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The European
Union came up with a trillion dollar bail-out for itself at the dawn's early
light. Plus, each member gets a Latvian prostitute, gratis. The Germans will
love this. It already goosed the Euro back above $1.30 -- just when they
hoped a lower Euro would help them move a few more export goods off the
shelves. I expect that Mrs Merkel is already
catching an earful. A few hours earlier, her coalition of Christian Democrats
and free Democrats got their joint ass kicked in a North Rhine - Westphalia
local election....
I
mention these events reluctantly, knowing how averse we Americans are to news
out of Old Europe, that boring backwater of sclerotic cafe lay-abouts, socialistic train service, and
less-than man-sized portions of things that real men don't eat anyway.
The
question begging itself here, of course, is how Europe intends to come up
with roughly a trillion in bail-out money. Sell Portugal to China? Cut Greece
up into bait and catch whatever fish are left in the Mediterranean Sea?
Frankly, I'm stumped. Talk about robbing Peter to pay Paul.... All the
European nations are already so hopelessly enmeshed in chains of unfulfillable counter-party obligations that the bail-out
might as well be a game of musical chairs played in the Large Hadron Particle Collider, set to the tunes of Karlheinz Stockhausen. The European bail-out is, in fact,
an absurdity. I predict that the effect of the announcement will last all of
one trading day on the stock markets.
The truth is that the imbalances of global finance are so grotesque now
that the whole money system is hanging together with nothing but spit and
prayer. I get rafts of e-letters every week warning of a supposedly-coming
global currency -- a companion idea to the notion of a one-world government.
Both are idiotic fantasies. Events are taking the nations of the world in the
other direction: towards break-up, down-sizing, down-scaling.
Likewise, if major currencies such as the Euro and the dollar blow up,
they're much more likely to be replaced by more local bank-notes backed by
gold than by some hypothetical Amero or Globo-buck.
At
seven a.m. Eastern time, the European stock markets were zooming, and
Bloomberg even carried a wonderfully mysterious headline saying Greek
Bonds Rally. That was especially rich -- like, who in the fuck is going
to load up on Greek bonds now? Is there a pension fund somewhere run
by such dimwits that they would sell their positions in the Goldman Sachs
issued Timberwolf CDO in order to get in on the new
bargain in ten-year Greek sovereigns? I hope those pensioners are prepared to
spend what remains of their lives selling chestnuts from pushcarts on the
streets of Oslo, because they sure won't be clipping coupons in front of any
World Cup telecast.
As
if life in the USA wasn't surreal enough last week.
Once upon a time, the stock market was a place
where people with capital went to look for productive activity to invest in
-- say, a company devoted to making soap flakes, an underpants factory. Now
the market is a robot combat arena where algorithms battle for supremacy of
the feedback loops. Thursday's still-baffling fifteen-minute
"crash" was an excellent demonstration of the diminishing returns
of technology. People too-clever-by-half, aided greatly by computers, have
now gamed the investment indexes so successfully that these markets no longer
have anything to do with investment -- they're just about shaving
micro-points of profit at high volumes by micro-milliseconds off mere
differentials in... math! This is truly quant
heaven, a place where only numbers matter and there is no correspondence to
anything in the real world. In other words, last Thursday's bizarre action
was a warning that the American stock markets have flown up their own
aggregate ass.
These algo-robots may be elegantly complex, but
they are really no more than triggering mechanisms, and Thursday's --
whatever it was -- glitch, let's say, ought to be regarded as a mere
preview of coming attractions for a full-on feature clusterfuck
in which the putative contents of these stock markets get sucked into a black
hole so vast that the trading desks will have to find a way to arbitrage
infinity to ever again catch a glimpse of America's receding wealth. And it
could all happen in a finger-snap.
Why would anybody not heavily medicated stay invested in the stock
markets? Well, the answer must be that they're not. The few still hanging
around are the institutionals with nowhere else to
go, the pitiful pension funds or the pathetic college endowment funds
desperately chasing "yield" in a world where once-sturdier
instruments yield zirp-o -- and these poor chumps
are getting played and played out. The only other remaining marketeers are -- you guessed it -- the too-big-to-fail
banks, the Federal Reserve, and possibly the US Treasury itself playing
front-running games and algo stunts and black box
buy-ups, and carry-trade rackets, and -- let's not forget -- outright
swindles.
We tend to forget that all this hugger-mugger once had a relation to
real economies. The basic truth about real economies -- at least the
industrial-strength ones -- is that they cannot be successfully managed on
the basis of revolving debt in the context of no growth -- and no growth is
exactly the bottom line of the peak oil story so revolving debt is finished
for now. Speaking of oil, the Deepwater Horizon disaster (still ongoing) has
gotten so boring to the editors of The New York Times that further
news about it has been banished from the front page of the paper. Too
depressing, I guess.
In
the meantime, though, rest assured that whatever else is going on out there,
credit default swaps never sleep.
James Howard Kunstler
www.kunstler.com/
James Howard Kunstler’s
new novel of the post-oil future, World Made By Hand, is
available at all booksellers.
James Kunstler has worked
as a reporter and feature writer for a number of newspapers, and finally as a
staff writer for Rolling Stone Magazine. In 1975, he dropped out to write
books on a full-time basis.
His latest nonfiction book, "The Long
Emergency," describes the changes that American society faces in the
21st century. Discerning an imminent future of protracted socioeconomic
crisis, Kunstler foresees the progressive
dilapidation of subdivisions and strip malls, the depopulation of the
American Southwest, and, amid a world at war over oil, military invasions of
the West Coast; when the convulsion subsides, Americans will live in smaller
places and eat locally grown food.
You can purchase your own copy here
: The Long
Emergency .
You can get more from James Howard Kunstler -
including his artwork, information about his other novels, and his blog - at
his Web site : http://www.kunstler.com/
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