says:

Someday the U.S. dollar will essentially be toilet paper.  But that is not in our immediate future.  What is in our immediate future is a “flight to safety” that will push the surging U.S. dollar even higher.

This is what we witnessed in 2008, and this is happening once again right now.

Just look at the chart that I have posted below.  You can see the the U.S. dollar moved upward dramatically relative to other currencies starting in mid-2008.  And toward the end of the chart you can see that the U.S. dollar is now experiencing a similar spike…

Dollar Index 2015

At the moment, almost every major currency in the world is falling relative to the U.S. dollar.

For example, this next chart shows what the euro is doing relative to the dollar.  As you can see, the euro is in the midst of a stunning decline…

Euro U.S. Dollar

Instead of focusing on the U.S. dollar, those that are looking for a harbinger of the coming financial crisis should be watching the euro.  As I discussed yesterday, analysts are telling us that if Greece leaves the eurozone the EUR/USD could fall all the way down to 0.90.  If that happens, the chart above will soon resemble a waterfall.

Will leave it for you to work out what a rising US dollar means for those growing economies all over the world that have borrowed enormous piles of very cheap U.S. dollars, and who now face the prospect of repaying those debts and interest with much more expensive dollars, when their own currencies are crashing.


Quick Takes

The Disease Time Bomb: Flooding the Country with Eradicated Diseases

Over the last year we have seen numerous eradicated diseases come surging back in the United States. From Whooping Cough and the current Measles outbreak, to mystery diseases like EV-D68, which is causing paralysis in young children, The United States seems to be a ticking time bomb of disease.

Warning: author seems to be all to willing to blame these outbreaks on immigrants.


 Empire of Lies

The redoubtable Charles High Smith addresses this week’s central theme:

We are living in an era where a single statement of truth will drive a pin into the global bubble of phantom assets and debts, and the lies spewed to justify those bubbles.

How many nations are blessed with political and financial leaders who routinely state the unvarnished truth in public?

Only two come immediately to mind: Greece and Bhutan.

 

 


Koch Brothers Group Shouted Down By Irate Citizens During Montana Town Hall Meeting

A “Healthcare Town Hall” set up by the Koch brothers’ Americans for Prosperity (AFP) group, in Kalispell, Montana, turned raucous on Thursday night. Americans for Prosperity has been crisscrossing the state of Montana, in an attempt to pressure moderate Republican lawmakers into signing a pledge to block Medicaid expansion. On Thursday, they brought their traveling road show to Kalispell. However, the residents of the small Northwestern Montana town were unpersuaded…

 Not all the news is bad. A defeat for the Koch brothers anywhere is a victory for humanity everywhere.
 

 Here’s what developer scum have in mind for the Grand Canyon:

Developers Confluence Partners want to make a 420-acre attraction out of the east rim, with a plan to put in an Imax theater, retail shops, hotels, an RV park, and a 1.6-mile-long gondola tram that would take riders from the rim of the canyon down 3,500 feet to the valley floor in about 10 minutes. Intentions for the valley floor include construction of a terraced “riverwalk” and a food pavilion.

Native American groups are banding together to battle this absurdity.


The useless agreement which everybody wanted

The Saker on the agreement between France and Germany and Russia regarding Ukraine.


Creeping Lawless Fascism Watch

The video was just released of an elderly grandfather being slammed to the ground so hard by an Alabama police officer that it severed his vertebra and paralyzed the man. As you will see in the video, the police then attempt to force the man to walk and believe he’s resisting arrest when his legs won’t work – not knowing that they broke his neck.

According to AL.comChief Larry Muncey told a small press conference in Madison that he also recommended that Parker be fired for his use of force against a man who committed no crime, did not speak English and could not understand the commands. 

There are no words.


Peak Ignorance Watch

GOP lawmaker calls women “a lesser cut of meat”

South Carolina State Sen. Thomas Corbin

 
A Republican state senator in South Carolina called women “a lesser cut of meat” and suggested that they belonged barefoot and pregnant, the libertarian-leaning blog FITS News reports.

Chauvinist in any context, Corbin’s remarks occurred during a legislative dinner this week to discuss domestic violence legislation. Sources present at the meeting told FITS that Corbin directed his comments at fellow GOP state senator Katrina Shealy, the sole woman in the 46-member chamber.

“I see it only took me two years to get you wearing shoes,” Corbin told Shealy, who won election in 2012. Corbin, the site explains, is said to have previously cracked that women should be “at home baking cookies” or “barefoot and pregnant,” not serving in the state legislature.

Contrary brought this particular rabbit turd to my attention. One might well speculate why he’s so hostile towards women….

Contrary offered this wordless comment:

Good enough for me. And illustrates why the people in South Carolina, home office of American sedition, can’t have nice things. And a reminder of what the madness of crowds can wreak.


banksy 07-flower-thrower-wallpaperSurly1 is an administrator and contributing author to Doomstead Diner. He is the author of numerous rants, articles and spittle-flecked invective on this site, and quit barking and got off the porch long enough to be active in the Occupy movement. He shares a home in Southeastern Virginia with his new bride Contrary in a triumph of hope over experience, and is grateful that he is not yet taking a dirt nap.

The Broken Template

From the keyboard of James Howard Kunstler
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pyramid-scheme
Originally Published on Clusterfuck Nation January 26, 2015

The more detached from reality American culture becomes the more strictly ceremonial leadership gets, as illustrated by the raft of bromides Barack Obama floated past the assembled vassalage of government last week in another grand effort to avoid the necessities of the moment.

Those necessities include freeing a hostage public from the tyrannical clutches of corporate despotism — the evil empire of big boxes, big burgers, big pharma, Big Brother — and the atrocious rackets fostered by them that masquerade as an economy. The template of the life we have known is broken and the pieces within are flying apart, and no amount of wishing or promising can keep them going. If this society is even going to survive, the people have to smash their way out of this template prison, probably against the efforts of the people and organizations now running it merely for their own benefit.

The future is telling us very clearly: get smaller, get finer, get more local, get less complex, get less grandiose, do it now. Do you want to eat food in the years ahead? Better make sure you live in a part of the country where small-scale farming and backyard gardening is possible because the General Mills Agri-Biz GMO Cheerios model will be folding its big tent along with its financing agents in the debt Ponzi banking system.

