If bond-dumpers rush into stocks, then who are the next bond buyers at ZIRP? The USA can’t keep going without continuous bond selling. Somebody has to buy the darn things. The Federal Reserve is now buying around 70 percent of US issue — a lot of it via secondary market pass-thru shenanigans involving “Primary dealers” (a.k.a. Too Big To Fail banks, who get to cream off a premium when they flip bonds to the Fed — tidy little racket). If the other 30 percent of issue can’t find willing buyers at ZIRP then interest rates will have to go up. If interest rates go up, then interest paid out on bonds (that is “debt service”) by the US government will go up catastrophically, because the aggregate debt is so colossal and most of the debt is short term, meaning that in a post-ZIRP world the interest rate ratchets up automatically every 13 weeks as bonds roll over. The US will then only be able to pretend that it can service the debt at higher interest rates. Everybody in the world will recognize this — surely only increasing the velocity of the stampede away from bonds. The question is: how long can pretending to service debt go on before it is just called by it’s real name: default? Or, if countered with additional furious computer “money” creation: hyperinflation? Either way, of course, you end up broke.

     This cattle drive into stocks is strictly a political gambit. The cattle are being driven to the slaughterhouse. It’s discretionary strategic national financial suicide. They’re driving up the stock markets for cosmetic purposes, to make it appear that an economic recovery is going on, and with the aim of setting in motion a self-reinforcing financial feeding frenzy in this rush to “equities.” By the way, in case my manner seems didactic today I am attempting to define my terms as I go along because most other financial bloggers seem to assume that ordinary people understand all their jargon, which I am quite sure they do not.

     Returning to my point… the Fed and their auditors on Wall Street and in government, are jacking up the stock markets in the hopes of stirring up “animal spirits,” as the financial psychologists say, to put over the story that it equals a vibrant economy — which is nonsense, of course, to anyone who shoots a casual glance at the economic wreckage all around them. Anyway, since the stock market action these days is dominated by high frequency trading robots running on algorithms, where exactly would animal spirits even factor in? If anything the absence of real animal spirits in this action also implies the absence of its counterpart, animal survival instinct, of which human intelligence is an order. What can come of stirring up animal spirits among robots? A train wreck is exactly what.

     Now, I ask you: at a moment in history when vast interlinked global financial markets have never been so unstable, so primed for unintended consequences courtesy of the diminishing returns of technology, so ripe for a massive, cascading “accident,” is it a prudent thing to fuck around with such crude PsyOps?

      One other factor outside pure financials assures that US economic performance will remain impaired (that is, the kind of economic activity we regard as “normal” (suburban sprawl building, credit card “consumer” spending): the price of oil, which is inching up to the $100-a-barrel hashmark. Apparently that shale oil bonanza we hear so much about has not left the USA swimming in cheap oil. As a general principle, it’s probably safe to say that an oil price above $80 crushes the US economy. It drives up the cost structure of just about everything we make, do, or sell here, but of course the primary things that go up in price are food and motor fuel.

     Hence, it’s tragically ironic that — getting back to official financial PsyOps — that one of the primary motives for the Fed keeping interest rates super-low in the first place (apart from enabling wild fiscal irresponsibility in government) has been to promote the housing sector — because in the reality of our time “housing” translates into building more suburban sprawl. How smart is it to promote more suburban sprawl at a moment in history when there’s no more cheap oil?

     It is this kind of stupendous foolishness that is putting the USA on the path of an epochal systemic collapse.

Did anyone notice how violent and psychotic the Superbowl advertising was this year? An Oreo commercial that depicted a mob of nerds destroying a library —  huh? The Doritos spot where “Daddy” and his male buddies transform themselves into an insane clown posse of cross-dressers. The Fast and Furious 6 trailer featuring the destruction of every vehicle known to man and a few office buildings, too. The third-quarter power failure was a neat harbinger of things-to-come in the Most Exceptional United States of America. Party on, peeps!

