Clusterfuck Nation

The New Abnormal

2013-05-20T14:03:40Z

The collective state of mind in the USA these days may be even more peculiar than what went on in Germany in the early 1930s, when the Nazis were freely elected to lead the country and reconstructed the battered national psyche into a superman cult that soon beat a path to mass death and ruin. America has its own way of going crazy. We don't goose-step to tragedy; we coalesce into an insane clown posse and stumble into it by pratfall -- juggaloes dancing backwards off the cliff edge.

We've been softened up and made extra-stupid on a 60-year-long diet of TV and kreme-filled donuts. Instead of a "master race," our political fantasies revolve around a master wish - to get something for nothing. Want to feel good about yourself? Smoke some crank. Want to become economically secure? Buy a Powerball ticket or drive to the local casino. Want political esteem? Plug a flag pin into your lapel. Want status? Borrow free money from the Federal Reserve at zero interest and arbitrage it into massive earnings for your primary dealer bank. All these behaviors are the consequence of a culture that elevated advertising to such a high social good, it ended up drowning in its own manufactured bullshit.

A subset of our master wish has been on vivid display in recent months, namely the idea that God has blessed the USA with a limitless supply of new oil that will allow us to keep driving to WalMart forever. This propaganda from an oil industry desperate for capital investment has been swallowed whole by people in authority who ought to know better, just as that same class of people in Germany of 1934 should have known better about what they were bargaining for in economic well-being with the Nazi agenda. In our case, the propaganda drumbeat is being led by formerly respectable news organizations. The New York Times, National Public Radio, Bloomberg News, Forbes, and The Atlantic Magazine are media giants that have lately spread the "good news" that America will soon be 1) "energy independent," 2) the world's leading oil exporter (greater than Saudi Arabia is now!), and the "go-to nation" for cheap manufacturing.

All of these claims are false, by the way. The American way-of-life was designed to run on $20-a-barrel oil, not $90-a-barrel oil, and "new technology" has not changed that. The unfortunate and, to some extent, mendacious memes about the wonders of "new technology" have only snookered the public into a false sense of security about a future that will disappoint them badly and probably provoke an extreme political reaction as the reality of our predicament sweeps through daily life.

Most of the current "endless oil" fantasy revolves around shale oil. Just to get a visual idea of what this amounts to, consider this map. It depicts the two major shale oil production regions of the USA: the Bakken in North Dakota and the Eagle Ford "play" in Texas. Bakken production is confined almost entirely to four counties in North Dakota (Williams, Mountrail, McKenzie, Dunn). The Eagle Ford region touches perhaps ten Texas counties. Now, realize that the oil fields all over the rest of the USA (including Alaska) are in decline. Here's where the "bonanza" of new oil all comes from:

The oil coming out of these places is high cost and low flow-rate oil. This is exactly the opposite of what US oil production used to be (low cost and high flow-rate) when we were busy building all the freeways, strip malls, housing subdivisions, suburban office parks and all of the other stranded assets that now make up the infrastructure of daily life in this country. Those were the days when you could pound a single pipe vertically 1000 feet down (not much deeper than many home water wells) into the temperate wheatfields of Oklahoma (drive to work in shirtsleeve weather!) and after that modest investment in drilling you could kick back and depend on a great flow rate (5,000 barrels-a-day, not unusual) of sweet light petroleum for years.

Horizontal drilling (often more than 10,000 feet down + many "laterals" an additional 10,000 feet horizontally) and then fracturing "tight" rock for shale oil is not only a way larger capital expense (lots of steel!) but the flow rates per well (82 barrels-a-day average) are laughable compared to the halcyon days of conventional oil -- little better than "stripper" wells. Consider also that shale oil well flow-rates decline greater than 60 percent in the first year (rapidly thereafter, too) and you can see easily that there will be no "kicking back" to run the pump-jacks like cash registers, as in the old days. In fact, the rapid depletion only prompts more frantic drilling and re-drilling to keep the production at its current rate - the "Red Queen Syndrome" ("I'm running as fast as I can to stay where I am"), which means fantastic capital expenditure to keep drilling and fracking more wells (even more steel!). Consider also, that the small "sweet spots" in the shale oil regions were the ones drilled first (in earnest after 2003), for the simple reason that they were the most promising. This was the "low hanging fruit" -- easy to pick. Outside these sweet spots the oil may be too meager or difficult or costly to bother drilling for.

This is a picture of a boomlet that may run a few more years -- if the banking system doesn't implode and the massive stream of capital doesn't quit flowing to the shale counties. The excitement will all be over before 2020, but I suspect that troubles in finance and banking will put the schnitz on the shale gas mania long before that date. What will happen when the American public discovers that they were lied to about yet another important matter? The discovery will coincide with very severe changes in daily life that won't be avoidable. Everyone will be affected. Many will be impoverished and suffer real hardship. That's when the public goes apeshit and starts tearing down the house.

Apart from the issue of sheer economic suffering and all the damage that will ensue, consider that it will be generations before anyone believes the "authorities" again -- though, like the oil age itself, the era of giant national media will probably prove to be a one-shot deal, too. Future generations -- if they are lucky -- may read the news on one-page circulating broadsides, printed laboriously in hand-set type by letterpress. Or maybe they'll be reduced to just parsing out rumors.

_______

Note: This blog (and JHK website as a whole) will be getting a design upgrade in the next couple of weeks. In the meantime, for technical reasons the comments department is temporarily suspended.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

No Mo' PoMo?

2013-05-13T12:24:51Z

Whenever the Federal Reserve wants to tweak the dials of the economy -- or pretend that it can -- it turns first to its sock puppet at The Wall Street Journal, John Hilsenrath, and "leaks" a rumor of policy change (here). They like to do this late on Fridays when financial markets are about to close, so that market players will have a whole weekend to ponder the Fed's actions like medieval viziers reading goat entrails.

Last Friday's puddle of steaming guts was a supposed preview of the Fed's "exit strategy" from its reckless policy of "quantitative easing" or "money" creation (or "liquidity," if you like). In other words, they supposedly intend to stop juicing the financial markets with fake wealth, i.e. capital not accumulated from real productive activity, but just fictively created on computer hard drives. For the past year they have been doing this to the tune of $85 billion a month, "buying" US Treasury bonds and bills and an assortment of miscellaneous securities (mostly trash that can't be pawned off on anyone else) through their so-called "primary dealer" bank cohorts, the too-big-to-fail usual suspects, who "earn" hefty transaction fees in the process of conveying all these pixels from Point A to Point B. These interventions are called Permanent Open Market Operations, or PoMo.

The theory all along has been that this $85 billion a month would seep down to Main Street to provoke spending (increasing the "velocity of money) and therefore "jump start" the economy. The theory has proven itself to be complete horseshit, of course. All it has done is suppress interest rates on bonds, depriving old people of income off their savings by so doing. It also artificially jacked up reckless lending on loans for houses, cars, and college degrees, juiced the share price of stocks, and boosted food prices. Meanwhile, an increasingly former middle class languishes in a purgatory of foreclosure, penury, and desperation. The Fed can't really do anything to help them. It can only burden them with more easy-credit debt, especially their college-age children. But ours is a financialized economy and finance is too abstruse for most ordinary people to understand, so they just muddle along in a fog of dashed hopes and repossession.

Lately, though, the financial markets at the heart of the financialized economy -- that is, an economy based on buying and selling increasingly dubious "paper" assets rather than on capital formation through producing things of value -- are sending distress signals. The aforesaid efforts at economic dial-tweaking have only produced distortions and perversions in the basic functioning of the markets they're designed to tweak. They pervert the "price discovery" mechanism by dumping "free money" into equity markets. They distort "risk premiums" by steering money out of savings, where it earns less than nothing, into riskier investments subject to the vagaries of everything from weather (commodity markets) to control fraud (bank stocks) to geopolitics (Toyota stock). They debauch market expectations in general by implying permanent artificial life-support. They promote market gaming such as front-running equity prices via high frequency trading on computers, naked shorting (pretending to borrow shares that, in fact, do not exist) and the abuse of futures markets -- lately illustrated in the ongoing smash of paper gold and silver contracts, with the side effect of driving yet more money into stock markets. Finally, they undermine the meaning and value of money itself, which is the most dangerous game of all because when people lose confidence in their national currency, nations dissolve in political chaos.