Do you want to have a personal economic future? Think about what you can do to make yourself useful in a local economy made up of your neighbors. And if you live in one of the thousands of soulless, neighborless suburban wastelands that amount to nothing but big box and big burger plantations, you better get out and find a real town in some other part of the country.

Do you believe that computers and robot factories will define the years to come? Maybe you have failed to notice that the US electric grid is decrepit and in need of at least a $1 trillion upgrade-and-rebuild, which, by the way, is not going to happen. What is all that crap going to run on? America’s disappointment with the broken promises of technology will be so epic that we’ll be lucky not to slide back into a world ruled by superstition and ghosts.

Do you think that $50 oil is going to make the world safe for WalMart, Walt Disney World, and Happy Motoring? In fact, $50 oil is going to crush what is left of the US Oil industry, especially fracking for shale oil and deep water drilling. And guess what — everything else is depleting at about 5 percent a year. The frackers will never again get access to the sort of junk bond financing that allowed them to ramp up their Ponzi demonstration projects in the Bakken and Eagle Ford. And they will never again regain their current level of production — which is the net result of past Ponzi financing, now ending in tears. So, forget “Saudi America” and “energy independence,” unless you mean living in a walkable community near a navigable waterway.

Do you want to be an educated person, that is, someone capable of comprehending reality and functioning within its demands? In the USA, that means you must learn how to speak and write English correctly, especially if you are in a “low performing” ethnic minority group. If you can’t conjugate verbs, you will have a hard time distinguishing the past, the present, and the future in your daily activities. Among other things, you’ll be incapable of showing up on time. And that, of course, is only the beginning. It’s that simple. These abilities used to be the result of an eighth-grade education in the United States. We would be lucky to get back to that high standard, and our knucklehead fantasies about universal access to community college be damned. It’s only a new layer in the current racket that pretends to be education.

That is the current state of the union and a glimpse of the trajectory it’s on, which the inept leaders of our country do not comprehend and cannot communicate.

 

 

***

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 Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

Forecast 2015 — Life in the Breakdown Lane

From the keyboard of James Howard Kunstler
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"Order Out of Chaos" by Anthony Freda

“Order Out of Chaos” by Anthony Freda

Originally Published on Clusterfuck Nation January 4, 2015
All images by Anthony Freda

“Don’t look back — something might be gaining on you,” Satchel Paige famously warned. For connoisseurs of civilizational collapse, 2014 was merely annoying, a continued pile-up of over-investments in complexity with mounting diminishing returns, metastasizing fragility, and no satisfying resolution. So we enter 2015 with greater tensions than ever before and therefore the likelihood that the inevitable breakdown will release more destructive energy and be that much harder to recover from.

I don’t know how anyone can trust the statistical bullshit emanating from our government reporting agencies, or the legacy news organizations that report them. Yet the meme has remained firmly fixed in the popular imagination: the US economy has recovered! GDP grows 5 percent in Q3! Manufacturing renaissance! Energy independence! Cleanest shirt in the laundry basket! Best-looking house in a bad neighborhood…!

¡No hay problema!

This is simply the power of wishful thinking on display. No one — with the exception of a few “doomer” cranks — wants to believe that industrial civilization is in trouble deep. The staggering credulity this represents would be a fascinating case study in itself if there were not so many other things that demand our attention right now. Let’s just write this phenomenon off as the diminishing returns of career log-rolling in politics, finance, media, and academia. All the professional “thought-leaders” pitch in to support the “hologram” of eternal progress that issues their paychecks and bonuses. This culture of pervasive racketeering that we’ve engineered has made us obtuse. The particular brand of stupidity on display also points to another signal vanity of our time: the conviction that if you measure things enough, you can control them.

I’m of the view that the measurers only pretend to measure and can only pretend to control things, especially in the most fragile of the systems that we depend on for running all the other systems of techno-industrial economic life: finance. The pretense has endured a lot longer than many of us had expected. The legerdemain employed by banking officials and their handmaidens was greatly augmented by the sheer wish that fragility (i.e. risk) had been successfully and permanently banished from the universe. That “magic” at least sustained a universal faith in currencies until the middle of last year when so many monies went south — except the dollar, levitating on blowback of the deflationary wind flattening everything else.

All this unreality in money and markets should be expected in the conditions just preceding systemic collapse of an entire trans-national industrial civilization, just as one should expect societies to construct their most grandiose monuments to themselves shortly before collapse. The Mayans R us. One year, they were cavorting bloodthirstily atop their garish painted pyramids and a generation later the jungle was stealing back over the temple steps and the population was a tenth of its former size. The same thing is going to happen to us, except there will be a hell of a lot more worthless, toxic debris left on the landscape.

Of course, even that is a more long-term projection than the exercise at hand calls for, viz., the forecast for measly little 2015. So without further throat-clearing, permit me to break it down for you:

Finance and Banking

As 2014 closed out, that kit-bag of frauds, swindles, Ponzis, grifts, bait-and-switches, and three-card-monte scams is looking at least as wobbly as it did in 2007 when Wall Street was busy manufacturing booby-trapped MBSs and CDOs. Except we know the true aggregate risk at stake has only grown larger and more hazardous due to all the strenuous efforts by authorities since the panic of 2008 to evade any natural process for clearing mal-investment and debt gone bad. A lot of that stank was simply shoveled into the Federal Reserve’s basement, where it sits to this day, composting steamily. As to be expected (and averred to in my previous books and blogs) financial repression, market intervention, and statistical distortion will produce ever more financial perversity. That is the hazard in decoupling truth from reality. Imposed dishonesty will always express itself in unexpected ways. Who expected the price of oil to fall by nearly half in a few months? (More on that below.)

These days, perversity expresses itself in a morbidly obese dollar gorging on junk while bulimic currencies elsewhere projectile-vomit their value away as the economies attached to them die of malnutrition. Perhaps this comes as a surprise to central bankers standing at their control panels like recording engineers at the soundboard, tweaking all the dials and slides expecting to achieve a perfect repressive inflation rate of 2-plus percent so they can melt away the onerous debt of sovereign balance sheets and Too Big To Fail banks — incidentally squeezing the citizenry of purchasing power in small annual increments that add up, after a while, to worthless money. They did manage to extend the inflation of stock market indexes another year, which the public is supposed to interpret as “prosperity.” Half a trillion dollars in stock buybacks of S & P companies were executed in 2014, much of it done with money, i.e. “leverage,” borrowed at zero interest. Stock buybacks boost share prices, of course, but they don’t represent any real increased value in a given company. They’re just snakes eating their own tails.

