For those of you sitting on U.S. Treasury bonds and
bills, now would be a good time to get out.
March 23, 2009 -- If central casting called for a poised, straight-talking, and
capable-seeming president, it would be hard to come up with someone
better than the Barack Obama who walked and talked around the White
House grounds with Steve Croft on "60-Minutes" Sunday night. He may
perfectly represent the majority who elected him, though, because he
also appears to be in full commanding denial of the realities
overtaking our American experience.
Those realities include
the fact that we can't possibly return to the easy credit and no money
down "consumer" economy no matter how many nominal dollars get shoveled
into the fiery furnaces of banks too-big-to-fail. As Treasury Secretary
Geithner's underling, Stephanie Cutter, said last week, "Our singular
focus is on increasing lending to support economic recovery. Everything
we do to stabilize the financial system is done with that goal in
mind."
Lending on the scale that became normal over the last
decade is for sure the one thing that we will not recover. We turn
around in 2009 to find ourselves a much poorer nation than we thought
we were a year ago, especially among that broad range of formerly
middle-class wage-earners who lived so luxuriously until yesterday. The
public can't process this reality and the president, for all his
relaxed charm, is either not ready to articulate it, or can't process
it himself.
Everything that we're doing right now is engineered
to avoid reality, to sustain the unsustainable, to recover the
unrecoverable, when the mandate of reality compels us to face our
losses in order to move on to the next chapter of a collective American
life. The next chapter would be a society that runs on a much more
local and modest scale, centered on essential activities like growing
food, requiring harder physical work, and focused attention -- in other
words, the opposite of a society lost in abstractions, long-range daisy
chains of off-loaded responsibility, and incessant pleasure-seeking.
In
retreat from this reality, we've set in motion two forces that are
pretty certain to bring us to grief. The first proceeds from the
fateful FMOC decision last week at the Federal Reserve Bank to begin
buying massive amounts of our own treasury bonds and bills. This is
predicated on the idea that the mechanisms of wealth production -- even
of illusory wealth, such as the fortunes created by trading securitized
unpayable debt -- can keep chugging along, spinning off limitless
additional suburban villas, chain stores, car trips, and deep-fried
snacks. It would be sententious to explain how this destroys
currencies, but wherever "monetizing debt" has been tried before in
history, that is the outcome. The result would be ruinous at every
level and would lead straight to the second terrible force: social
upheaval brought on by the conversion of economic problems into
political turbulence.
Those two forces are underway right now,
in fact, since the overt monetizing of last week was preceded by the
shoveling of bail-outs, which tacitly guaranteed a collapse of
credibility in U.S. debt instruments. I'm not in favor of violence and
anarchy, but after the AIG bonus affair, it's hard to imagine that we
are not one more corporate misdeed away from a
rocket-propelled-grenade, or something like that, being fired into a
glass office tower somewhere -- and then the "first-broken-window" rule
of social disintegration comes into play. Meanwhile, I stick to my
time-table of six-to-eighteen months before the reckless creation of
new money-for-nothing filters through the system, overcomes even
compressive mass bankruptcy, and starts expressing itself in the
sinking value of dollars and the revved up velocity of their
circulation in pursuit of tangible commodities.
We're already
seeing the first twinges of that in the up-creep of oil prices, busting
through the $50-a-barrel barrier last week. Since scarcity tends to
express itself in gross volatility, it's easy to imagine oil prices
rising swiftly beyond the $147-per-barrel record level of last year. As
that occurs, the most basic premises of everyday life in the USA will
be called into question. If you think car sales have been bad lately,
with oil in the $35-a-barrel range most of the winter, just wait. The
newly-minted unemployed will be marooned in their subdivisions. They
will not be buying GMC Yukons on 48-month installment contracts, let
alone X-boxes on their Visa cards. They might be very very hungry,
though. All bets are off as to how these social classes may organize
themselves to alleviate their hunger (and express their anger about it).
Given
all this, it's kind of hard to believe that the savvy, thoughtful Mr.
Obama is going along with such a disastrous program as the one his
"team" is rolling out. Perhaps his ease and confidence masks a
tragically conventional world-view, an incapacity to imagine "change"
outside a very narrow range of possibility. I must say I doubt this is
the case. I think, he is going along, for the moment, with a consensus
of wishes to prop up life as we know it at all costs. This consensus
emanates from the top down and the bottom up. The millions of
"Joe-the-Plumber(s)" out there don't want to rethink the terms of
existence anymore than the lords of Goldman Sachs. I also think that
circumstances will force Mr. Obama's hand before long -- specifically
that a moment will arrive when he goes on TV and tells the American
public that things have changed way beyond the scope of what they even
imagined when they pulled the levers last fall and voted for an
uncharted future.
Capable observers are calling, meanwhile,
for a robust bear market rally moving through Spring, on technical
grounds that have little to do with the greater forces roistering in
the background. Reality is a cruel mistress. If the stock market rally
rolls out as predicted, it will surely fake-out the mainstream media.
They'll conclude wishfully and foolishly that something like "recovery"
is underway. They may even interpret rising oil prices as a "positive
sign" that the great groaning enterprise of the something-for-nothing
economy is back "on track."
They'll be shocked sometime after
Memorial Day when it all comes off the rails again. We have a lot to
sort out and very little time to get on with job. Notice, I haven't
even mentioned the potential for mischief and instability coming out of
the rest of the world -- enough black swans to blot out the sun. Want
some concrete advice? For those of you sitting on U.S. Treasury bonds and
bills, now would be a good time to get out.
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My 2008 novel of the post-oil future, World Made By Hand, is available in paperback at all booksellers.
LINK: Clusterfuck Nation