Despite the aura of control, Fed officials (and casual observers) may sense things spinning out of control. Of course, hyper-fragility is exactly the effect that all the Fed's own actions would predictably lead to. When you divorce truth from reality, strange things are bound to happen. The Fed ventriloquists who speak through Hilsenrath at The Wall Street Journal suggest they would accomplish their exit from the current $85billion-a-month QE policy in a set of "halting steps" by irregularly dialing down QE issuance month-by-month to fine-tune the results on-the-fly, as markets may require. This is also complete horseshit because they could only accomplish controlled tweakings by somehow signaling their intentions beforehand through some lackey like Hilsenrath. Otherwise, they could not pretend to control the results of their actions. They might as well just throw spaghetti at the wall to see if it sticks. Unfortunately, the "halting steps" idea would only provide even more opportunities for selective, complex front-running, shorting, and gaming -- which is to say setting up more dangerous behavior with more uncertain and possibly destructive outcomes.

Anyway, there's no evidence at this moment that anyone believes what was leaked to Hilsenrath. It could easily be more smoke and mirrors aimed at concealing the fact that the Federal Reserve has no idea what it has been doing and fears the consequences. There is one thing that we know for sure in this strange period when bankers have tried to manage reality in the absence of truth: that advanced industrial-technological economies designed to run on $20-a-barrel oil can't run on $100-a-barrel oil, and that is why the US economy was subject to financialization in the first place -- to offset declining productive activity by an attempt to get something for nothing. Notice that this macro-trend coincided exactly with the rise of legalized gambling all over America. That is how the idea that you could get something for nothing got to be normal. The world is about to find out that you really can't get something for nothing. It will be a harsh lesson.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

The Deep End of the Risk Pool

2013-05-06T12:43:36Z

Where on earth did Paul Krugman get the idea -- expressed Monday morning -- that ours is "a weak economy?" The Dow Jones Industrial Average is about to scale previously uncharted heights and the Standard & Poors Index is piling onto its molehill, too. If stocks are up the economy can't be weak since stock markets = the economy. All the efforts of the Gitchi Manitou behind the operations of money, the Federal Reserve, are bent toward inflating the stock markets, including now the novelty of outright strategic stock purchases, so these stock markets must hold the secrets of economic life.

Notice, the Federal Reserve is not inflating the precious metal markets. Rather, they might be inclined in the deep background to militate against them, or even engage in coordinated subversion of them. It would be convenient for the Fed if the public, increasingly befuddled by the absence of yield, the mis-pricing of risk, and the antics of Larry Kudlow, would just let go of its delusion that yellow and white metals had any intrinsic value -- after all, you can't eat them, can you? The weight of opinion is also against gold and silver. The redoubtable Martin Armstrong is even inveighing against them because, as he put it, these things trade only on the technicals, not fundamentals.

This does raise a sticky question or two, of course, such as, what if the technicals are detached from the fundamentals, which is to say that the numbers and charts don't jibe with reality? That may be possible, after all, when everything from interest rates to asset purchases are rigged and accounting fraud is the order-of-the-day in government and its larger-than-life handmaiden banks. Consider, for instance, that if our national government under Obama has continued the practical policies of the Bush II regime -- wars, Gitmo, non-regulation and non-enforcement, wealth confiscation (and reassignment) -- than it may have also continued the underlying principle that "we make our own reality." In which case, the fundamentals are whatever you say they are and the technicals are just traffic lights on the freeway of "liquidity."

That perhaps explains why stock markets rise on both good and bad news. If a few more spec houses are being built in Las Vegas and Phoenix (where, I'm sure, they're needed) then the stock markets go up. If a low manufacturers' index comes out, well, then that's fine, too, because the Federal Reserve puts up a smoke signal that it might increase its monthly bond-buying beyond the current $85 billion a month -- meaning more liquidity to juice the stock markets, so up-up-and-away they go up. The stock markets apparently rocked on last week's news that about 175,000 more car wash attendants were added to the work force, because that's where the money is these days. If I were Warren Buffet or Jamie Dimon, I would consider part-time work in a car wash to plump up the family fortune.

Consider, though, that when everything is mis-priced then nobody knows the value of anything, and when nobody knows anything and everyone is flying blind, then accidents can happen. Welcome to the deep end of the risk pool.

Count Paul Krugman of The New York Times among those who don't know anything and as you do that, consider also that societies get what they deserve, not what they expect. What Paul Krugman doesn't know (because he never mentions it), for example, is that oil prices around $100 a barrel (the average between West Texas Intermediate and Brent Crude) crush industrial economies. That implacable downdraft is what motivates USGov.com and the Fed to intervene and manipulate the things that represent economic activity: currencies, asset values, interest rates, and markets, which in turn promotes the detachment of the technicals from fundamentals. Anyone actually paying attention to the weak signals coming through all the noise would hear the faint wail of desperation in the background.

These financial metaphysics are apart from conditions on-the-ground all over the foundering empire, namely, an infrastructure for daily life that becomes more onerous and obsolete every day. When historians of the future swap their stories around the campfire, this age will be remembered for little more than all the useless movement of automobiles and the fate of the crumbling surfaces they moved about on. Not even Paul Krugman is capable of noticing how we live, and what it means.

Well, spring has finally arrived in the bony northeast USA and I am preoccupied with cultivating my own garden. In honor of our heritage I planted two American chestnuts. The species was nearly put out of business in the first stirrings of the global economy, when previously unknown plant diseases arrived here with shipments of foreign botanicals. Now that the global economy is imploding, it is a favorable time to get with the older program, in which the technicals reflect the fundamentals.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

We Wish

2013-04-29T13:07:01Z

Wishful thinking now runs so thick and deep across the USA that our hopes for a credible future are being drowned in a tidal wave of yellow smiley-face stories recklessly issued by institutions that ought to know better. A case in point is the Charles C. Mann's tragically dumb cover story in the current Atlantic magazine -- "We Will Never Run Out of Oil" * -- setting out in great detail the entire panoply of techno-narcissistic "solutions" to our energy predicament. Another case in point was senior financial writer Joe Nocera's moronic op-ed in last week's New York Times beating the drum for American "energy independence."

You could call these two examples mendacious if it weren't so predictable that a desperate society would do everything possible to defend its sunk costs, including the making up of fairy tales to justify its wishes. Instead, they're merely tragic because the zeitgeist now requires once-honorable forums of a free press to indulge in self-esteem building rather than truth-telling. It also represents a culmination of the political correctness disease that has terminally disabled the professional thinking class for the last three decades, since this feel-good propaganda comes from the supposedly progressive organs of the media -- and, of course, the cornucopian view has been a staple of the idiot right wing media forever. We have become a nation incapable of thinking, or at least of constructing a consensus that jibes with reality. In not a very few years, the American public will be so disappointed and demoralized by broken promises like these that they will turn the nation upside down and inside out, probably with violence and bloodshed.

Charles Mann's Atlantic article begins by cheerleading for the mining of methane hydrates from the ocean floor. These are natural gas molecules trapped in ice formations in the muck around the continental shelves. Mann spotlights the efforts of a Japanese research ship conducting tests. Guess what: the Japanese are engaging in this because they have absolutely no fossil fuels of their own, and a failing consensus about nuclear power, and they are on a course to become the first advanced industrial nation to be forced to return to a medieval economy. That is, they are the most desperate among the desperate. You could say they've got nothing to lose (but a few billion of their rapidly depreciating Yen).

Methane hydrates are stable only at extreme pressures or very low temperatures. They also exist in the arctic permafrost, for instance, Siberia, where conventional natural gas drilling operations have been carried out for decades, with no contributions from methane hydrates. Undersea methane hydrate exploration projects have gone on for decades in the US, Canada, India, Russia, China, and Japan. The hope is that this so-called "hot ice" would turn out to be the gas equivalent of tar sands, which would mean at best a very expensive way to get more fossil fuels as the conventional sources dry up. That hope has dimmed in nations other than extremely desperate Japan. Like a lot of techno-wonders, the recovery of methane hydrates can be demonstrated on the "science project" scale. For now, no viable technique exists for getting commercially-scaled streams of natural gas out of methane hydrates. The Japanese themselves state that it would take at least ten years, if ever, to commercially mine methane hydrates. Japan doesn't have ten years. It's banking system is imploding, and without capital even the science projects will come to an end.

Charles Mann is equally rapturous about shale oil and gas. He writes:

"Today, though, fracking is unleashing torrents of oil in North Dakota and Texas--it may create a second boom in the San Joaquin Valley--and floods of natural gas in Pennsylvania, West Virginia, and Ohio. So bright are the fracking prospects that the U.S. may become, if only briefly, the world's top petroleum producer. ("Saudi America," crowed The Wall Street Journal. But the parallel is inexact, because the U.S. is likely to consume most of its bonanza at home, rather than exporting it.)"

This is very misleading. The US consumes roughly 19 million barrels a day. The Bakken and Eagle Ford shale formations produce about a million barrels a day combined now, and guaranteed to get a whole lot lower within the next five years. Today's near-peak production is based on furious drilling and fracking of extremely expensive wells -- known as "the Red Queen syndrome" because they are running as fast as they can to keep production up. Meanwhile, the depletion curve on shale oil is a reverse "hockey stick."