The belief that the world’s “reserve” currency is an implacable force, and that central bankers are omnipotent has made this trade appear to be an irresistible trend — Don’t fight the Fed! Since it’s a matrix of fraud based on thin air money detached from real productive activity, it is certain to blow up. And since 2015 is seven years past the last blowup, it can happen any time. All it requires is some small slippage somewhere, that one equivalent extra grain of sand or snowflake to bring the accumulate mass of false value down in a financial earthquake or avalanche. That obese dollar has been gorging on the equivalent of cheez kurls and Little Debbie Snack cakes, so it only grows more diseased as it gains weight. Sentient observers cannot fail to notice the advancing sickness.

Meanwhile, the US is stupidly waging currency war against other nations that can only blow back by incurring the animosity of every trading partner we have on the only planet available to live on. In 2015, I expect Russia to enlist China’s aid in undermining the dollar’s reserve status. Both countries have weaponry in the form of cash reserves and gold in their vaults. They also have the computer hacking expertise to start seriously messing with US markets — as much Fed technicians and TBTF bank algos do — bringing on mysterious flash crashes, derivatives “accidents,” and other abnormal events that will leave even the Goldman Sachs MIT graduates scratching their heads. Such hacking may accomplish what years of arrant market interventions by US technicians failed to produce: a deadly loss of faith on all the institutions that govern money and markets. Then the US will be the cleanest shirt in a laundry basket that is on fire.

The dollar these days represents two kinds of capital. The first is the stuff that the US has built and invested in since, say, the end of World War Two: a wasteland of aging and decrepitating suburban sprawl, that is, the infrastructure of a living arrangement with no future, the greatest entropic sink in human history. It extends to whole cities and their subsystems, e.g. the hell-hole of Las Vegas with Hoover dam and the dwindling reservoir of Lake Mead. Before mid-century, Las Vegas will be as desolate as Egypt’s Valley of the Kings. Try to imagine the money that went into building all that stupid shit in the desert. In another decade, across America, the housing subdivisions and commercial highway strips filled with tilt-up box stores, muffler shops and burger dispensaries will retain less value than the pyramids of Palenque had for the Mayans after their society rolled over and died. The so-called real economy is a New Age serfdom of burger fryers and janitors, indentured to that entropic sink. Below them is a widening slough of methedrine, child abuse, and tattoo art on its way to becoming Soylent Green. To put it bluntly, the dollar is entropy’s algo bitch.

The second kind of capital the dollar represents is the imaginary value based on sheer lying, making shit up, and borrowing from a future that has no chance of being paid back. This is the capital ginned up on “American exceptionalism” and “energy independence,” fairy tale memes functioning as collateral for the aforementioned malinvestments that add up to “The American way of life.” This capital has no substance, since it is just made up of intellectual and emotional dishonesty. This is the kind of constructed narrative that addicts and other functional cripples resort to to justify their behavior, and the fragility of it will sooner or later lead to the well-known condition of “hitting bottom.” That is the event horizon where the remnants of America enter what I call the World Made By Hand. It will be the greatest socio-economic shift since the fall of Rome, only much swifter.

Oil

AnthonyFredaTinManTTIt really deserves a sub-category of its own because it is the primary resource of our techno-industrial society and its troubles lie behind much of the present disturbances of our times. Despite the triumphal agitprop of the past few years, peak oil is for real. It just manifests more strangely than most people thought, namely, the simpleminded idea that it would only show up as ever-rising prices. No, I made point in The Long Emergency (2005) — and other commentators did too — that peak oil would manifest as volatility. And so since the actual moment of peak conventional crude around 2005, we’ve seen pretty wild oscillations in the price of oil. This is due to the harsh reality that the price people and enterprises can afford to pay for increasingly harder-to-get oil is less than the price that makes it possible to get it. This sets up a yo-yo-ing instability in economic performance that exacerbates even normal wave patterns in the business cycle (which are, in turn, aggravated by banks and governments’ interventions such as ZIRP to suppress those cycles). Below $70-a-barrel the producers go broke; above $70-a-barrel the customers go broke. So the price wobbles up and down as financial Ponzis like shale oil are introduced onto the scene in the hope that debt finagling and mineral rights leasing scams can substitute for physics and geological reality. One trouble with this is that each violent oscillation generates more economic and financial destruction. Activities like motoring, aviation, manufacturing, and retail are badly affected and the entire financial system is made more fragile by worsening increments. Most importantly, the cost structure of the oil industry itself gets battered to a degree that fewer companies can survive to produce the remaining oil.

The big story for 2014 was the crash of oil prices. It is yet being celebrated in other blogger’s 2015 forecasts as a boon to America. Wait until they find out that almost all of the “good jobs” added in recent years were associated with the shale drilling industry that is now being put out of business by low oil prices. Wait until they find out how the failure of junk bond financing thunders through the bond markets and the savage wilderness of derivatives — and ultimately into their ruined pension funds. Wait until they discover that it was but a symptom of the compressive deflationary depression now gripping the entire techno-industrialized world.

Here are my financial forecast particulars for 2015:

  • Early in 2015 the ECB proposes a lame QE program and is laughed out of the room. European markets tank.
  • Greek elections in January produce a government that stands up to the EU and ECB and causes a fatal slippage of faith in the ability of that project to continue.
  • Second half of 2015, the rest of the world gangs up and counter-attacks the US dollar.
  • Bond markets in Europe implode in first half and the contagion spreads to the US as fear and distrust rises about viability of US safe haven status.
  • Derivatives associated with currencies, interest rates, and junk bonds trigger a bloodbath in credit default swaps (CDS) and the appearance of countless black holes through which debt and “wealth” disappear forever.
  • US stock markets continue to bid upward in the first half of 2015, crater in Q3 as faith in paper and pixels erodes. DJA and S & P fall 30 to 40 percent in the initial crash, then further into 2016.
  • Gold and silver slide in the first half, then take off as debt and equity markets craters, faith in abstract instruments evaporates, faith in central bank omnipotence dissolves, and citizens all over the world desperately seek safety from currency war.
  • Goldman Sachs, Citicorp, Morgan Stanley, Bank of America, DeutscheBank, SocGen, all succumb to insolvency. American government and Federal Reserve officials don’t dare attempt to rescue them again.
  • By the end of 2015, central banks everywhere stand in general discredit. In the US, the Federal Reserve’s mandate is publically debated and revised back to its original mission as lender of last resort. It is forbidden to engage in further interventions and a new less-secretive mechanism is drawn up for regulating basic interest rates.
  • Oil prices creep back into the $65 – $70 range by May 2015. It is not enough to halt the destruction in the shale, tar sand, and deepwater sectors. As contraction in the failing global economy accelerates, oil sinks back to the $40 range in October…
  • …unless mischief in the Middle East (in particular, the Islamic State messing with Saudi Arabia) leads to gross and perhaps fatally permanent disruption in world oil markets — and then all bets are off for both the continuity of advanced economies and for peace between nations.

