Strange Days (why we're screwed) - Jim Kunstler

[Pale Blue Dot]

Even while a wave of reflex nausea washed over America last week, and the unemployment rolls swelled by much more than another half million, the greatest stock market suckers' rally in seventy years pulled in the last of the credulous. These are strange days. The earth is heaving and the buds swelling again -- at least north of the equator, where most of the action is -- and the global economy, which was supposed to be a permanent new add-on to the human condition, is sloughing away in big horrid gobs. But no one in charge of anything can believe it. The banking fiasco has introduced so much noise into the system that world leadership can't think straight.

What they're missing is real simple: peak oil means no more ability to service debt at all levels, personal, corporate, and government. End of story. All the other exertions being performed in opposition to this basic fact-of-life amount to a spastic soft-shoe performed before a smokescreen concealing a world of hurt. If the "quantitative easing" (money creation) and fiscal legerdemain (TARPs, TARFs, et cetera) happen to jack up the "velocity" of the new funny-money, and the world resumes its previous level of oil use, the price of oil would rise again -- this time astronomically because the previous crash of oil prices crushed the development of new oil projects to offset depletion -- and the global economy will crash again. Only the next phase of the disease is liable to move beyond the financial and into the social and political realms. Disorder of various kinds will rule -- toppled governments, civil unrest, international tension and conflict.

The US is doing everything possible to avoid these awful realities, but probably the worst self-deception is the idea that everything would be okay if we could just "re-start lending." That's just not going to happen. There is no more capacity to service the debt we've already piled on. Americans borrowed too much, and the bankers who made obscene fortunes in fees and bonuses in fraudulent lending managed to leverage this unpayable debt into the greatest collective swindle the world has ever known. The swindle has sent poison into every cell of the macro socio-economic organism, and further swindles are unlikely to revive it.

The rally in stocks, the financials in particular, could go on for another month or two. In the meantime, banks are striving desperately to avoid calling in more bad loans -- especially in commercial real estate, malls, strip malls, Big Box power centers -- because they don't want any more losses on their balance sheets. That can only go on for so long, too. Sooner or later the daisy chain of credibility in the fundamental transactions of business lose legitimacy and something's got to give.

My guess is it will first take the form, sometime after Memorial Day (but maybe sooner) of wholesale liquidations of everything under the North American sun: companies, households, chattels, US Treasury paper of all kinds, and, of course, the S & P 500. We'll soon find out whether an organism the size of the United States can run an economy based on one family selling the contents of its garage to the family next door. My guess is that this type of economy won't support the standards of living previously enjoyed in places like Dallas and Minneapolis.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2009/04/strange-days.html

Jim Kunstler wrote the book The Long Emergency - published 3 years ago - in which he correctly predicted the mess we're in now. He's one of the ones who saw it coming.

[Democracyinkind]

1. Don't forget to mention his two 90's classics....

... "home from nowhere" and the "geography of nowhere" ... Two books that really shaped my architectural paradigms.

[Pale Blue Dot]

2. Kick. nt