The situation is similar for shale gas, the difference being that the temporary glut of 2005 - 2012 happened because we didn't have the means to export surplus gas from the initial burst of development and it briefly flooded the domestic market. The price of shale gas is still below the level that makes it economic to produce and when it eventually rises to that level, and beyond, it will be too expensive for its customers to buy. Shale gas is also subject to the Red Queen Syndrome.

These arguments have been well-rehearsed many times in this blog and elsewhere. But the key to understanding our energy predicament is ignored in cornucopian cases like Charles Mann's Atlantic piece, which is the role of capital. Non-cheap oil has already worked its hoodoo on advanced industrial economies: it has already destroyed the process of capital formation. These economies were not designed to run on non-cheap oil and they can't, and the capital is no longer there for even the research-and-development to change out the infrastructure, let alone carry out any as-yet-undesigned changes. Furthermore, there is no prospect that we can rescue the process of capital formation at the scale required to continue financing things like shale oil. The absence of real growth in the USA, Europe, and Japan has already destroyed the operations of interest and repayment of debt, and any new debt issued will never be repaid, meaning it is functionally worthless (we just don't know it yet). These impairments of capital formation have left the major commercial banks insolvent and central banks have worked tirelessly to rescue them by issuing more "money" in the form of credit that can never be paid back.

What all this means is that the capital does not exist to run non-cheap oil economies, or to continue indefinitely the production of non-cheap oil and gas, not to mention methane hydrates and other fantasy fuels.

Joe Nocera's op-ed in last week's New York Times was shorter and even dumber (and lazier) than Charles Mann's foolish Atlantic article. It was based on remarks made by Canada's Energy Minister, Joe Oliver, who said (among other patently false and idiotic things) that Canada "has the resources to meet all of America's future needs for oil." Oliver was pimping for the Keystone pipeline project to transport tar sands byproducts from Alberta down to the US. Nocera swallowed everything Oliver said whole, such as "oil mined from the sands is simply not as environmentally disastrous as opponents like to claim." Is that so, Joe? And what's your source for that assertion? Canada's Energy Minister? The slug at the bottom of Nocera's column said he was invited onto the op-ed page because regular columnists Gail Collins and Nicholas Kristoff were off (or on book leave). Nocera's column was disgracefully ignorant. The editors should send him back to the Times business section where unreality is the order-of-the-day.

Now, many people may draw the conclusion that some conspiracy is underway when the major mainstream media report the news so disingenuously, but that is just not so. The reason we, in effect, lie to ourselves incessantly is because of the master wish behind all the subsidiary wishes: we want to keep driving to WalMart forever and we can't imagine any other way of life, let alone the way of life that the contraction of industrial economies is tending toward -- which is to say a way, way downscaled and re-localized economic life centered on farming and artisanal manufacture. Yes, we are going medieval too, eventually, just like the Japanese, who will get there a little sooner than we will. It's hard to swallow, I'm sure. That's why we prefer the more digestible propaganda gummi bear treats like Charles Mann's Atlantic article and Joe Nocera's stupid op ed.

* This was the title on The Atlantic's cover. Charle's C. Mann's article inside was titled "Why We Will Never Run Out of Oil." Shame on the editors of The Atlantic.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

Aftershocks

2013-04-22T12:51:29Z

If the FBI can track down two homicidal Chechen nobodies inside of forty-eight hours of their Boston bombing caper, you kind of wonder how come the Bureau can't detect the odor of racketeering, insider trading, and wire fraud in this month's orchestrated smackdown of the gold futures markets, including the parts played by the Federal reserve, one or more too-big-to-fail banks, self-interested big money players such as George Soros, slumbering regulators at the Commodities Futures Trading Commission, and tractable editors at The Wall Street Journal and The New York Times.

Of course, US Attorney General Eric Holder, who oversees the FBI, has done a fair imitation of a Brooks Brothers store window mannequin for four years, but surely somewhere in the trackless labyrinth of American law enforcement there exists some dogged rogue investigator with a filament of nagging curiosity who might piece together the clunky train of events that may amount to the financial crime of the century. For instance, it can't be so difficult to determine who was behind the several hundred ton mass dump of paper gold contracts a week or so ago. There must be a pretty simple record of the transaction, retrievable with a warrant or a subpoena. Whatever entity did it -- still ostensibly unknown -- knowingly generated losses in the neighborhood of a billion dollars for itself. Was this just the cost of doing business? Or a favor owed, say, from a bank to its godfathers at the Fed, carried out to make the dollar look relatively a lot less unsound than it really is? Or a ruse to allow the custodians of bullion in US depositories re-acquire at bargain prices gold that has been stealthily hypothicated into oblivion? Or just to divert attention from their inability to make good on contracted deliveries of actual physical gold.

No official has yet answered why the Federal Reserve Bank of New York told the German government a couple of months ago that it would take seven years to return that country's gold held in safekeeping (across the ocean from the Russians) since the Cold War. The NY Fed must have a vessel under contract that makes the proverbial slow boat to China look like an ICBM.

Doesn't anybody want some answers to these questions, including how come the two aforementioned major newspapers published front-page stories calculated to justify, if not provoke, the most extreme negative sentiment in the precious metals markets, seemingly coordinated with Goldman Sachs advisories to short those markets? And what about a glance at the trading records to see who executed massive naked shorts? Wouldn't it be interesting if they were the same parties as the dumpers? And why? -- other than a strenuous intervention in the markets to make those markets look unreliable? Does anyone even remember that the purpose of financial exchanges is to verify and authenticate the clearing of trades to provide confidence that markets are honest so that real business can be conducted?

What the interveners have accomplished is only to prove that the gold and silver derivatives markets are unreliable. They may have smashed the trade in that kind of paper, but only achieved a firmer divergence between the derivatives markets and the bullion markets where, for example, the premiums on delivery of silver ounces makes the price exactly equal to the pre-smackdown price. Anyway, nobody believes that the London Bullion Market Association (LBMA) or that the New York Commodity Exchange (COMEX) can deliver. Meanwhile, runs on bullion contracts were starting to uncover a contagion of swindling in precious metals obligations that pervaded the western banking system. It was not a coincidence that the smackdown happened three weeks after the Dutch bank ABN Amro notified clients that it would only satisfy demands for redemptions of gold held in its custody with equivalent cash payments. "No gold for you today!" A fair inference based on subsequent events would be that all the custodians of physical gold bullion have misreported their holdings. And now that actions by the European Union and its agents have ventured into the dangerous territory of plain confiscation, there is not a whole lot of faith throughout the western world by people who are paying attention that an account of any kind in any financial institution is safe. There is good reason to fear runs on everything.

Because the smackdown organizers pulled off their operation in a panic, they probably ignored the potential further negative consequences of their stratagem, namely a worsening loss of confidence in banks generally and in the trade of abstract financial instruments in particular, including currencies. Nervous public officials may be brooding on imminent "bail-ins" and currency controls, but the public may be ready to bail out of the prevailing banking model into things that have been considered more money than "money" for a few thousand years, namely real gold and silver. The basic fact remains: there isn't enough to go around.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

Smack Down Time

2013-04-15T11:46:02Z

What a humdinger last week was in a money world that is chugging toward maximum velocity and turbulence. Readers know (and may be sick of hearing) that I'm allergic to conspiracy theories, but my allergy is not absolute or total and there are excellent reasons to believe that the smack down of gold and silver was an orchestrated event. By whom? So far, in the opaque realm of paper gold sales, we don't know, except that it was a 500-ton dump that set off the larger skid, and it is even quite possible, as one anonymous wag put it on James Sinclair's website, that the buyer and seller were virtually the same entity -- meaning that the probable naked short transaction only amounted to a mere bookkeeping jot when all was said and done.

Anyway, the 500-ton all-at-once dump could only be calculated to drive the price down. Any rational strategic sale of so much gold would be parceled out in smaller amounts over time so as not to drastically impair the sales revenue, as this sale did. And, by the way, who even has the roughly $25 billion holdings in paper gold besides a major government, a major central bank, or one of the Fed's Too Big To Fail handmaidens (Goldman Sachs, JP Morgan, Morgan Stanley)? Or who could afford to eat the $billion-plus loss on the smacked-down sales value? In other words, the usual suspects.

I hate the term The Powers That Be, with its odors of recycled paranoia and lumpen extremism, but signs of collusion abounded last week. First, on Wednesday, Goldman Sachs issued an advisory to short gold as the price flirted with $1600/oz. Then on Thursday, The New York Times planted a front-page story headlined: "Gold, Long a Secure Investment, Loses Its Luster." The story featured a quote by supreme market manipulator and world-class schmikler George Soros: "Gold was destroyed as a safe haven, proved to be unsafe," Mr. Soros said in an interview last week with The South China Morning Post of Hong Kong. "Because of the disappointment, most people are reducing their holdings of gold."