     The Kunstlercast podcast is back online all y’all! This week: interview with Nicole Foss of The Automatic Earth.com

8 Comments on "Kunstler: Cattle Drive"

Plantagenet on Mon, 4th Feb 2013 6:04 pm 



The Obama administration economic psy-ops has succeeded in its first goal—getting Obama re-elected. It remains to be seen if the psy-ops can also get the economy re-ignited.

rollin on Mon, 4th Feb 2013 7:04 pm 



The public has been numbed by so many disaster films and political intrigue films that they no longer believe when they hear the danger bells rung. In fact there are no more bells, just books and droning speakers.

If Paul Revere road through towns today calling out “Warning, prepare, disaster is coming!” he would be hauled off by the police.

J-Gav on Mon, 4th Feb 2013 7:28 pm 



JHK pretty much on target as usual. Even though he says he’s taking it easy on all the folks who don’t understand the jargon … and doesn’t spell out what ZIRP is. Zero Interest Rate Policy, just to get that out of the way. Actually, LTZIRP, ie less than zero in real terms.

Planta, psy-ops will only go so far. Then reality will kick in. Re-igniting the economy (ie growth) translates into a biodiversity massacre on a scale as yet unseen in human history plus runaway climate change as a bonus. In my day we used to describe this as finding oneself between a rock and a hard place. The classic double-bind. So Kunstler’s hardly new train-wreck image is nevertheless still valid. Obama, or the next occupant, or the one after … in the role of Jon Voigt at the end of Konchalovsky’s film ‘Runaway Train,’gritting his teeth as the locomotive approaches the wall.

Nothing to be done? There surely is and a good place to start would be to completely re-vamp central banking (dump the Fed, etc), derivatives-trading regulation and so on, such that ‘money’ might become a public service as opposed to a wealth-pump for the happy? few. As that seems rather unlikely in our present situation (since they control everybody with the power to enact that sort of change), the best option at this point appears to be individual and community-level disengagement with systemic dependencies on dead-end strategies.How that will work out is anybody’s guess.

poaecdotcom on Mon, 4th Feb 2013 8:33 pm 



“The best option at this point appears to be individual and community-level disengagement with systemic dependencies on dead-end strategies.”

BINGO

“How that will work out is anybody’s guess.”

Only one way to find out…..

christian phillip on Mon, 4th Feb 2013 11:09 pm 



ouch, Master, when will you accept that nothing can be done, wont be done and does not deserve to be done…just let them get extinct, i promise they will not even notice it watching all that ball playing on tv…the rest is only whining…what do you people want, to save humanity of itself?…are you out of your minds?…dont you have something else better to do, like giving a late useless amnesty to the rest of the planet?…enjoy canibalism now…

Arthur on Tue, 5th Feb 2013 12:45 am 



It is a pity, but no surprise, that Ron Paul was sabotaged by the GOP leadership. He had enough competence to wind down the imperial project with minimal damage and turn the US into a halfway normal country. Again, nobody threatens the US and there are enough (potential) allies, like Europe and Russia and the rest of Anglosphere, to secure the future of the US.

BillT on Tue, 5th Feb 2013 1:53 am 



Ron Paul was allowed to talk to give some sense of ‘freedom’ in America, but when the time came to give him a real chance, it was killed. ‘Package Obama’ was supposed to win. Both times. The Republicans ran the most unelectable challengers possible without being too obvious. Airhead Saran Palin? A beat-up war vet? A Mormon millionaire? A rabid conservative? Nope never intended to make it a real contest. Just a show for the sheeple to make believe they still had a say in their government. Will there be another election? I doubt it.

GregT on Tue, 5th Feb 2013 5:32 am 



Ron Paul was the last hope that the US had. Too late now, the country’s fate has been sealed.

The economy will be re-ignited again alright, into a massive fireball, until there is nothing left but ashes.