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The
New York Times ran a story of curious import this
morning: "Mel Gibson Loses Support Abroad."
Well, gosh, that's disappointing. And just when we needed him, too.
Concern over this pressing matter probably reflects the general mood of the
nation these dog days of summer - and these soggy days, indeed, are like
living in a dog's mouth - so no wonder the USA has lost its mind, as
evidenced by the fact that so many people who ought to know better, in the
immortal words of Jim Cramer, don't know anything.
Case in point: I visited the Slate Political Gabfest podcast
yesterday. These otherwise excellent, entertaining, highly educated folk
(David Plotz, Emily Bazelon, and Daniel Gross, in for vacationing John
Dickerson) were discussing the ramifications of the economic situation on the
upcoming elections. They were quite clear about not being able to articulate
the nature of this economic situation, "...this recession, or whatever
you want to call it..." in Ms. Bazelon's words. What's the point
of sending these people to Ivy League colleges if they can't make sense of
their world.
Let's call this whatever-you-want-to-call-it a compressive
deflationary contraction, because that's exactly what it is, an accelerating
systemic collapse of activity due to over-investments in hyper-complexity
(thank you Joseph Tainter). A number of things are going on in our society
that can be described with precision. We've generated too many future claims
on wealth that does not exist and has poor prospects of ever being generated.
That's what unpayable debt is. We have such a mighty mountain of it that the
Federal Reserve can "create" new digital dollars until the cows
come home (and learn how to play chamber music), but they will never create
enough new money to outpace the disappearance of existing notional money in
the form of welshed-on loans. Hence, money will continue to disappear out of
the economic system indefinitely, citizens will grow poorer steadily,
companies will go out of business, and governments at all levels will not
have money to do what they have been organized to do.
This compressive deflationary collapse is not the kind of cyclical
"downturn" that we are familiar with during the
two-hundred-year-long adventure with industrial expansion - that is, the kind
of cyclical downturn caused by the usual exhalations of markets attempting to
adjust the flows of supply and demand. This is a structural implosion of
markets that have been functionally destroyed by pervasive fraud and
swindling in the absence of real productive activity.
The loss of productive activity preceded the fraud and swindling
beginning in the 1960s when other nations recovered from the traumas of the
world wars and started to out-compete the USA in the production of goods.
Personally, I doubt this was the result of any kind of conspiracy, but rather
a comprehensible historical narrative that worked to America's disadvantage.
Tough noogies for us. The fatal trouble began when we attempted to compensate
for this loss of value-creation by ramping up the financial sector to a
credit orgy so that every individual and every enterprise and every
government could enjoy ever-increasing levels of wealth in a system that no
longer really produced wealth.
This was accomplished in the financial sector by
"innovating" new tradable securities based on getting something for
nothing. That is what the aggregate mischief on Wall Street and its vassal
operations was all about. The essence of the fraud was the
"securitization" of debt, because the collateral was either
inadequate or altogether missing. That's how you get something for nothing.
The swindling came in when these worthless certificates were pawned off on
credulous "marks" such as pension funds and other assorted
investors.
Tragically, everybody in a position to object to these
shenanigans failed to issue any warnings or ring the alarm bells - and this
includes the entire matrix of adult authority in banking, government
(including the law), academia, and a hapless news media. Everyone pretended
that the orgy of mortgage-backed securities, collateralized debt and loan
obligations, structured investment vehicles, collateralized debt obligations,
and other chimeras of capital amounted to things of real value.
Certainly the editors and pundits in the media simply didn't
understand the rackets they undertook to report. You can bet that the players
on Wall Street made every effort to mystify the media with arcane language,
and they succeeded beyond their wildest dreams. (Making multiple billions of
dollars by trading worthless certificates based on getting something for
nothing must be the ultimate definition of succeeding beyond one's wildest
dreams.) It's harder to account for the dimness of the news media. I doubt
they were in on the caper. More likely there is a correlation between their
low pay and their low capacity. But I wouldn't discount the fog of
assumptions and expectations about the way the world is supposed to work that
can disable even people of intelligence.
I'm as certain as the day is long that the folks on Wall Street, from
the myrmidons in the trading pits to the demigods like John Thain, with his
thousand-dollar trash basket, knew that they were trafficking in tainted
paper. Many of them deserve to be locked up in the federal penitentiary for
years on end, and they probably never will because president Barack Obama
lacked the courage to set the dogs of justice after them and now it is too
late.
The most confused of any putative authorities are the academic
economists, lost in the wilderness of their models and equations and their
quaint expectations of the way things ought to go if you can tweak numbers.
These are the people who believe with the faith of little children that if
you can measure anything you can control it. They will go down in history as
the greatest convocation of clowns ever assembled, surpassing all the
collected alchemists, priests, and vizeers employed in the 1500 years
following the fall of Rome.
It's harder to tell whether the elected officials and their appointees
in sensitive places like the Securities and Exchange Commission and the FBI
had a clue as to the scale of misconduct in the financial sector, or if they
were bought off plain and simple, or just too stupid to understand what was
going on all around them. The term "regulatory capture" provides
valuable insight. How could Christopher Cox at the SEC fail to notice the
stupendous malfeasance in the mortgage-related securities rackets. Why isn't
he working for fifty cents a day in the laundry of Allenwood Federal
Correctional Facility? Why is the grifter of Countrywide mortgage favors,
Christopher Dodd, still free to guzzle the fabled bean soup in the Senate
lunch room? I could go on in this vein for two hundred pages, but you get the
drift.
The collective failure of authority, whether of intention or oversight
or mental deficiency boggles the mind. And it leaves us where we are: in a
compressive deflationary contraction, a.k.a. the long emergency. This
is not a cyclical recession. It's the end of one thing and the beginning of
another thing, another phase of history in which people will have to learn to
live differently or perish. I'm convinced that just about very elected
official who can be swept out of office will be swept out of office - even if
their replacements turn out to be a very unsavory gang of sadists and morons who
will certainly make things worse.
But these dog days of summer nobody will be paying attention, even as
the markets themselves roll over and puke, as I rather imagine they will
between now and Halloween, if not next week.
P.S. I have not come to any conclusions about the fate of the Macondo
blow-out and the claims of Matthew Simmons, though I have certainly got a lot
of mail about it, some of it very intelligent. The BP oil spill has vanished
from the news headlines again as the world waits for the final push at the
relief wells. We do know that we are entering the heart of the hurricane
season and that will make for some excitement.
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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