Well, there you have it. Soros sez: Gold = shit. If you get some on your shoe, scrape it off. All that set the stage for the Friday smack down. Notice how falling gold and silver prices make the US dollar look good -- it takes fewer dollars to buy more precious metal. The dollar must therefore be sound! And this is in the interest of whom? Say, perhaps, a Federal Reserve busy systematically melting away the value of dollars through so-called quantitative easing (money "printing" or promiscuous credit creation) plus financial repression (interest rate chicanery), and also a US government so deep underwater on its debt obligations that Treasury Secretary Jack Lew shares office space with the giant squid of the Aleutian Trench.

To complicate matters, the day of the gold smash, rumors flew of a plan by the Cyprus government to sell off its relatively small gold holdings to pay off its EU debt -- didn't happen -- but the rumor had the effect of further queering the gold price some more by implying that the EU would soon come calling on all the PIIGS nations to settle up their vigs with yellow metal.

Thursday, interesting things happened in another ring of the circus. The novelty investment called Bitcoin, having developed a hockey-stick chart profile, shooting up from about $60 a month ago to $260, got smacked smartly back down to $60. It had been attracting a lot of attention as a shelter from international monetary shenanigans -- and hypothetically as an eventual rival to funny-money central bank currencies. Bitcoin is a web-based species of virtual "money" invented by a shady character (or cohort of characters) called Satoshi Nakamoto whose true persona remains mysterious. Bitcoin's supposed virtue is that it can't be confiscated by governments -- though experienced programmers know any website can be hacked -- or otherwise meddled with, making it a more reliable store of value than the traditional "safe harbor" investments such as sovereign bonds and precious metals. Well, okay, but it raises a couple of questions: 1) Does the world need an even more abstract form of "money" than fiat currencies, CDOs, Fannie Mae promissory notes, and JC Penny stock? I don't think so. If anything, the world needs more tangible instruments to represent a store of value, a medium of exchange, and an index of price. Bitcoin is little more than a bundle of algorithms. Granted, math helps with the management of money, but is math "money?" 2) what happens if you can't get online to access your Bitcoin "wallet?" Is Bitcoin, after all, just another example of the techno-narcissism infecting contemporary culture?

That idea is just off the radar screens of Bitcoin pimps such as Jon Matonis of Forbes Magazine who said last week that "civilization won't regress to the state of having no electricity." Really? You think so? Just watch. Electric grids all over the world are aging and decrepit -- the USA's in particular -- and the capital is not there to renovate them. And perhaps you haven't noticed the gathering scarcity problem with fossil fuels. You bet society could regress to, first, spotty electrical service and then possibly no electricity at all in many places. But that is an extreme case because in the meantime all it would take is a "denial of service" incident to render Bitcoin useless -- and the mysterious Mr or Ms Nakamoto him/her/itself induced a half-day time-out in Bitcoin last week, taking its Mt.Gox trading platform off-line.

The week ahead in world money matters looks bloody and gruesome. Japan is committing financial hara-kiri by central bank desperation. In artificially suppressing the gold price, the American Powers That Be (yccchhh....) give China, Russia and other rivals the opportunity to buy gold cheaply, and to do so by dumping some of their US Treasury holdings, weakening the dollar's international exchange value -- which the gold smack down was supposed to enhance! China and Russia have both been steadily accumulating their gold holdings in plain sight, with the possible motive of backing currencies with more appeal in international trade settlements than the dodgy US dollar.

The weeks ahead could be a bloodbath for the four horsemen of monetary apocalypse: the dollar, the Japanese yen, the Euro, and Great Britain's pound -- that is, the core of the so-called advanced economies of the world. What a prankster history is!

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

That Dreadful Day

2013-04-07T21:55:38Z

For the moment, the trend seems pretty clear. Money from far and wide rushes into the US stock markets because every other conceivable place to stash money produces no return, no interest, no increase, at a time when the value of central bank currencies is slip-slidin' somewhere south of Palookaville. The rush into equities gooses equities increasing the rush, goosing the goose. Consider, however, that trends by their nature must last longer than the moment to be trends in the first place. One thing you can be sure of: the trend will end.

Another region of the trend concerns the recent peculiar behavior of gold and silver. Fear and greed may rule the trade in paper instruments, but something else rules the trade in hard metals: uncertainty. These days the uncertainty is very keen, not so much about the direction of the trade in paper - because the trend is up, up, and away - but whether the placeholders for the paper are for real, or whether you get to keep any of them when the dust settles at every dust-up. Markets can go wither they will, but it's another matter when the government slams on capital controls and you can't move your money or redeem it from your account.

With the precedent of Cyprus now established (never mind MF Global), you'd think people all over the planet would be buying gold and silver as stores of value without counterparty risk, but the price keeps slowly sinking. I don't think it's because of the much chattered-about threat of confiscation. The US government could not be dumb enough to try to pull an FDR-style gold grab. This is a different land than it was in 1933. The people who hold gold are exactly the same people who are very heavily armed, and just because the Department of Homeland Security supposedly has been buying up all the ammo on God's green earth, virtually all the people who are heavily armed are already heavily stocked up on ammo, too, and have quite enough to start an insurrection if the treasury agents come calling for their life savings.

Though I'm generally allergic to conspiracy theories, it smells like someone is engineering the downward behavior of the metals. The central banks of the US and Europe have a big incentive for driving the price down: it makes their currencies look stronger - despite the universal QE policies designed to make them actually weaker. That is, it gives the appearance that QE is not doing exactly what it is intended to do: wage currency war by driving down the value of money and incidentally inflating away the cost of debt denominated in these currencies.

I think the Federal Reserve and its TBTF cronies will succeed in driving the price of gold down, perhaps as far as the $1350 range, for a while (a moment, let's say). But by the time it gets there they will have completely wrecked the economies they pretend to represent, and driven many citizens into penury. Now, consider that hyperinflation is always a rather sudden phenomenon. When it comes on, it comes fast and hard, by the day and then the hour. The Fed and its handmaidens will not be able to control it when it happens, because it will spring from all their previous actions, including the concealment of the loss of value of the dollar via manipulation of the gold and silver markets - and Ben Bernanke can't pretend that his helicopter is a time machine. There will be no going back to undo what he's already done. That's the point where you will see the price of gold very quickly head toward $3,500 or even $10,000 and beyond, depending on the damage done and the oafishness of the political response. QE to infinity really translates into dollar wreckage to infinity.

History will record that this crisis of confidence in money was brought on by men who stupidly refused to acknowledge that the terms of daily human existence had changed in 2013. We could save the country and fashion a new economy appropriate to the new era of contraction, but it wouldn't look much like what you see out there now. It would be all about empty highways and empty WalMarts and people turning their energies elsewhere, to their communities, workshops, homesteads, and main streets. We'll get to that place, but the journey to it will be dark and lonely since it will be accomplished by individuals bravely venturing where no politician dares to speak of, and the lonely individuals will receive no support from their culture or any of the authorities who play at political leadership.

There could well come a time, though, when those authorities will be disgraced, dragged down, and trampled, and I would tremble to be there on that dreadful day. That will be the day that the ultimate TV reality show debuts. Call it: Waterboarding the Real Housewives of Beverly Hills. When elites circulate, things get messy.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

Are You Going To Entropy Faire?

2013-04-01T12:43:50Z

Things are breaking loose. Holes have appeared in the fabric of fraud and lies that passes for the world money system. They are black holes, gravitationally sucking in the things breaking loose, and as these things cross their event horizons, they will never be seen again. These things I speak of are the collateral for vast nebulae of falsely generated debts and obligations that were never intended to be honored (i.e. regarded as real). As they vanish down the wormholes of time, they take with them their pretenses of money value, meaning they leave reverberations of impoverishment in the shadowy place that the real world has become.

The process described above - an alchemy of physics - will begin to shed light where the shadows have been, revealing a much harsher world in sharp contours and shocking color, for instance: red, the color of ink representing losses on real balance sheets of every household, every enterprise, and every government the whole world round. A scramble for safety now ensues, not just to lay hold of anything with remaining real "moneyness," but for the resources that drive the kind of economies we have. In other words, for gold and silver, and for oil and gas.

