Pre Post Mortem

Excerpt from James Howard Kunstler's (author of 'The Long Emergency')'s blog, 8 November 2010.

Check out a comment he received from someone on this post:

"My boy gave me a copy of your book, The Long Emergency. I won't look at it because I don't believe in conspiricies. If this peak oil nonsense was true, don't you think the Bush/Cheney people would of told us? Not that I'm a big fan of them, but, wake up!! - they were IN the oil business. You think they would of known."

'...The unvarnished truth of our predicament is that all pathways now lead to the same destination: a falling US standard of living as measured conventionally. What's unknown is how swift and severe this decline might be, exactly what all its implications are for the social order and geopolitics, and whether it might present itself in a form that could be called collapse. For the moment, one question is: do we go broke the standard way by having less money, or the trick way by destroying the value of our money so that folks (as President Obama might say) have lots of it, only it isn't worth anything. There is even at this late date much debate between the inflationistas and the deflationistas - that is, those who think the economy ends in a bang or a whimper.

I am stumped out loud, frankly, though an exogenous ill wind has me leaning just a bit in the "de" direction. The untold tonnage of bad financial paper out there, rotting away like so much herring stuffed in the bilges of a cosmic Flying Dutchman, would tend toward an outcome of wealth vanishing from our system - and money, which represents wealth, with it. Yet, there's no denying that the prices of everyday things such as food, gasoline, cotton, and steel are shooting up just now. Surely some of this is due to the sheer operations of finance, in which herds of believers in this-or-that stampede one way or another, in this case from bonds to commodities. But herds might get spooked by something (anything!) and suddenly reverse direction, seeking safety in cash and its equivalents. Really anything might happen in the stock markets, too, at this point, they are so detached from their former reality as a price discovery mechanism.

I like the formulation of John Michael Greer that we're about to see something called hyperstagflation, which would amount to sharply rising prices in an economy going nowhere fast. But if it's based on anything like the stagflation of the 1970s, that journey also ends in an inflationary fiasco, and logically some hyper version of it, which would kill the US government as we know it. Much as I loiter in the precincts of thought experiment, I don't really relish that outcome. But, sadly, we seem to be in one of those times when events outrun personalities and their meager abilities to react.

It's been my contention for weeks now that criminal mischief on the mortgage scene - all those lost, doctored, forged, robo-signed documents - will slow foreclosures (and even plain vanilla transactions) to the extent that the real estate market will choke on un-sellable property, leading to suffocation of the big banks and ultimately generalized thrombosis of the system. Hence: Dr. Bernanke appears on the scene with the defibrillation paddles of quantitative easing, hoping to goose the circulation of money through the quivering bodies of BAC, Citi, and their croaking cohorts. They may stagger back into their beds in the intensive care unit, but their fate has only been postponed.

Back in the real world, outside the hospital for ailing banks, it's harder and harder to get paid by anybody for anything, so the circulation of money slows in the everyday economy. Accounts receivable go unreceived. Payrolls can't be met. Pink slips are issued. Mortgages won't get paid. Credit card bills lie unopened on the kitchen table while the late fees, penalties, and other cockamamie charges rack up, and one day some suspicious looking fat men in mullet hair-doos and wife-beater shirts, with flames tattooed on their necks, show up with a tow truck and start hitching your car to it and you wonder for a moment how you managed to park illegally in your own driveway - wait a minute...!

Don't worry folks, that sound of heavy breathing you hear is the exhalations of the big banks reviving on their IV drip lines of financial liquidity. Pretty soon, the nurses will bring them Kansas City strip steak dinners, with truffled mashed potatoes, asparagus flown in from Chile, and even a nice year-2000 Clos Du Val reserve cabernet. You - you can go down to the food pantry and get yourself some government cheese. Melt it over some ranch-style Doritos and hunker down with Fox News where a dry drunk will explain to you the morbid workings of the Trilateral Commission and how the Rockefellers are scheming to take over the National Football League for the greater glory of Karl Marx while selling your daughter to Albanian white slavers. You'll think you understand the world. You'll feel fulfilled and easy in your mind.'