Geopolitics

freedon firghter fredaThe signal event of 2015 will be the disintegration of Tom Friedman’s global economy, the trade and banking relations we have known for about a quarter century, especially the frictionless flow of goods and capital between East and West. The tactical blunders of the USA and its Euro-partners drive the so-called emerging markets, led by China’s Shanghai Cooperation Organization, into a skein of work-arounds to undermine and avoid the US dollar trade. They don’t exactly replace the dollar as the world’s reserve currency but the workarounds lead to a period of worldwide currency turmoil that can only be resolved by monies being at least partially backed by gold. Both China and Russia will continue to work to convert their dollar reserves into Gold whenever possible. Meanwhile, America and Great Britain’s campaign to discredit and devalue gold will only permit their rivals to acquire more at a cheaper price.

The rest of the world is sick of America’s interventionist shenanigans and its moronic exported culture of burgers, Grand Theft Auto, and twerking Jezebels. They are aided by America’s own obdurate foolishness and poor strategic choices, for instance the blowback from the Ukraine misadventure of 2014. Who in the White House, Pentagon, or State Department thought it was a great idea to undermine the fragile stability of Ukraine? Is there any question that Ukraine was ever not in Russia’s sphere of influence? Or that Russia would allow it to be dragooned into NATO and used as a forward base for American firepower? Dmitry Orlov’s explanation for all this is the most cogent on the web:

What the Anglo-imperialists were paying for in corrupting Ukraine’s politics was a ring-side seat at a fight between Ukraine and Russia. And what they got instead is a two-legged stool at a bar-room brawl between Eastern and Western Ukraine.

Read the whole darn thing; it’s not long.

We succeeded in turning a marginally-bankrupt, marginally-independent nation into a complete basketcase that is going Dark Age as I write — no money, no work, no fuel, no heat, no food, no prospects. Having completely botched the operation, and misplayed the game against Russia’s Putin — and Russia’s legitimate interest in a stable next-door neighbor — the US will now abandon Ukraine. It will be forgotten as surely as the US-sponsored Ukrainian air force’s role in the crash of Malaysian Airlines Flight 17 — the incriminating details of which were buried by the Dutch investigating officials. Eventually, the Russians will have to care for the dying Ukraine. They will not be enthusiastic about it. They will do little and do it slowly.

Likewise our economic sanctions campaign against Russia (including the attack on the ruble) is now blowing back on the Eurozone’s export economy. Russia has survived much worse than Western sanctions in recent history. Russia will survive by turning east to Asia. This is already happening and is well publicized. What it means for Europe sooner than later is the loss of their access to imported oil and gas from Russia. Meanwhile, the North Sea fields and the Dutch Groningen gas field are dying. Good luck staying warm, Europe.

The blowback of Europe’s foolish partnership with the US campaign to punish Russia can only discredit the ruling parties and boost new right-wing parties such as France’s National Front and Britain’s UK Independence Party, both deeply nationalistic, anti Euro Union, and anti endless immigration.

The Islamic State was another legacy of blowback from American foreign adventurism. It was spawned out of the remnants of Al Qaeda in poor, broken Iraq and its conquests in 2014 ranged clear across northern Syria to several major cities in Iraq (Faluja, Tikrit, Mosul) right up to the suburbs of Baghdad. They made a lot of money off of captured oil wells and ransoming western hostages, and they shocked Western decency with their YouTube decapitations of hostages that the US and UK refused to ransom. The US’s response now is to bomb their installations and bivouacs. That can only drive them, literally, underground. IS will thrive on Western punishment. It has vast potential to recruit the population of idle, under-employed young men all across North Africa and the Middle East, and beyond to Europe and the band of Islamic society that stretches below Russia across mid-Asia. The catch is, if and when they come to actually rule most of these territories, they will be running economies reduced to Dark Age levels.

As I write, King Abdullah of Saudi Arabia has just entered the hospital. At 91, he is closer to the end of his story than the middle. Meanwhile, the tanking of crude oil prices has critically impaired an Arabian economy that depends on oil sales for more than 80 percent of its operating revenue. Much of that revenue goes to a national welfare system that pays just about everybody to not work. There will be a lot less money to go around now and a lot of grievance over it. The population of the Arabian Peninsula is so far beyond critical overshoot that the situation can only get ugly, especially since a large part of that excessive population consists of testosterone-jacked young men under 30 with nothing to occupy their hours but chitchat over tea and religious mummery. Consider also that when King Abdullah goes, there is liable to be a deeply destabilizing fight for the throne among the hordes of princes and competing clans — despite whomever Abdullah has named as his successor. You may be sure the Islamic State will be standing by to add fuel to those fires. That, in and of itself, could bring on a fast end of the oil age. Bear in mind, too, that the eastern side of Saudi Arabia, where most of the oil infrastructure is, contains a majority Shi’ite population. In a conflict between Sunni IS and Iran-backed Arabian Shia, a lot of stuff could just get blown up. At the least, itr could badly interrupt 30 percent of the world’s oil supply.

China is obviously struggling to prevent a financial freefall brought on by 20-plus years of extravagant debt creation and a lot mal-investment in the service of a very late entry into the techno-industrial frolic. It can’t be denied that they made a good show of it in a very short time, but they got in at the blow-off stage. Now conditions are changing unfavorably. The global economy that made China the world’s workshop is unwinding in a vortex of currency war, trade friction, territorial dispute, ethnic ill-will, and the disturbances that attend the great background problem of peak cheap oil.