Of course, great geopolitical forces spin in the background. Only idiots subscribe to the paranoid fantasies of "one world government" and "global currencies." In the scramble underway, the things falling apart include units of governance, breaking into smaller pieces: empires, nation states. These will include the unraveling European Union but also the matrix of agreements and protocols that binds together the West - everything from the IMF to the G-7 to the World Bank - into an entropy express. One rather extreme scenario I do subscribe to was laid out by blogger Jim Willie recently: the effort by Russia, China, and others to isolate and neutralize the US dollar as the world's so-called reserve currency by systematically converting holdings of US Treasury bills into gold wherever possible, and to thereby diminish the baleful influence of the Imperial US behemoth. They are assisted in this endeavor by the US itself in its bungling efforts to manipulate and suppress gold prices, as well as our prevarications as to exactly how much gold remains in the various places it is supposed to be stashed - Fort Knox, West Point, and the sub-basement labyrinth of the Federal Reserve Bank of New York - generating ever-greater uncertainty about the extant world gold supply, and hence its value relative to things like currencies. Nobody here can even ask the right questions.

While The New York Times focuses on the momentous issue of real estate sales in the Hamptons, Russia and China will build gold-backed currencies aimed at monopolizing the trade in mineral and energy resources, leaving America and much of Europe to freeze in the dark and sit on gasoline lines at the empty filling stations. For a while that will work to the East's advantage - until it becomes clear that the entropic contraction of industrial economies is for everyone as we veer into a literal world made by hand. That's right, sooner or later Russia and China will get theirs, too. But in the meantime they have the ability to make the story a lot more interesting.

There's plenty of suspense this Easter weekend as observers nervously await the breaking action, to find out how much the oft-cited fear of confiscation has penetrated the regional money centers around Europe. Slovenia, a fairy-tale republic somewhere between Austria and the Duchy of Grand Fenwick, has been nominated by observers as the place most likely to be whacked by EU treasure confiscators. It owes about 10 billion Euros to the EU entropy cloud, with exactly zero chances of meeting its obligations. But then, it's in the nature of such non-linear event sequences that the shadows of the black swan's wings will pass over Slovenia and alight on a chimney-top in some utterly surprising place, say, Latvia or perhaps even Italy. In any case, European money will be on fire and a lot of that smokin' moolah surely will wend its way into the US equity markets under the illusion of safety. It's all just an accident waiting to happen. Money is not what it used to be and not what it seems.

There must be an inverse relationship between the juiced S & P index and the IQs of the public figures in America who pretend to be able to think, so that there are now just six remaining people in the political arena who can articulate the various parts of the mega-swindle that besets us: Bill Black, Jim Rickards, Bill Moyers, Elizabeth Warren, Bernie Sanders, and David Stockman. Stockman is out with a new book, The Great Deformation, that manages to concentrate all the requisite outrage in one gale of rectified objurgation. It is a pleasure to read Stockman - former budget director under Reagan and Michigan congressman - call out the villains from Reagan to Bernanke to Paulson to Rubin and scores of others in the most opprobrious terms. Stockman characterizes the financial action of recent decades a "leveraged buyout of the USA" and it sure looks that way. If you travel around the towns of the upper Hudson Valley - once an industrial corridor full of Jimmy Stewart type burgs - it's beginning to look like the country Borat grew up in. Everything of value that wasn't nailed down was taken, and everything that remains is broken, including the ragged population.

On Sunday night, wire stories had Cyprus close to "going Icelandic," that is, hoisting the middle finger to Brussels and repudiating the money owed. That option may end up seeming more attractive to virtually everybody in the broke world, including even the young college loan debt donkeys of the USA, groaning under their loads as they stand idle in the barren fields of unemployment. Imagine, all those people thinking that nirvana is a place of cold and darkness... with the vague odor of rotting fish hanging in the still air.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

Money Worries

2013-03-25T12:20:21Z

Of course, everybody should have been worried a lot sooner than last week because the basic operating system of global banking is accounting fraud, and has become that stealthily, insidiously, for about fifteen years now. Nothing is what it appears to be anymore. Compound interest has not really been working since 2008 because the world can't increase its energy production enough to generate the additional surplus wealth needed to cover the aggregate interest due all around the world.

What remains are games of musical chairs, Ponzi schemes, frauds, swindles, stonewalls, ruses, ploys, scams, dodges, bluffs, subterfuges, QE martingales, interventions, rehypothecations, pretenses and other modes of evading or disguising reality. The reality is that there is not enough real wealth to go around, certainly not enough to cover the giant web of obligations that masquerades as "money." So, now whenever somebody or some company or government or entity is called upon to put up or shut up, the danger arises that the whole web will disintegrate, since all the participants are broke. You want "your" money? Wait three days. Make that four days. Check that, let's say next week. How about two months from now? Oh, forget about it.... No wonder folks are spooked.

This is really getting out of hand. That's why the ills of the poor, untoward, tiny crypto-nation of Cyprus have got everyone's knickers in a twist. Cyprus is everybody writ small. Cyprus ran out of pretense. It's banks are toast. It can't take care of itself. It is too poor to be a "modern" economy. It failed trying to be a money laundromat for the brigands of Russia and the dope merchants of the Eastern Mediterranean. The tourists and retirees may even have to pack up and leave now because there will be no access to ready cash for day-to-day living.

The terms of the latest bailout announced Sunday night are curious. The New York Times reports that, "the deal would scrap the highly controversial idea of a tax on bank deposits, although it would still require forced losses for depositors and bondholders." Say, what? In fact, there is no material difference between the so-called "tax" and the "forced losses." That was just semantics. The word tax had been bandied about two weeks ago when the EU first proposed that the Cyprus government might pass a legislative act skinning its bank depositors. That didn't go down, of course, so now its just an EU mandated haircut on deposits over E-100,000 and bank bondholders. As for the deposits under E-100,000... you're welcome to them, the catch being that the banks aren't open for business... and the EU bailout money will not arrive in Cyprus until May. They are sending it by packet boat from Antwerp and hoping for fair winds.

Cyprus has to become somebody's ward again. Cyprus was either Turkey's or Great Britain's ward for most of the past 400 years. The population is ethnically split about 60 / 40 Greek / Turkish making for chronically uncomfortable governance. The island remains physically divided into two separate and hostile north-south zones. If you look at it on the map, it is nowhere near Greece, but rather tucked right up under Turkey's bosom. It is strategically a naval hub of the Middle East and is occupied both by NATO troops and by two remaining British military bases - a convenience given the ongoing deterioration in Middle East geopolitics, as nation after nation melts down, and threatens to impinge on much of the world's oil supply. My guess is that Turkey will eventually recover administration of Cyprus by dint of sheer geographical proximity. It is said to possess considerable offshore gas, but the politics there are so problematic that the stuff may not be logistically recoverable, especially with the rest of the Middle East in flames.

The current bailout deal with its confiscations and haircuts is the first time in the multi-year melodrama of the wobbling EU that big-shot EU officials had voiced the idea that they had any authority to snatch private property (money) of a member's citizens. So, instantly the notion reverberated around Europe that they could easily do the same thing in Italy, Spain, Portugal, Ireland, Greece - the usual broke suspects - if the EU was pushed too hard. And a few nervous nellies stateside began to wonder out loud when the US government might try some confiscational monkey business, such as the much-blogged-about notion of forcing retirees to put all their money in US Treasury instruments.

More to the point perhaps was the additional notion that the money was not there in the first place. Or anywhere. It was not snatchable. The banks were insolvent. They had pissed their meager reserves away on bad paper - like every other financial enterprise around the world - and the collateral was a joke. Depositors in Cyprus banks might indeed lose their money, but the EU would not collect any theoretical plunder either, so the whole bailout exercise was just another empty bluster. Even more to the point was the additional notion that no money in any bank in any sovereign EU member would be plunderable because there is no money in any of them, and the fiasco in Cyprus was leading to the recognition of the utter bankruptcy of the system.

In other words, this charade is far from over. There will be more bank runs. They may or may not take the form of disgruntled depositors physically standing in line along the pleasant blocks of Europe's cities as the street trees burst into lovely spring bud and flower. In the first flush of activity post-Cyprus, a lot of hypothetical cash will probably just end up shifting out of Europe altogether and into the clutches of Jamie Dimon and his fellow miracle workers, primed for grand new acts of rehypothication with the inflow.

The chatter around this crisis has not included any consideration of the dark forces roiling in the alternate universe of rackets known as derivatives -- which should now be primed to detonate whatever remains of financial legitimacy even while governments and central banks rally with new sets of excuses and "ring-fence" strategies for the floundering banks. All the ruling parties this whole world round won't face the fact that absolutely nobody can cover his losses, and the losses just keep mounting with every central bank keystroke. Welcome to the age of phantom money.

