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Page added on September 21, 2015

Kunstler: Fed Cred Dead

The economy is a two-headed monster. One head is the trade in real goods and real services. The other head is the financialized traffic in swindles and frauds that surrounds banking. There is some deception and overlap about which is which. For instance so-called health care might be perceived as a real service. In fact, it’s a hostage racket, designed to victimize “patients” at their weakest, with a “protection” premium that easily runs to $12,000-a-year for a married couple, even when they aren’t sick, and vulnerable. Just see what happens if you go to an emergency room with an injury that requires six stitches. Next stop: re-po land.

Most of the remaining on-the-ground economy consists of people merely driving their cars absurd distances, burning gasoline, between exquisitely-tuned giant warehouse store operations that were designed to destroy local Main Street trade — and accomplished that, by the way, to the applause of the local citizens whose towns were destroyed (“We want bargain shopping!”).

Now, of course, even WalMart is looking over its shoulder at the collapse of the complex arrangements that allowed it to metastasize across North America like some cancerous fungus. Globalism is winding down as the gargantuan matrix of Ponzi schemes based on owed money dissolves debt by debt. It isn’t long before nobody is a credit-worthy borrower, and no transaction in real goods can be risked unless cash hits the barrelhead — which turns out to be a very awkward way of doing business.

It’s especially like this these days in the so-called “emerging markets” — e.g. places in the world with large populations of willing factory slaves. The traffic in shipping-out containers full of flat screen TVs (or shipping-in the raw materials to make them) won’t work very well without letters-of-credit, which are promises between banks to make sure that the stuff on the receiving end gets paid for. That becomes difficult when national currencies drop 3.5 percent in value one day and then 4 percent another day, and so on. An eight-year-old can figure out how that math works.

My new theory of history applies well to the macro situation: people do what they do because it seems like a good idea at the time.

For instance, a few decades ago, the suburban / “consumer” arrangement of daily life seemed like a good idea. You buy cheap land twenty-seven miles outside what used to be a functioning (now obsolete) city. Build lots and lots of houses out of cheap, shitty materials such as strand-board and vinyl, pave a lot of new roads, line many of them with even shittier strip-mall buildings and Big Box “power centers,” and there you have a wonderful basis for an economy. That was more or less the Ronald Reagan Utopia.

Now it’s all aging badly, fraying, too costly to fix and, increasingly, not worth scraping off the land and replacing with a new cheap, shitty building. The younger generation doesn’t even want to live in that suburban dystopia. They run shrieking from it to Brooklyn, or even downtown Troy, New York, up the Hudson River Valley. Alas, this younger generation has also been broadly victimized by the college loan racket — reinforced by the revised bankruptcy laws that make it impossible to ever write-off this sort of debt. When will they get political about it? Their debt loads will disfigure their lives as surely as a tour of duty in Vietnam would have forty years ago. Perhaps Siri has not informed them about this.

Last week was the watershed for central banking and for the illusion that the current disposition of things has a future. The Federal Reserve blinked on its long-touted Fed funds interest rate hike and chairperson Janet Yellen was left standing naked in the hot glare of her own carbonizing credibility, a pitiful larval creature, still maundering about “the data,” and “the median growth projection,” and other previously-owned figments spun out of the great PhD wonk machine in the Eccles Building.

The Federal Reserve itself is the victim du jour of its own grandiose fatuous fecklessness, in particular the idea that it could play a national economy like a three-button flugelhorn. What seemed like a good idea at the time when Alan Greenspan and then Ben Bernanke stepped into the pilot house now just looks like the fraud of frauds: enabling corporations to borrow ever more money from the future to pretend that their balance sheets are sound. That scam is has nowhere left to go, except into the black hole that has been waiting for it. All the Fed really has left is to destroy the value of the dollar (to save it! Just like Vietnam!).

This ought to be an interesting week in the financial markets as the players have had a long, anxious weekend to absorb the death of Fed cred. And October, too. Expect dramatic re-pricing. Sometime a few months down the line, financial markets will present a “relief rally.” Don’t get suckered on that one.

Meanwhile, what remains on the other head of this two-headed economy besides driving to-and-from the Walmart? Pornography? The tattoo industry? Meth and narcotics? Prostitution? Professional sports on the flat screen? Kim and Kanye? Grand theft auto? Do you really think Donald Trump can fix this?

Kunstler

19 Comments on "Kunstler: Fed Cred Dead"

penury on Mon, 21st Sep 2015 3:11 pm

I do not think that most people care about the FEDS credibility, they have no idea what the FED is. The real economy is dead. The make believe which is going on today will end and when it does look out. Current total national debts are approx 10 times gross world GDP. U.S. citizens owe more collectively than the gov. Pension funds are rapidly going bankrupt. If gov checks to citizens stop there is no alternative.

Davy on Mon, 21st Sep 2015 3:46 pm

Pen keep in mind it is the wealthy that have most of that debt and assets. They are the ones with phantom wealth. Granted anyone who has retirement savings or social security is SOL in just a few years.

My point is these huge numbers are relevant to the rich not the average citizen. So trying to turn this debt per capita is meaningless. It is a 1% thing and it is 1% that are going to have to screw each other over when the economic shit hits the fan.

apneaman on Mon, 21st Sep 2015 4:01 pm

The Federal Reserve — A Question of Legitimacy

http://www.declineoftheempire.com/2015/09/the-federal-reserve-a-question-of-legitimacy.html

penury on Mon, 21st Sep 2015 6:05 pm

Davy I agree that the wealthy have the most to concern them about the debt. Remember your debt is someones asset income. Granted people like me who have no asses have no worries. However, with our current government if the wealthy are in danger of losing wealth, taxpayers like me are entertained by bail-outs of the too big to fail.