The Chinese will work sedulously to try for a soft landing in the great economic contraction that looms. Chinese banking being non-transparent, overly subject to blundering central control, and deeply corrupt, may not bode well for that project. However, China has many cushions to fall back on short-term in the form of foreign money reserves and stockpiles of raw materials. But sooner or later they have to reckon with their dependence on continued oil imports. That is clearly the basis of China’s current flirtation with Russia — but with Russia arguably past its own oil production peak, that’s not a long-term strategy. China has cranked up the world’s mightiest production line of photovoltaic hardware, but solar won’t replace oil the way things currently run, and whatever they rig up may not last more than one generation if there’s no supporting platform of an oil economy for the manufacture of solar replacement parts.

Japan’s suicidal experiment with hyper-turbo ZIRP and QE is not accomplishing much except exacerbating global currency carry trades and driving down the nation’s standard of living. It may succeed in destroying the Yen and what remains of its economy in 2015. Fukushima remains unresolved and Japan’s energy future looks plain dismal. They have no energy resources of their own whatsoever. Any serious mischief in the Middle East oil fields will finish them off. The nation has been on the fast track to become the first post-industrial neo-medieval society. They could be fortunate to land back there and set up their shop while there are still residual riches in the world to work with. They might also go cuckoo and start a war with China for control over the oil fields of the South China sea. It is hard to see any other outcome from such a conflict other than China kicking Japan’s ass.

Geopolitical forecast particulars for 2015

  • Russia toughs out sanctions imposed by the USA; European partners drop their sanctions as self-evidently counter-productive. Russia threatens to post-pone debt repayments to Western banks. The ruble stabilizes.
  • Russia endures Islamic terrorist attacks and responds very harshly, embarrassing the wimpy West.
  • Baghdad Falls to Islamic State forces. Years of American endeavor are lost just like that. The IS attempts to use Iraqi oil reserves to fund its operations. It has a hard time keeping the infrastructure in repair. The USA refrains from bombing Iraqi oil installations, a decision viewed as weakness by IS.
  • The Islamic State makes inroads across North Africa. Libya, Egypt, Algeria, Tunisia, Morocco are all susceptible.
  • Formerly marginal political parties win big across Europe, forcing nations to rethink wide-open immigration policies. Neo-liberalism sinks into deep Weimar-style discredit. Open ethnic warfare breaks out in France, Britain, the Netherlands, Sweden.
  • European economies continue to sink for the simple reason that the growth era of techno-industrialism is over, along with affordable oil, and no amount of debt production will bring it back. All the machinations of the EU and the ECB are dedicated to overcoming this implacable reality, and thus will only lead to deeper and more intractable problems.
  • Beginning with the late January elections, which Alexis Tsipras’s Syriza party wins, Greece plays hardball with the EU for debt restructuring that amounts really to forgiveness of utterly unpayable €322 billion ($398 billion). If the EU calls Greece’s bluff and kicks them out, a European banking meltdown is almost certain. If Greece stays, then other hopelessly indebted nations of the EU declare they want the same deal. Pretty much a rock and hard place. Impossible to call except to say the situation promises mucho turmoil in 2015. ¡Hay problema!
  • Ebola contagion persists and rips across sub-Saharan Africa. Other nations are forced to pass severe travel restrictions to-and-from Africa.
  • Nigeria descends into bloody political turmoil as its oil industry falls apart in response to low prices. UN intervention accomplishes nothing. In wartime conditions, Ebola gains a foothold in Lagos, one of the world’s most overpopulated slum cities.
  • Pakistan and Afghanistan both continue to melt down into ungovernability. India is forced to take over administration of Pakistan and remove nukes. America continues to pretend that its mission in Afghanistan has some purpose, but it only remains a black hole of military expenditure and becomes a rancorous issue in the run-up to the 2016 Presidential election.

The USA Homefront 2015

shootout dream fredaFor one who has been a close observer of the US socio-political-economic scene since the Kennedy era, the nation has gotten itself into a pretty sorry state. The pervasive racketeering that poisons American life from the money-in-politics farce, to the shameless, chiseling medical-pharma cabal, to the SNAP-card and disability rights empire of grift, to the college loan swindle, to the disgusting security state apparatus, to the corporate tyranny of local life and economies, to the delusional techno-narcissism of the media, to the despotic and puerile gender preoccupations of academia — all of it adds up to a society that cares as little for the present as it does for the future. And that’s aside from the pathetic digital device addiction of the generation coming up, and the sheer sordid behavior of the tattooed, drug-saturated, pornified masses of adults now forever foreclosed from a purposeful existence or a decent standard of living.

Even physically America is a sorry-ass spectacle: between our decrepitating cities, abandoned Main Streets, gruesome strip-mall highways, repellent and monotonous suburbs, dreary industrial ruins, profaned countryside, and desecrated coastline, there is little left to actually love about This land is Your Land. We’ve made so many collective bad choices about how we live that one can’t help feeling we are simply a wicked people who deserve to be punished.

Whole classes already are, of course. What used to be a working class with aspirations has devolved to the forlorn savagery averred to above. Our thought-leaders are devoid of thought. Our hopes and dreams are absurd sci-fi fantasies prompting us toward robot-assisted suicide. Our political stratagems of recent years accomplish nothing except making more trouble for ourselves while inciting the enmity of people elsewhere.

Barack Obama’s signal failure — aside from letting the banks get away with murder and omitting to counter the Supreme Court’s Citizens United decision — has been his total evasion of measures that would prepare the nation for the vast changes in social and economic imperative that will attend the transition out of the techno-industrial era when he is out of office. These include supporting local small scale agriculture (rather than giant corporate agri-biz); promoting and supporting the reconstruction of local economic networks (Main Street business); eliminating multitudinous federal regulations that prevent individuals and small enterprises from operating; closing the hundreds of superfluous US military bases around the world; giving federal support to rebuild the US passenger rail system; promoting walkable communities — especially the re-activation of existing small towns and cities — instead of mindless obeisance to the suburban “home-building” industry (and its step-child in the commercial highway strip development racket) — and truly reforming medical care without the connivance of the insurance racketeers.

Obama and his party can be faulted for fostering the myth that every young person needs a college degree — leading a whole generation into debt penury for no good purpose, while depriving society of a long list of vocational roles and livelihoods based on providing genuine service or value. We will be a nation of unemployed gender studies graduates instead of plumbers, electricians, organic farmers, arborists, carpenters, machinists, nurses and paramedics, small business owners, et cetera.