Things Went Awry

2013-03-18T12:58:40Z

If you've never had major surgery before there's the cool part after they've got you all scrubbed and prepped in pre-op, and inserted IVs in your veins, and you're ready to rock and roll with whatever's on the program. I'm familiar with this routine. It's the only part of the surgery your apt to remember. Then they start pumping fentanyl and versed (midazolam) into you and things get extremely pleasant instantly. You're riding a gurney, a rolling taxicab, through the maze of subterranean hospital hallways and everyone's wearing the same outfit: green scrubs with a big puffy beret, and there's a party going on exactly where you're headed: the room where they disassemble you and put you back together.

I was in for a minimally invasive cervical decompression on March 4. They were going to thread some arthoscopic instruments into the spaces around my neckbones - the cervical vertebrae - and grind down some bone spurs and fix some other crap that was pressing on my spinal cord and giving me grief. I was goofing with the anesthesiologists as I rolled into the OR, doing an old routine from a Samuel Beckett novel, Molloy, that I'd memorized back in college called The Story of the Stones ... "I took advantage of being at the seaside to lay in a store of sucking-stones. They were pebbles but I called them stones. Yes on this occasion I laid in a considerable store...." It's a great piece, goes on for pages and pages of absolutely absurd poetic drivel, and the chief anesthesiologist (Albany Med is a teaching hospital) was an Irishman like Beckett so I thought he'd appreciate it.

They'd just given me the final chemical push into dreamyland and inserted the breathing tube when the EKG unit that my heart was hooked up to started reporting strange activity. The waveform looked bad. My blood pressure shot way up. They stopped the operation. I don't know this on my own, but I'm told that as they yanked the breathing tube out I seamlessly resumed The Story of the Stones "...I distributed them equally among my four pockets and sucked them turn and turn about. This raised a problem which I first solved in the following way...."

In the commotion I assumed that that operation had concluded and all was well. I was then informed what actually happened, wheeled off to some post-op holding pen, and left to stew in drugged mystification and disappointment for a while. Eventually, they wheeled me up to a neurosurgery recovery ward to cool my jets until some new order of business was lined up.

The next two days I had heart tests. First was the common stress test. You get a dose of radioactive fluid, wait an hour watching Honey Boo Boo videos until it penetrates your tissues, and then get a set of fancy pictures of your heart taken under this big revolving drum of a camera. Then they put you on the treadmill to study how your heart performs under a controlled strain. Turned out the treadmill interface with the EKG was on the fritz, so they took me off and opted for the "hot-shot" instead. The hot shot is a dose of some chemical that fools your heart into thinking it had just run the 100 yard dash. Meanwhile you're hooked up to an EKG readout. It was like a chemically-induced anxiety attack. The EKG on me produced a strange wave form. The pictures, on the other hand, showed nothing conclusive.

The next day I went to the angiogram lab. It's a subterranean room chilled like a walk-in-fridge because all the computer equipment stuffed into it doesn't like to get warm. I got another IV "cocktail" down there while they shaved my groin and threaded a catheter wire into my femoral artery up toward my heart. There were at least eight technicians roistering around in there including the cardiologist who ran the lab. Some kind of Star Wars type of "music" filled the room, and the ambience was rather like a dance club around two o'clock in the morning, minus super-models. The upshot of the test was that I had a 90 percent blockage of the Left Main coronary artery, the "widow-maker." The other coronary vessels were clear.

It had to get fixed. The next step was to decide whether they would fix it with a stent or a bypass surgery. The stent is a little wire basket inserted with a catheter. They have two kinds: 1) plain; 2) coated with anti-clotting chemicals. It will hold a blocked artery open, but it has its limitations. You have to stay on blood-thinner drugs practically forever and the stent can just fail. The heart-surgeons and their cardiologist office-mates came around to talk it over with me and we all decided that a bypass was the way to go.

I spent the next six days as a hostage waiting for a surgery slot. The doctors didn't want to cut me loose because the widow-maker might take me out just lifting a bag of onions in the supermarket, and I suppose there were liability issues - like: this guy's heirs and assigns will sue us if we let him go for a few days and something happens. I had visitors, and my girlfriend kept me company for big chunks of the day, and I read a biography of Stalin - a much more interesting chap than I'd previously understood him to be - and, of course, I enjoyed the fabulous hospital cuisine. Oh, I wrote last week's blog somewhere in there, too, on my iPad.

Tuesday morning it was back to pre-op. This time, I didn't feel as frisky as the last when I performed Beckett. The anesthesiologist resident was a whip-smart Asian beauty with a jaunty head-rag and a droll sense of humor, and that was good enough. I don't even remember them shaving my chest, let alone sawing through my sternum and retracting the ribs to reveal all the marvelous pulsing wet gunk inside. The operation lasted about five hours. For about four of them, my heart was stopped and my lungs collapsed (on purpose, to get them out of the way). My blood and oxygen circulated through a machine. That was my "Kurzweil" moment. I don't remember dreaming up any avatar super-model sex partners in the process.

The surgeon "harvested" a couple of blood vessels from around my pectoral muscles to use as grafts. They used to go straight for the leg veins, but the chest veins are stronger and more flexible. They ran two bypasses around the blocked Left Main coronary vessel. The Left Main provides nourishment and oxygen for the whole left side of the heart, so you want to make sure that the bypasses deliver a lot of flow. They left three drainage hoses and a temporary pacemaker wire in my thoracic cavity, wired the sternum back together, and called it a day.

I came to, partially anyway, in the post-op with the breathing tube jammed in my craw and, quite possibly, the most unpleasant range of sensations I'd ever felt. A nurse or patient assistant sat nearby and I tried to communicate that the breathing tube was killing me, but he just said he couldn't understand me. So, I tried writing it out on my forearm with my index finger. He remained perplexed. Finally, I wrote it upside down and backwards, and he said, "Oh, 'gagging.' Yeah. Don't worry, it's normal."

The next 48 hours in the cardio intensive care unit amounted to a diminishing set of ghastly sensations. I was wired up to several machines and the hoses were dumping liters of accumulated fluid. Sleep was out of the question, such a racket of beeps and gurgling surrounded me. They got me sitting in a chair and then walking around the unit within a day of surgery. The other people on the ward were amazingly old, it seemed to me, pale, shriveled, grub-like creatures, like the nematodes you find digging up a patch of lawn. It was a stretch to imagine them surviving this.

The doctors came by now and again to check in with me. They mostly gave you the impression that they wanted to be somewhere else, and were impatient to get there. But since they came by in the evening, and still wore the scrubs they put on at seven in the morning, you got the feeling that they were horribly overworked, too. After two days in the ICU, they sent me upstairs for one more night, and then I came home.

The feeling of having been hit by a truck and then having had my brains pulled out of my head through my nostrils is beginning to dissipate. A few provisional conclusions. 1) I was lucky to find out I had a blocked artery in the way I did. 2) I was lucky to get it fixed, pronto. 3) Unlike many of my boomer friends in these later innings of life, I know exactly what the condition of my heart is now. 4.) I didn't have a heart attack at any point in the ordeal, and the muscle is actually quite strong, so I will be here to torment my adversaries and auditors for quite a while.

I now await the cavalcade of bills. It was impressive to see how hermetically sealed off the "care-givers" (doctors, nurses, etc) are from the business side of the hospital. At no point in the ordeal was the cost of anything discussed. Therefore, apart from the great benefit of staying alive, one is firmly in the grip of what amounts to an outrageous and indecent hostage racket. I'll keep you posted on how that unravels in the weeks ahead, when I'm not running my mouth in other directions.

Apart from that, too, I'm grateful to the doctors and nurses whose skills allowed me to stay on board the mystery train and see how Ben Bernanke's grand experiment works out, among other temporal melodramas. And thanks to many readers who sent emails of support and concern.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

Fortress of Lies

2013-03-11T13:24:21Z

History has a special purgatory where it sometimes stashes feckless nations punch drunk on their own tragic choices: the realm where anything goes, nothing matters, and nobody cares. We've surely crossed the frontier into that bad place in these days of dwindling winter, 2013.

Case in point: Mr. Obama's choice of Mary Jo White to run the Securities and Exchange Commission. A federal prosecutor back in the Clinton years, Ms. White eventually spun through the revolving door onto the payroll of Wall Street law firm Debevoise & Plimpton, whose clients included Too Big To Fail banks JP Morgan, Bank of America, Morgan Stanley, and UBS AG, defending them in matters stemming from the financial crisis that began in 2008, as well as other companies that needed defending from allegations of financial misconduct, such as the giant HCA hospital chain (insider trading), General Electric (now a virtual hedge fund with cases before the SEC), and the German-based Siemens Corporation (federal bribery charges).

A republic with a sense of common decency -- and common sense -- would have stopped the nomination right there and checked the "no" box on Mary Jo White just for violating the most basic premise of credibility: that trip through the revolving door that shuttles banking regulators from the government agencies to the companies they used to oversee and sometimes back again.

