The banks can
probably keep this gag running a little longer, but not without
consequences. My guess is that it spins out of control in March
sometime when some more hedge funds blow up and at least one big bank,
perhaps Citi, rolls belly up like a harpooned whale. The game is really
over, and all the playerz know it. The consequence of continuing to
pretend the meta-fiasco of Ponzi endgame is fixable will be an even
more shattering depression than the one we're already in for.
We are a much poorer nation than we thought we were and the
reality is just too hard to face. Nobody from the most august banker
(Treasury Secretary Hank Paulson) to the lowliest wanker (the WalMart
inventory clerk who "bought" a house outside Phoenix with a
no-money-down, payment-option, adjustable rate mortgage) can believe
that this is happening. The candidates for president are pretty much
assuming that vast financial resources will exist to be deployed
against a range of problems. Everybody is going to be hugely
disappointed.
When you introduce perversities into an economic system, they
invariably end up expressing themselves as distortions. The economy
that evolved the past two decades, driven by the perverse
securitization of wishes and frauds, will now express itself in a stark
cratering of American living standards. Incomes and jobs will vanish,
massive quantities of stuff will collect dust on the WalMart shelves,
the fragile infrastructures of daily life will go to shit, and there
will be political hell to pay. Every attempt to avoid a straight-up
workout of our massive losses, will represent another layer of
perversity and more consequent destructive distortions.
I feel sorry for the next president. Even as he takes his oath of
office, the nation will be flying apart like a seized-up engine. Since
the fiasco in finance is happening in lock-step with Peak Oil (and very
likely because
of it at a fundamental level) we can expect one of the distortions to
take the form of oil shortages. These shortages will come not just from
demand bottlenecks in a stressed-out world oil allocation system, but
because exporting nations will start demanding payment in Euros or
something besides the depreciating currency that reflects our
disintegration, and we'll have a problem coming up with payments that
amount to at least fifty percent more than we're used to shelling out.
Once the US gets into serious difficulties with our oil supplies.
every other sector of the economy wobbles, including especially the
food-growing sector, which cannot function without copious amounts of
diesel fuel and hydrocarbon-based soil "inputs." Americans will go
hungry, and not just the "underclasses."
Along in this process somewhere, there is huge potential for armed
conflict with other nations. If the unraveling gets traction while
George W. Bush remains in charge, the US may answer bellicosity from
oil-exporting nations, or energy-hungry rivals, with truculence of our
own. Things can get out of control very fast in such a situation.
Nations that were happily selling us salad shooters six months earlier
may be targeting our naval vessels with a different sort of shooter,
say a Sunburn
missile. In any case, we will be acting with a bankrupt, exhausted, and
over-extended military, and the best case outcome would leave us merely
isolated and marooned geopolitically on our own continent, with
dwindling energy and mineral resources and an angry, demoralized
population.
This time around we have more to fear than fear
itself. The banking executives, government officials, and candidates
for president are not doing the nation a service by concealing and
ignoring our losses. Finance, as the driver of an economy, is finished,
but the deployment of capital is still an indispensable arm of a real
economy. Sooner or later we'll get back to money that stands for
something and banks that function as credible repositories of wealth.
But we haven't even started down the path to that place, and the longer
we pretend that we don't have to go there, the worse the journey will
be.
LINK & COMMENTS: Clusterfuck Nation