by James Howard Kunstler: Financial
Crisis Called Off
George W. Bush
was onto something in the fall of 2008 when he remarked apropos
of the Lehman collapse: “…this sucker could go down.”
serene conviction, by the way, that this sucker actually is going
down, right now, even as I clatter away at the keys – perhaps
in slow motion, so that not many other bystanders have noticed yet,
and the few who have noticed are mostly too cross-eyed with nausea
useful to define even what we mean when we say “this sucker.”
Everybody knows what a sucker is, of course – say, a Midwestern
public employees’ union pension fund snookered into buying
a fat slice of equity tranche in a Goldman Sachs–engineered CDO.
But “this sucker” is something else: a rather large cargo
of commercial relations, entailed obligations, hopes, expectations,
habits of daily life – indeed millions of whole lives –
loaded onto the rather creaky vessel we call modern civilization.
“This sucker” was such an apt term coming from someone
whose understanding of civilization was like unto that of a boy
who found a PlayStation under the Christmas tree.
perhaps useful to define what we mean by “going down.”
To my mind it means an awful lot of money disappears and nobody
can pay for anything and an awful lot of things that have kept going
on promises to pay and to get paid will stop keeping going. I don’t
think that the idea of money disappears – that is, paper certificates
representing claims on future work – but there will be a lot
less of it to go around. Eventually the idea of money could go,
too, at least in its current form as Federal Reserve notes. But
mostly for some years it will just be a lot of people, companies,
and governments who are broke.
down” will mean a society with no money and an infrastructure
for daily life that requires gobs of money to run, and a populace
too dazed, confused, and inflamed to do anything useful in the way
of organizing new infrastructures for daily life for their new circumstances.
In retrospect, the Great Depression of the 1930s will look like
Philadelphia Story compared to what we wake up to ten years
speech at Cooper Union last week was a remarkable performance. It
managed to appear forceful and serious without containing any really
serious or forceful proposals to discipline a banking system that
is running a hostage-and-ransom racket on civilization. If this
is finally what the Obama Experience is all about than his detractors
have been right all along: he is a tool. Finance reform aside, there
are still plenty of laws left on the statute books that could be
applied to the frauds and rackets that ran absolutely amok on Wall
Street the past few years. I would still like to know why buying
CDS “insurance” against your own issue of bonds deliberately
engineered to default is NOT a form of insider trading, to put it
as simply as possible.
The SEC action
against Goldman Sachs is likely to open a Pandora’s box of
troubles for that company, and perhaps all of the Too Big To Fail
banks. But even so, I believe this sucker is going down before 99.9
percent of it is sorted out. Anyway, there was a lot about the SEC
action that seemed curious, to put it mildly, from the timing of
it, to the brevity of the document, to the strange fact that it
emerged at all from an agency whose principal activity the past
few years has been the viewing of internet porn, and which has otherwise
behaved so indifferently in the face of numberless offenses to common
decency, not to mention the public interest, that it might as well
have been staffed by a thousand head of Holstein cows rather than
licensed attorneys and graduates of accredited colleges.
is going down because the train of bankruptcies underway has a remorseless
self-reinforcing power to provoke more and more bankruptcies at
every stop along the line as every promise to pay is welshed on.
The mortgages will not be paid and securities will not pay their
investors and the banks will choke on the bad paper promises in
their vaults and the pension funds will not pay their beneficiaries
and the states and counties and municipalities will go broke and
not pay their employees and creditors, and the federal government
will not be able to “print” new money in sufficient quantities
fast enough to compensate for all the money not being paid up-and-down
the line… and one morning we will wake up and discover that
all those promises to pay were sham promises based on no productive
activity whatsoever… and that will be a sad day. Perhaps the
Dow Jones Industrial Average will hit 35,000 on that day.
stop this chain of bankruptcy. It’s already baked in the cake.
There is probably some wish on the part of those in charge, like
Mr. Obama, to try everything possible to postpone it. And there
is likewise surely a huge effort underway in the banking sector
right now to cream off as much cash as possible so that when this
sucker does go down they will bethink themselves better positioned
to survive the consequences.
I believe that the damage was mostly done during the tenure of poor
dim George W. Bush, and his predecessor Bill Clinton. I suspect
that Mr. Obama learned at the height of 2008 election campaign –
during those days of the Lehman collapse and the TARP – just
how completely the government – and the people of the USA –
were in fact hostage to the banking system, and that it has been
his unfortunate role to pretend that there is some other fate to
bargain for besides this sucker going down. It is probably why he
continues to smoke so much. He must be lighting one Marlboro off
the tip of another, one after another, in whatever inner sanctum
he repairs to when the midnight chimes toll around the White House.
It’s sad to think of this graceful, still rather young man
going down in history as the chump-of-the-century, a reincarnation
of Herbert Hoover on steroids, with sugar on top.
brewing as they are among the white trash elements of the country,
I just hope this sucker doesn’t resolve into an ugly bout of
attempted ethnic cleansing. Certainly Obama’s racial make-up
has inspired a revival of the Ku Klux spirit around the Nascar ovals.
I’m sincerely worried that the misdeeds of people named Blankfein,
Rubin, and Madoff could provoke a red-white-and-blue pogrom.
The big mystery
for the moment is how come a few good men of stature in important
places have not stepped forward to say the right thing or do the
right deed. How come no US congressperson challenged the knavish
behavior of Republicans who condone malicious idiocy that they know
to be false like the so-called “birther” activity. How
come no putative “progressive” has called the Democrats
on their disingenuous failure to call illegal immigrants what they
are. How come no state attorney general has filed charges against
TBTF bank misconduct even if the US attorney general lies in state
over at the US DOJ. How come no political figure of any stripe has
called for the resignation of Summers, Rubin, Gensler and other
Goldman Sachs “sleepers” infesting high levels of government.
How come Dylan Ratigan is the only visible figure in any major newsroom
willing to identify the precise nature of the meta-swindle.
When this sucker
goes down, our primary task will be reorganizing American life on
a much more local and de-complexified basis. It’s a very big
assignment and especially daunting against a possible background
of political disorder. The losses will be epic and the changes severe,
but it doesn’t have to mean the end of recognizably American
culture. There will be very little money around, and it may end
up being a certificate backed by gold issued by a bank other than
the Federal Reserve. Or maybe we’ll just be swapping stuff
for the makings of dinner.
So many forces
are roiling around u201Cout thereu201D now that it’s hard to believe
that the authorities in government and banking can keep the illusion
of normality going a whole lot longer. The possible litigation against
Goldman Sachs–style frauds by a thousand aggrieved victims is enough
to paralyze the system. Meanwhile, trillions in credit default swaps
are ticking away like dirty bombs. Greece is going down, with Portugal,
Spain, Ireland, and the UK standing by to go next. Nobody can pay
their bills. Before long, the old folks won’t get their checks.
Then the poor folks. Lately, I wonder if there will even be an election
six months from now.
from Whiskey and Gunpowder.
Howard Kunstler is perhaps best known for his 2005 book The
Long Emergency, which predicted the financial meltdown and
the implications of the peak oil problem. His 1993 book, The
Geography of Nowhere, about the fiasco of suburbia, is a
campus cult classic among the architecture and urban-planning students.
It was followed by a sequel, Home
From Nowhere, and a companion book called The
City in Mind: Notes on the Urban Condition. Mr. Kunstler
is also the author of 10 novels including his latest book, World
Made By Hand, a story set in America’s post-oil future.
His articles have appeared in The New York Times, The
Washington Post, Rolling Stone and The Atlantic Monthly.