Has there not been enough national conversation about the scuzziness of that routine to establish that it's not okay? Does it not clearly represent the essence of dysfunction and corruption in our regulatory affairs? Didn't President Obama promise to seal up the revolving door? So how could Mary Jo White possibly be taken seriously as a candidate for the job? And how is it possible that everyone and their uncle, from The New York Times editorial page to the Sunday cable news political shows to the halls of congress, is not jumping up and down hollering about this? Well, because anything goes, nothing matters, and nobody cares.

The funny part is that, when challenged over her past connections to the banks and companies she would now have to regulate, Mary Jo White offered to recuse herself from future cases involving them. So, from the get-go as SEC head, Ms. White would not concern herself with the doings of JP Morgan, Bank of America, and Morgan Stanley? How is it that gales of laughter did not blow Mary Jo White clean out of the hearing room? Is there not another qualified person from sea to shining sea who could come in and do the job without one hand tied behind his or her back?

Now it also turns out that upon leaving Debevoise & Plimpton, Ms. White is scheduled to collect monthly retirement checks from the company amounting to a half million dollars a year -- that's for life, by the way -- while she supposedly runs the SEC. How is that not a conflict of interest? The remedy proposed by Ms. White and her attorneys was for her to take the retirement loot as a lump sum during her tenure as SEC chair, after which she could revert to collecting her pension in the $42,500 monthly payouts. Pardon me, but, well ...what the fuck? What planet are we on?

As if that's not enough, Ms. White's husband, John W. White, is a partner at another giant Wall Street law firm, Cravath, Swaine & Moore, which frequently tangles with the SEC on behalf of its clients. Mr. White proposed to change his pay structure while his wife runs the SEC. More gales of laughter. He is also on the advisory committee of the Financial Standards Accounting Board, the group that oversees national accounting practices and which, in 2009, infamously changed its Rule157 so that TBTF banks could "mark to fantasy" the fraudulent CDOs and other bond-like "innovative" securities that they created -- many of which they had to eat after the housing bubble bust when the collateral for these swindles lost its value and the "innovators" could no longer pawn the stuff off on credulous pension funds and other client "muppets."

The silence over this disgraceful matter -- and many others like it, including the dead hand in the empty suit posing as US Attorney General -- indicates that not only is the rule of law extinct in this country, but so are public figures of principle and credible news organs. Nobody has made a noise about it. Anything goes, nothing matters, and nobody cares. So, the objection to it has to come from outside the authorized channels. And the consequences will mount outside the fortress of lies that the establishment has become.

Reply To Gary North

2013-03-03T23:56:56Z

Last week, extreme right-wing, hyper-patriot blogger and "Christian Reconstructionist" Gary North published a piece that bounced around the Web titled "James Howard Kunstler: Foul-Mouthed Apologist for the Good Old Boys." Gary North was inflamed because I had put out a recent blog inveighing against the chain-store rape of local economies from sea to shining sea. North wrote:

Consider his [JHK's] most recent screed. It begins with an attack on the most successful free market retailing operation on earth, Walmart. He uses Walmart as a representative company for all of the low-price, high-volume box stores. He hates them all.

In the United States, millions of customers return day after day to buy at stores like these. But Kunstler, who is an arrogant Leftie elitist, dismisses them as helpless rubes who need protection from price competitive retailers. And who will supply this protection? The Good Old Boys.

My point, of course was that the chain store business model, and WalMart in particular, has destroyed local Main Street economies all over America, as well as the networks of social relations that went with these economies, in which local business owners employed local people and had to take responsibility for how they treated them. The damage to American civic life ought to be self-evident in the desolation of thousands of crumbling traditional downtowns, the extermination of a whole class of local business owners (and the local institutions they cared for), the funneling of business profits out of every local community to a few corporate bank accounts in distant places, as well as the desecration of the once-rural landscape outside our towns, now a uniformly profaned wilderness of parking lots and the tilt-up warehouses of chain-store commerce.

My further point was that the WalMart model of business now faces its own demise as America contends with the realities of a what will prove to be a permanent energy and capital formation crisis, requiring us to downscale our activities and rebuild fine-grained local networks of economic interdependency.

Gary North's intemperate response to these ideas illustrates everything that has become malignant and dishonorable in conservative politics lately. It also displays a brand of shocking stupidity that bodes darkly for America's political future. There are many towns across America where WalMart is not just the only place to buy all goods, but the chief employer, too. How is it a good thing for anyone's home town to be dominated by such a single despotic entity? How does it square with the rhetoric about "liberty" spouted by conservatives? How is it so different in kind from the tyrannical one-party rule of the old soviet system that is the pole star of conservative animus?

WalMart is the largest corporate employer in the USA and most of its rank-and-file store workers barely get paid enough to live on (those with children fall statistically below the official poverty line). They have no control over their working lives, are cruelly deprived of full-time status in order to avoid giving them health insurance, have been subject to lock-ins during late-shifts, and are forced to attend off-hour browbeating ("coaching") sessions with no pay. WalMart trumpets "made-in-America" propaganda around its stores but buys the majority of its merchandise from foreign countries -- over $20 billion in merchandise from China every year, and more from other overseas vendors.

For Gary North, the supposed benefits of "bargain shopping" trump the fantastic damage that this mode of commerce wreaks on the nation. It was some bargain to sacrifice all the local business enterprises in this land, and the careers that went with them, and the incomes they produced, and the choices they represented so that underpaid chain store serfs could save five bucks on a toaster-oven. Gary North writes:

Kunstler is merely one more hapless defender of local business oligopolies. He stands in front of the freight train of price competition, yelling: "Stop!" He will be run over, just as they all have been run over.

Gary North is not being ironic when he characterizes the Americans whose independent businesses, lives, and towns were destroyed by WalMart as "good ole boys." The owners of all those shuttered mom-and-pop stores along the vacant Main Streets of America were oligarchs?

Gary North is exactly what I have in mind when I refer to the "corn-pone Nazis" who threaten the political future of this country. Either he's a hostage to his own ideological rigor mortis or he is a genuine fool. He's certainly a fake patriot. He literally knows not what he actually stands for. There is no precedent for such malign totalitarian nonsense in American history. But it matches the spell that Germany fell under in 1933. And it can happen here, too.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

Not So Smart

2013-02-25T14:34:39Z

"The Fed can afford to lose money because it can simply print more."

--The New York Times

One striking but little discussed element about the new Netflix Washington political drama series, House of Cards, is that every time a character picks up a cell phone, something bad happens. The character's phones shadow them at every turn like evil twins, giving the impression that the US government, and everything in its orbit, is run not by human beings but by cell phones. The people attached are merely puppets of the phones.

I don't think this is a sign of the rumored "singularity," the point at which human and machine intelligence supposedly meld into a shimmering synthesis of silicon masturbation fantasies. Rather it's just another demonstration of the diminishing returns of technology -- or how thinking you're so smart actually makes you stupider. Surely we are a stupider nation politically than we were before the age of texting, drones, and high frequency trading.

I have no predictions about what exact effects the so-called Sequester might bring about when its dreaded hammer rings down on Friday. But something that works as a bitch-slap upside this nation's tattooed head is apt to be salutary, if only to demonstrate to the apathetic masses and its grifter leaders that anything which can't go on forever, eventually won't.

What disturbs me, a non-right-winger politically, is that the US government should not try to replace a functioning real economy of volitional exchanges, especially if necessity compels that economy to change. That is what our government has been attempting by stealthy increments for decades and now with reckless abandon in the new era of a permanent contraction that no political figure can fathom. Lately, this trend has been ramped up under the wishful hypothesis that some magical new technology or financial "secret sauce," will eventually bring back a return to the nirvana of techno-industrial boom times, if only we can be "smart" enough. The wishing is evident in such con-jobs as the shale gas bubble ("We'll soon be energy independent") and the idea that a few new Apple fabrication factories, staffed largely by robots, will save the remnant American blue collar class from their fate as tattooed convenience store layabouts.

Of course there is plenty of real work to do around the USA in transitioning to the next phase of history, but we're not interested because it might violate our narrow comfort zone. We need more people to start working at local farming. When agri-biz fails it will happen hard and fast because of its seasonal nature, and the familiar distribution networks (supermarkets) will fail with it. American political leadership won't inform its citizen-subjects about this beforehand, or shift policy supports away from their ag-industrial client-patrons. To be fair, American citizens can't see themselves working in the crop rows, either. They will choose to starve rather than do what they've seen Mexican migrants do for a couple of generations -- and they will starve, eventually, too, even with The Real Housewives of Beverly Hills playing on the flat screen in the background.