This enormous bundles of myths and misplaced expectations for yesterday’s tomorrow prevents the collective national imagination from summoning a revised American Dream based on repairing the massive destruction of recent decades.

The political mood has not been murkier in my longish lifetime. Both major parties edge toward extinction as the Whigs did in the mid-1850s. The citizenry not sunk in drugs and depravity — that is, people who still read the news in some form and would like to care about their country — deserve a new faction or party that can at least express their discontent with the current situation. They will surely not get this in the generally supposed coming contest between Hillary Clinton and Jeb Bush. I hope they will be so insulted by this dynastic grab that more than one new party will form and make a big stank about it. The Tea Party was a good start in that spirit, but it tripped on its internal contradictions and its association with Dixieland-style religious fundamentalist idiocy and cracker war-mongering.

All that redounds on the current state of the Republican Party, a gang of venal ignoramuses pimping for lost causes. Despite having won the 2014 midterms, and capturing both houses of congress and governorships, they seem increasingly out-of-touch with the realities of economic contraction, peak oil, and climate irregularities. The old magic of stirring up the animals on social issues of abortion, bedroom activities, and allegiance to Jesus fail to move the old base, which is becoming economically quite desperate. That base also becomes conscious of how they have been hornswoggled into voting against their own interests for years in the sense that author Thomas Frank so aptly described in What’s the Matter With Kansas.

Race relations turned very sour in 2014 with more highly publicized killings of young black men in ambiguous circumstances. The chief martyr of the year, Michael Brown of Ferguson, Mo., was a poor candidate for sainthood, and did not help advance the credibility of claims that police brutality rather than the misbehavior of young men is behind a lot of strife abroad in the land. One gets the feeling that black race hustlers are in the driver’s seat recklessly pushing African Americans toward open warfare with everybody else. My view of the situation is not popular with Progressives, viz: that black separatism and its offshoots in “diversity” politics and multi-culturalism tragically promote an antagonistic, alienated, oppositional black politics at the expense of a common culture for blacks and whites with common values and common standards of behavior. It has gotten so bad that reasonable people can sadly conclude that the long civil rights project has ended in failure. We are treading on dangerous ground here, with foolishly outmoded ideas about what to expect from each other, and of course all this begs the questions: What now? What next?

Domestic Forecast Particulars for 2015 

  • Markets tanking in Q3 destroy the illusion of “recovery.” It becomes obvious that the story was a lie and the public mood grows much more surly.
  • 2014 proves to be the year of peak shale oil. After the shakeout of 2015 due to low oil prices, production never returns to previous levels. The fairy tales of “energy independence” and “Saudi America” fall apart, deeply demoralizing a gulled public and adding yet another layer of discredit to the people in charge of things.
  • Different kinds of political revolt break out around the country among varied groups, left, right, and center. Some of it revolves around life-and-death struggles for the souls of the floundering major parties. Some of it is organized violence against the government and especially against the US security state apparatus, including overly militarized local police forces.
  • Low-grade racial warfare erupts across the US. Flash mobs, knock-out games, lootings, and hammer attack type outrages generate counter-attacks. By summertime the conflict heats up. Firefights become routine and casualties mount. President Obama proves to be tragically ineffectual in restoring peace.
  • Anti-immigration sentiment in Europe spreads to the US as falling oil prices produce political disorder in Mexico prompting tens of thousands to try to flee north.
  • Bank of America is the first of the Too Big To Fails to enter the event horizon of failure. Obama can’t get congress to go along with a bailout. By Thanksgiving, there is turmoil among the banks as they scramble to cover losses. A public furor over using taxpayer money to cover derivatives losses leads to an unprecedented concerted action by states to attempt “nullification” campaigns.
  • Citibank applies for a bail-in of account holders. Dithering, frightened federal authorities are too slow to respond, permitting a run on deposits.
  • Hillary is loudly booed and hectored at campaign stops as “a tool of Wall Street.” Her coffers overflow with TBTF bank contributions. She bows out of the presidential contest as the public mood toward her sours. But not before she generates a lot of resentful opposition and alienates many Democratic Party voters who are also furious over the eight-years of Obama’s “hope” and “change” hand-jive. Elizabeth Warren is dragooned to replace her — dubbed the “Un-Hillary” — rescuing the party from a near-death experience. She openly feuds with party bosses, who plot against her, and undermine her campaign.
  • Senator Rand Paul agitates to abolish the Federal Reserve. His senate colleagues are shamed into considering legislative reform of the Fed’s mandate. Debate on the issue is the only thing the Republican dominated congress and senate accomplish in 2015. Paul decides to challenge Jeb Bush for the 2016 nomination. This blows the Republican party apart.
  • At Christmas 2015, the DJA sits at 13,500, the S & P is at 1200. Gold is at 1750, silver at 42.

Good luck everybody. Gird your loins and fasten your seat belts.

 

 

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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 Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

Conn’s Game: Subprime Loans, Subhuman Lenders

From the keyboard of Thomas Lewis
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One of the stores built by a Conn’s game, based on junk bonds and subprime loans, in Houston Texas.

One of the stores built by a Conn’s game, based on junk bonds and subprime loans, in Houston Texas.

First published at The Daily Impact  December 12, 2014

After some rant or another about the combined greed and stupidity of the industrial Masters of the Universe, I frequently get this response: “Look, they couldn’t be that stupid or they wouldn’t be in charge. They know what they’re doing, and we just don’t understand it.” Seriously. I get that. If a quick refresher on the Enron Bubble and the Dot-com Bubble and the Housing Bubble are not enough to put this turkey of an argument into the deep fryer for once and for all, then consider the true story of Conn’s, a Texas-based 90-store retailer who came up with the Business Plan to End All Business Plans. And it did.

Aesop could not have fashioned a better cautionary tale of greed and stupidity, and now he doesn’t have to. (I’m grateful to Wolf Richter for laying all this out on his blog Wolf Street)

Conn’s game was at first a pretty standard one. It sold furniture, appliances and electronics to people who didn’t have a lot of money. And, to increase the take on each sale, they lent the customer the money to make the purchase. So far, so good. You get an increase in sales from the convenience of in-store financing, and you get additional profit in the form of interest collected on the loan. Lots of companies do it, often successfully. GMAC comes to mind.

