ALL FALL DOWN
by James Howard Kunstler
God knows what manner of deals went down this past weekend in the Hamptons'
wine cellars and below-decks among the Chesapeake Bay sailboat fleet. All
these hidey-holes must have been dank and fetid with the sweat of mortal
fear. Will the U.S. government declare itself a subsidiary of General
Electric? Will Vlad Putin be roped in to save Goldman Sachs? Meanwhile, the
whole noisome rat maze of international counter-party deals was taking on
sewer water and rodents of every nationality were seen leaping for daylight
all over the fusty old motherlands of Europe. A cascading collapse of
international finance is underway. While many fixers may jump heroically
into the tumbling wreckage hoping to rescue this-and-that, the outcome by
Friday is liable to be an unrecognizable smoldering landscape of the G-7's
hopes and dreams.
Some big questions for the week: will the Euro survive as a currency? Will
the rush into the U.S. dollar continue even as the U.S. financial system
dematerializes in a Fibonacci fever of accelerating de-leveraged infinitude?
Will the remaining Big Boyz, Goldman Sachs and JP Morgan succumb to the
counter-party hemorrhagic fever? Will great rows of lesser banking dominoes
now start clacking onto their faces? Will all fifty states follow the leads
of California and Massachusetts and line up at the U.S. Treasury's hand-out
window. Will the entity that calls itself the civilized world be left at
week's end with anything resembling money?
Your guess is as good as mine. We've entered the realm of phase change,
where everything is slipping and nothing has settled. The final result, when
the dust settles - and that may not be for weeks to come - will certainly be
a poorer western world. Will it be so poor that it can no longer afford to
import anything? Including oil from the land of the date palm? If so, we are
really in for a rough ride, poised as we are at the edge of the heating
season here in the temperate regions. Notice, by the way, that the $700
billion just approved by congress to bail out Wall Street is exactly the
same sum of money that we send to the oil exporting nations this year.
Will millions stop receiving paychecks due to the turmoil in banking? It's
certainly possible, starting with the poor drones in Mr. Schwarzenegger's
motor vehicle bureau and eventually ranging to every payroll office in the
land. Will Sarah Palin's fellow Six-packers line up around the parking
lagoons of the suburban banks trying desperately to withdraw the last
seventy bucks in their checking accounts? (And will their thoughts in the
event be: this economy is fundamentally sound....) Will the supermarket
shelves of chipotle-flavored crunchy snacks and power drinks go empty as
truckers refuse to deliver their loads without up-front payment? And how
long does it take a hungry public to turn mean?
We could see a parallel problem in the motor fuel supply sector. So far,
gasoline shortages have only appeared in parts of the Southeast USA, due to
interruptions caused by two hurricanes. If the oil tankers quit offloading
now for lack of credible payment, then the whole nation will get an
interesting lesson in the shortcomings of the suburban development pattern.
The candidates' debate Tuesday night should be interesting. I don't expect
too much give-and-take on the subject of East Ossetia this time around.
Even at this point, the current crack-up in world finance makes the 1929
crash and the events of the 1930s look in comparison like an orderly small
town auction of somebody's grandmother's effects. Back in that sepia day,
America had plenty of everything except ready cash. We had, especially,
plenty of our own oil, and - you're not going to believe this but it's
true - the stuff was selling for as little as ten cents a barrel, it was so
abundant. And yet still, America in the 1930s plunged into a dark depression
of inactivity, loss of confidence, and impoverishment.
This time around, things could get more disorderly. Personally, I think we
may be beyond the reach even of fascist authoritarianism, because unlike the
programmed industrial masses of the 1930s, we are unused to regimentation,
to lining up at the factory gates and the movie theaters. Back then, society
was so regimented that everybody wore uniforms in-and-out of the military.
Look at movies from the 1930s. Every man-jack wore either a necktie and hat
or overalls. The industrial masses behaved like termites. Once unemployment
hit, they were waiting to be told what to do, to line up for something. It
worked fabulously for Hitler, who took every advantage of this mentality.
Luckily, the US went for Roosevelt (both FDR and Hitler entered office the
same winter of 1933, by the way). FDR was more like everybody's kindly Uncle
Frank, and his reassuring persona enabled Americans to suck up their bad
luck and altered circumstances. Many of them retreated to the family farm
(which still existed then) and waited things out - and, anyway, the
melodrama of the Great Depression soon resolved in the Second World War when
Hitler's love of regimentation led him into military misadventure. He
shouldn't have picked a fight with someone who had so much petroleum -
Okay, what happens here and now? To this point (9 AM Monday October 6, 2008)
events have been proceeding under a veneer of still-just-barely-credible
authority. We (as represented by Congress) have allowed Mr. Paulson to
advance and activate his remedies. As things unspool further, he will be out
of credibility, perhaps in a few days, and it's unlikely that his successor
will have any either. Mr. Bernanke has simply gone AWOL. Notice, he has
vanished from the media landscape. We may soon be hearing the declaration of
various "emergency" measures involving the allocation of food and the
rationing of oil products. The Big Bailout of last week may be partially
rescinded as it becomes obvious that it has had no effect - I believe about
half the $700 billion has already been allocated, which is to say: lost.
I realize these things sound pretty extreme. But forces have been set in
motion and momentum rules. One thing for sure: the American public is about
to undergo a severe mood adjustment. There will be fewer American Idol fans
and worshippers of Donald Trump by the close of business on Friday.
James Howard Kunstler
for The Daily Reckoning
Editor's Note: 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