If we weren't such a stupid people in thrall to our "smart" phones, we'd be rebuilding the US passenger railroad system for the day, not far off, when the grand entitlement of Happy Motoring rather suddenly vaporizes for a significant chunk of the population. The lack of interest in that project is really something to behold. Politicians who systematically "de-fund" the rail corridors, which is the case here in the Northeast, do it because they are as clueless as their constituents about what's really coming down. Rather, both the politicians and the public place their bets on "self-driving cars" powered by an as-yet-to-be announced sovereign replacement for liquid hydrocarbon fuel. The net effect of that stupidity is that your children and grandchildren will lead lives in which they rarely travel more than ten miles from home.

What also gets me about the aptly-named tele-drama House of Cards is the way all the leading politician characters are seamlessly conveyed around Washington D.C. by chauffeured limousines, even two-bit congressmen from states where people don't eat with knives and forks. Cossetted in their air-cooled back seats, they relentlessly romance their smart phones, making more trouble for themselves and for everyone in this sad-ass feckless country. What a tragic conceit for the nation of dunces we have actually made of ourselves.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

Scale Implosion

2013-02-18T14:06:51Z

Back in the day when big box retail started to explode upon the American landscape like a raging economic scrofula, I attended many a town planning board meeting where the pro and con factions faced off over the permitting hurdle. The meetings were often raucous and wrathful and almost all the time the pro forces won -- for the excellent reason that they were funded and organized by the chain stores themselves (in an early demonstration of the new axioms that money-is-speech and corporations are people, too!).

The chain stores won not only because they flung money around -- sometimes directly into the wallets of public officials -- but because a sizeable chunk of every local population longed for the dazzling new mode of commerce. "We Want Bargain Shopping" was their rallying cry. The unintended consequence of their victories through the 1970s and beyond was the total destruction of local economic networks, that is, Main Streets and downtowns, in effect destroying many of their own livelihoods. Wasn't that a bargain, though?

Despite the obvious damage now visible in the entropic desolation of every American home town, WalMart managed to install itself in the pantheon of American Dream icons, along with apple pie, motherhood, and Coca Cola. In most of the country there is no other place to buy goods (and no other place to get a paycheck, scant and demeaning as it may be). America made itself hostage to bargain shopping and then committed suicide. Here we find another axiom of human affairs at work: people get what they deserve, not what they expect. Life is tragic.

The older generations responsible for all that may be done for, but the momentum has now turned in the opposite direction. Though the public hasn't groked it yet, WalMart and its kindred malignant organisms have entered their own yeast-overgrowth death spiral. In a now permanently contracting economy the big box model fails spectacularly. Every element of economic reality is now poised to squash them. Diesel fuel prices are heading well north of $4 again. If they push toward $5 this year you can say goodbye to the "warehouse on wheels" distribution method. (The truckers, who are mostly independent contractors, can say hello to the re-po men come to take possession of their mortgaged rigs.) Global currency wars (competitive devaluations) are about to destroy trade relationships. Say goodbye to the 12,000 mile supply chain from Guangzhou to Hackensack. Say goodbye to the growth financing model in which it becomes necessary to open dozens of new stores every year to keep the credit revolving.

Then there is the matter of the American customers themselves. The WalMart shoppers are exactly the demographic that is getting squashed in the contraction of this phony-baloney corporate buccaneer parasite revolving credit crony capital economy. Unlike the Federal Reserve, WalMart shoppers can't print their own money, and they can't bundle their MasterCard and Visa debts into CDOs to be fobbed off on Scandinavian pension funds for quick profits. They have only one real choice: buy less stuff, especially the stuff of leisure, comfort, and convenience.

The potential for all sorts of economic hardship is obvious in this burgeoning dynamic. But the coming implosion of big box retail implies tremendous opportunities for young people to make a livelihood in the imperative rebuilding of local economies. At this stage it is probably discouraging for them, because all their life programming has conditioned them to be hostages of giant corporations and so to feel helpless. In a town like the old factory village I live in (population 2500) few of the few remaining young adults might venture to open a retail operation in one of the dozen-odd vacant storefronts on Main Street. The presence of K-Mart, Tractor Supply, and Radio Shack a quarter mile west in the strip mall would seem to mock their dim inklings that something is in the wind. But K-Mart will close over 200 boxes this year, and Radio Shack is committed to shutter around 500 stores. They could be gone in this town well before Santa Claus starts checking his lists. If they go down, opportunities will blossom. There will be no new chain store brands to replace the dying ones. That phase of our history is over.

What we're on the brink of is scale implosion. Everything gigantic in American life is about to get smaller or die. Everything that we do to support economic activities at gigantic scale is going to hamper our journey into the new reality. The campaign to sustain the unsustainable, which is the official policy of US leadership, will only produce deeper whirls of entropy. I hope young people recognize this and can marshal their enthusiasm to get to work. It's already happening in the local farming scene; now it needs to happen in a commercial economy that will support local agriculture.

The additional tragedy of the big box saga is that it scuttled social roles and social relations in every American community. On top of the insult of destroying the geographic places we call home, the chain stores also destroyed people's place in the order of daily life, including the duties, responsibilities, obligations, and ceremonies that prompt citizens to care for each other. We can get that all back, but it won't be a bargain.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.

State of the Union

2013-02-11T14:09:35Z

The fog of chatter about Federal Reserve money-printing shenanigans, currency wars, fiscal intransigence, exchange rates, and alphabetized rescue operations conceals the central reality of the historical moment: that all industrial economies now face epic contraction, even rip-roaring China in its absurd and spectacular bid to become the latest drive-in utopia. The so-called advanced nations of the world are all sliding toward something less than they wish to be, and the so-called developing nations will backslide further into poverty and anarchy where development will never happen.

The implacable contraction underway is the simple result of growing scarcity of cheap oil, the master resource. Thus, in a world where fantasy has replaced analysis, the propaganda channels brim with false news of America's coming "energy independence" and the rebirth of domestic manufacturing, the coming electric car fleet, and space tourism. There is also chatter among the paranoid that an imagined elite has deliberately engineered American collapse for fun and profit, with sideshows about the Department of Homeland Security promoting social upheaval in order to make a show of putting it down. This is all bullshit concealing the futile machinations of people so unfortunate as to hold political office in an unraveling they can't control. Where control is no longer possible, paranoid fantasies fill the vacuum of wishing for control.

One thing you can be sure of: the current sociopolitical weather will change. A front will blow through and sweep the fog away. So many circles of hazard are spinning around events that some fast-turning object will come off its axis and start smashing all the fantasies. When that happens, it will be every community for itself, and where there are no real communities -- for instance, the vast matrix of suburban noplaces that America emergently composed itself out of in a tragic quest to become its own televised fantasy -- we'll discover the dark side of the "liberty" that so-called conservatives endlessly invoke, in all its screaming eagle iconography.

Not since the Civil War (1861 - 65) has anything bad of this scale happened within the United States itself and the public is unprepared despite our total immersion in the on-screen ersatz heroics of avatars such as Dwayne Johnson. The terrible convulsion of the 1860s was preceded by a political time much like ours is now, with figures (calling them leaders is inaccurate) of no conviction backpedaling furiously toward strife.

Remember these things if you tune in to watch President Obama move his lips on Tuesday amid the incessant applause in the House chamber. He'll speak the words "climate change" and the hall will rock with thunderous handclapping -- but it won't mean anything because both the president and the people have no intention of changing the way we live. Mr. Obama will cheerlead for economic growth and he will be talking out of his ass. It's the nature of this contraction that economic growth is absent. You can have plenty of economic activity -- especially if you re-form (literally) the systems we depend on, such as farming, commerce, medicine, and transportation -- but it won't be expressed favorably in the GDP stats or the balance sheets of CitiGroup and Morgan Stanley.

At the core of this contraction is the disappearing act of real capital -- that is, accumulated wealth -- for the excellent reason that we are squandering what remains of it in the futile effort to keep living the way we do. But it will be vanishing fast, contrary to the view of such fantasists as David Leonhardt, Washington bureau chief of The New York Times -- catch him on the current Slate Political Gabfest -- who thinks that the Growth Fairy is about to land on the south lawn of the White House.

The State of the Union Address is happening in a peculiar quiet moment when all the financial brushfires of the time have been reduced temporarily to a smolder that conceals the full involvement of the roots under the surface. Our economic system is burning down. Nobody wants to talk about the system that will have to replace it, which I call a world made by hand.

The fortunate few will be those who have already established themselves in an authentic community of helping hands, who have some tools -- and I don't mean Adobe Photoshop or the latest iPhone app -- and laid in some bits of silver and gold.

____________________________________

For a complete list of books by James Howard Kunstler and purchase links, CLICK HERE.