But when you’re running a Conn’s game, you are not content to do as well as everybody else. You want to be number one, and Conn’s gamers came up with the answer. Subprime lending. They would finance anybody, without regard for credit score or credit record or assets or ability to repay the loan. That way, they would sell lots of stuff, and become number one in retail. That apparently is where their thinking stopped. If we had asked any of the obvious questions, they would have said, “We know what we’re doing. You just don’t understand.”

And their plan worked. Lord, did it work. People who couldn’t afford to buy a candy bar flocked to Conn’s and walked out with couches, TVs, and double-door refrigerators. Sales went through the roof. In the third quarter of this year Conn’s retail revenue hit $370 million, up 20% from last year’s third quarter. Six new stores were up and running, and gross retail margin was over 40% (Conn’s is no discounter; people who can’t buy anything anywhere else will pay just about any price Conn asks, when there’s no down payment). Retail profits were up 12%.

Another American success story, another bunch of self-made millionaires made billionaires by their own hard work and initiative. They really did know what they were doing, just like the Enron guys and the Countrywide mortgage guys and the shale-oil fracking guys — as long as you did not look at the rest of the picture. As long as you looked only at the retail P&L, Conn’s game is doing fine. How’re they doing over in the finance office?

Lots of paper — $1.25 billion in loans outstanding at the end of September, with an increasing number of them standing out pretty far, as in 10 per cent of them delinquent for 60 days or more. The unit lost $33 million in just three  months, which meant that overall, Conn’s game lost more than $3 million for the quarter. The company explained to its shareholders:

“Delinquency increased year-over-year across credit quality levels, customer groups, product categories, geographic regions, and years of origination… losses are occurring at a faster pace than previously anticipated, due to the continued deterioration in the customer’s ability to resolve delinquency.”

Damn those customers, and their inability to resolve delinquency! They’ve gone and ruined a perfectly good business plan! Conn’s stock has lost 73% of its value in a year. If you are unlucky enough to be the owner of one of the $250 million worth of junk bonds Conn’s sold in June to finance its operations, you might sell it for 60 cents on the dollar if you can find a rich idiot — better move fast — and you can expect 10 cents on the dollar when they default.

Set aside the fact that usury, which used to be a sin, is now a standard business practice (but only when you’re dealing with poor people); never mind that what Conn’s did is not illegal, and not widely regarded as immoral (although it is clearly unethical); and ignore the fact that the business plan is being replicated at full speed in the auto industry, and in the real estate industry (again!); ignore all that and explain to me in what universe, under what laws of mathematics, a sentient human being can be convinced that lending money to people who do not have the ability to pay it back is a profitable enterprise.

If you do I will agree that in that universe, these people are not that stupid, and may know what they are doing. But they still have no business on this planet.

 

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Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

 

 

Wealth Confiscation & Destruction

Off the microphone of RE

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Aired on the Doomstead Diner on July 6, 2014

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Discuss this Rant at the Podcast Table inside the Diner

Snippet:

SAMSUNG CAMERA PICTURES…For today, I want to look at the specter of Wealth Confiscation coming down the pipe, which has already occurred in places like Cyprus, but looks likely to expand in scope as the general financial Ponzi of the World implodes.

Graham Summers of Capital Research is a regular contributor to ZH, and a regular predictor of Financial Doom as well.  His schtick is how you need to set up your portfolio for Doomsday.
 
In his latest piece below, Graham talks about how TPTB will come after anyone with financial assets over around $200K, striking FEAR into the Heart of every 1%er out there.

The idea here is, TPTB will do anything and everything they can to try to keep the financial system floating another day, and if that means they have to confiscate the paper wealth of 99.9% of the people with some money in the bank, they will do so.

While worrisome to the 1% crowd out there, this is probably not quite so worrisome to the .01% with wealth measured in $Billions$.  These folks are “Key Men”, and though they may take a Haircut at the beginning, they won’t lose it ALL

For the rest, LISTEN TO THE RANT!

RE

Student Loan Forgiveness

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…Problem of course is that as time went by, there were lots of graduates who couldn’t pay up, and more all the time these days as the economy circles the tidy bowl. Besides that, as more students now had more money to buy an education courtesy of these loans, the institutions started jacking up the prices and the cost to get one of these Sheepskins has gone up about 1000% since I jumped through the hoops 30 years ago. You can’t “work your way” through school anymore, you would have to work 2 jobs to pay a full tuition and room and board, leaving no time to actually attend class. If you cut down the number of classes to take to what you could afford pay as you go, just to get an Undergrad degree would take you 10-15 years, forget doing Grad Skule. Good luck getting a job as a College Grad with no experience at 30 years old.

The expectation here for the student is that if you get one of these Valuable Sheepskins, there will be a Job waiting for you that will launch you into the upper middle class that used to exist, but as time has gone by fewer of these jobs have been available to get while more people graduated qualified for them. This isn’t just a problem in the FSoA, it’s been a long standing problem in China and the old Soviet Union also, where there are tons of folks with Ph.D.s working clerical and sales jobs because there is nothing available in their area of expertiese.  At least in those countries though under the Commie system, they didn’t graduate with a debt load the size of K2…

For the rest, LISTEN TO THE RANT!

RE

Shake me, wake me!


Off the keyboard of James Howard Kunstler

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Originally Published on Clusterfuck Nation  January 20, 2014
Discuss this article here at the Diner Forum.
  

     The rot moves from the margins to the center, but the disease moves from the center to the margins. That is what has happened in the realm of money in recent weeks due to the sustained mispricing of the cost of credit by central banks, led by the US Federal Reserve. Along the way, that outfit has managed to misprice just about everything else  — stocks, houses, exotic securities, food commodities, precious metals, fine art. Oil is mispriced as well, on the low side, since oil production only gets more expensive and complex these days while it depends more on mispriced borrowed money. That situation will be corrected by scarcity, as oil companies discover that real capital is unavailable. And then the oil will become scarce. The “capital” circulating around the globe now is a squishy, gelatinous substance called “liquidity.” All it does is gum up markets. But eventually things do get unstuck.

     Meanwhile, the rot of epic mispricing expresses itself in collapsing currencies and the economies they are supposed to represent: India, Turkey, Argentina, Hungary so far. Italy, Spain, and Greece would be in that club if they had currencies of their own. For now, they just do without driving their cars and burn furniture to stay warm this winter. Automobile use in Italy is back to 1970s levels of annual miles-driven. That’s quite a drop.

     Before too long, the people will be out in the streets engaging with the riot police, as in Ukraine. This is long overdue, of course, and probably cannot be explained rationally since extreme changes in public sentiment are subject to murmurations, the same unseen forces that direct flocks of birds and schools of fish that all at once suddenly turn in a new direction without any detectable communication.

     Who can otherwise explain the amazing placidity of the sore beset American public, beyond the standard trope about bread, circuses, and superbowls? Last night they were insulted with TV commercials hawking Maserati cars. Behold, you miserable nation of overfed SNAP card swipers, the fruits of wealth and celebrity! Savor your unworthiness while you await the imminent spectacles of the Sochi Olympics and Oscar Night! Things at the margins may yet interrupt the trance at the center. My guess is that true wickedness brews unseen in the hidden, unregulated markets of currency and interest rate swaps.

     The big banks are so deep in this derivative ca-ca that eyeballs are turning brown in the upper level executive suites. Notable bankers are even jumping out of windows, hanging themselves in back rooms, and blowing their brains out in roadside ditches. Is it not strange that there are no reports on the contents of their suicide notes, if they troubled to leave one? (And is it not unlikely that they would all exit the scene without a word of explanation?) One of these, William Broeksmit, a risk manager for Deutsche Bank, was reportedly engaged in “unwinding positions” for that that outfit, which holds over $70 trillion in swap paper. For scale, compare that number with Germany’s gross domestic product of about $3.4 trillion and you could get a glimmer of the mischief in motion out there. Did poor Mr. Broeksmit despair of his task? 

     Physicist Stephen Hawking declared last week that black holes are not exactly what people thought they were. Stuff does leak back out of them. This will soon be proven in the unwinding derivatives trades when most of the putative wealth associated with swaps and such disappears across the event horizon of bad faith, and little dribbles of their prior existence leak back out in bankruptcy proceedings and political upheaval.

     The event horizon of bad faith is the exact point where the credulous folk of this modern age, from high to low, discover that their central banks only pretend to be regulating agencies, that they ride a juggernaut of which nobody is really in control. The illusion of control has been the governing myth since the Lehman moment in 2008. We needed desperately to believe that the authorities had our backs. They don’t even have their own fronts.

     Is the money world at that threshold right now? One thing seems clear: nobody is able to turn back the plummeting currencies. They go where they will and their failures must be infectious as the greater engine of world trade seizes up. Who will write the letters of credit that make international commerce possible? Who will trust whom? When do people seriously start to starve and reach for the pitchforks? When does the action move from Kiev to London, New York, Frankfurt, and Paris?

***

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 Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

 

 

Creepily Close

Off the keyboard of James Howard Kunstler

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Originally Published on Clusterfuck Nation  October 14, 2013
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 Creepily Close

     Things that can’t go on, the prophet Herb Stein once observed, go on until they can’t. Criticality eventually bushwhacks credulity. The aggregation of rackets that American life has become is rolling over like a great groaning wounded leviathan and the rest of the world is starting to freak out at the spectacle. Instead of a revolution, we’re having a suicide party.

     But don’t worry, a revolution would not be far behind. My guess is that it would kick off as generational rather than regional or factional, but it would eventually incorporate all three. A generation already swindled by the college loan racket must be chafing at the bureaucratic nightmare that ObamaCare instantly turned into at its roll-out, with a website that wouldn’t let anyone log in. Isn’t technology wonderful? I wonder when the “magic moment” will come when all those unemployed millennials join a Twitter injunction to just stop paying back their loans. If that particular message went out during this month’s government food fight, it would do more than just get the attention of a few politicians. It would crash the banks and snap the links in every chain of obligation holding the fiasco of globalism together.

     So far, the millennials have shown about as much political inclination as so many sowbugs under a rotten log, but it is in the nature of criticality that things change real fast. In any case, the older generations have completely disgraced themselves and it is only a question of how cruelly history will treat them in their unseating. The last time things got this bad, the guys in charge divided into two teams with blue and gray uniforms, rode gallantly onto the first fields of battle thinking it was a kind of rousing military theatrical, only to find themselves in a grinding four-year industrial-scale slaughter in which it was not uncommon for 20,000 young men to get shot to pieces in a single day — one day after another.

     Of course, things are a bit different now since we became a nation of overfed clowns dedicated to getting something for nothing, but despite the abject futility of American life in its current incarnation, there is room for plenty of violence and destruction. The sad and peculiar angle of the current struggle is that both sides in government wish heartily to keep all the rackets of daily life going — they just disagree on the distribution method of the vig.

     What amuses me at the moment is the behavior of the various financial markets and the cockamamie stories circulating to explain what they are doing in this time of perilous uncertainty. One popular story is called “the energy renaissance.” This is a fairy-tale that pretends that we have enough oil at a cheap enough price to keep driving to WalMart forever. Of course, shale oil wells that cost $12million to drill and produce 80 barrels-a-day for three years before crapping out altogether do not bode well for that outcome, but the wish to believe over-rides the reality. Another laughable story du jour is “the manufacturing renaissance.” This story proposes that the “central corridor” of the USA, from North Dakota to Texas, is about to give China a run for its money in manufacturing. The catch is that any new factory opening up in this scenario will be run on robots — leaving who, exactly, to be the customers paying for what these factories produce? Think about it for five minutes and you will understand that it is just a story calculated to goose up a share price here and there, and only for moment until it is discovered to be just a story. What interests me most is what happens when the stories lose their power to levitate the legitimacy of the people who tell them.

            Well, Christine LeGarde, chief of the IMF, tried to read the riot act to the American clownigarchs over the weekend, but they’re not paying attention to her. What has she done for her own country, France, lately anyhow. They’ve got their own set of rackets running over there. The Chinese are getting a little prickly, too, since they are sitting on a few trillion in US promises to pay cash money in the not so distant future. The Chinese are beginning to apprehend that future perhaps never arriving.

     In case you haven’t heard: America is “in recovery.” We can play all the games we want with money, or what passes for money these days. And then the moment will come when we can’t. That moment begins to feel creepily close.

 

***

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 Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

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