Davy on Mon, 21st Sep 2015 6:30 pm

Pen, bailouts are likely over for the same reason the fed cannot normalize. We are in a deflationary spiral of demand and supply destruction. What comes next is likely marshal law, mad max, Stone Age and or a combination of all of the above. Maybe there will be another bailout but it will not have meaning or legitimacy like the 08 bailout. If there is another bailout it will be an act of desperation not policy.

GregT on Mon, 21st Sep 2015 6:54 pm

Could negative rates be next on the Fed’s policy menu?

http://www.cnbc.com/2015/09/20/fed-raises-possibility-of-negative-interest-rates.html

Desperate times call for desperate measures. Sadly, it appears that the eCONomists still don’t understand limits to growth.

Makati1 on Mon, 21st Sep 2015 9:11 pm

The Fed is in a tight corner with zero way out. Any step will be a wrong one and they know it. The sooner they take it the better for all of us in the long run.

Crash now and get it over with. Reset the Western economy at a 3rd world level and eliminate the billionaires by making their paper wealth worthless. What good is owning Apple if no one can afford even real apples?

MrNoItAll on Tue, 22nd Sep 2015 1:09 am

I strongly suspect that “when Alan Greenspan and then Ben Bernanke stepped into the pilot house” and got the ball rolling on the fraudulent joke that is the totally manipulated economy that we have today, they knew that the era of fossil fueled growth was coming to an end. The world has been hurting due to lack of “cheap enough” energy for a long time. They’ve just managed to obscure and compensate for that sad fact by pulling future consumption into the present via massive accumulation of debt. These guys aren’t stupid. They had to know even back then that the path they launched us on was unsustainable in the long run. Today we witness governments and central banks continuing to pull every trick in the book just to buy a little more time, with rapidly diminishing returns. It is illogical to believe that the Fed and the power structure that runs the federal government — in fact, the world — are ignorant of the consequences of their actions. They know, they have known for a long time, they have planned. Now all we can do is watch the plan unfold. And what a show it promises to be!

Makati1 on Tue, 22nd Sep 2015 1:21 am

MeNo, I am sure it will be a lallapaoosa spectacular with bombs bursting in air over the land of the free and the home of the brave. Not that the elite care. They have no love of anything but money and power. And they will all be crowded on NZ waiting for the Chinese missiles to rain down on their bunkers.

Davy on Tue, 22nd Sep 2015 2:23 am

The board war pig speaks:

https://www.youtube.com/watch?v=M4FuqVbwifk

theedrich on Tue, 22nd Sep 2015 4:47 am

It’s not the Fed and the economy alone that are our predicament. At this moment tens of thousands of desert dwellers are leaving Syria, Afghanistan, Iraq and environs (along with enterprising types from Black Africa) for freebies in Europe. The rich countries of the Persian Gulf, such as Saudi Arabia, Kuwait, Dubai and the UAE are preventing any refugees from relocating to their lands. Only Whitey has the mental decay and gutlessness to allow such an invasion.

Russia is also sending modern weaponry and even soldiers to Syria to fight ISIL and defend Assad, Syria’s president. This is embarrassing for the U.S., whose leaders have hoped that ISIL would do its dirty work for it.

Simultaneously, China and a number of East Asian countries are devaluing their currencies, putting the U.S. at a disadvantage to them in international trade, not to mention taking away American jobs.

Such things are happening while the leftist/communist media sprays its anti-Republican propaganda everywhere. This propaganda is being swallowed by vast numbers of “low-information” voters who constitute the main base of the Demonic Party. An example of such voters: recently some media wag, telling people on a California beach that Richard Nixon(!) had joined the competition for Republican nominee, asked them whether they thought he would make a good president. Many responded with convincingly affirmative or negative answers without even realizing that they were being asked about a dead man. (Probably the next thing such voters will have difficulty with is if they are asked, “Which came first: WW I or WW II?”) This kind of thing shows the true nature of American “democracy,” and provides a clue as to why it is so bottomlessly corrupt. The politicians are counting on what MIT economics professor and Obamacare-architect Jonathan Gruber called “American stupidity.” The masses cannot grasp that for every plus there must be a minus, and that the Demonic Party’s emotional appeals lead to political purulence in the republic.

The primary thrust of the “progressives” is anti-White, and especially anti-White-male. Given 2000 years of White-Guilt training by Christianity, Whites today accept the process of their being shamed and humiliated as natural. The only way their sins can be forgiven is through White genosuicide. With TV dominance (“the medium is the message”), the anti-Whites automatically win. Given the proliferation of “protected” groups, we are now seeing the rapid decay of the U.S., as we can no longer distinguish black from white, good from evil, up from down. The universally diseased elites are now in complete control.

The rise in the polls of schoolmarmish Carly Fiorina, who nearly destroyed the Lucent and HP corporations, is possible only because the media are promoting her over and against Donald Trump. In her defense, it must be said that she was the only one to mention the plague of narcotics now sweeping the nation — and, indeed, the West in general. But she has not pointed out that a great deal of that plague is being imported from Mexico and other Latin American countries. Because that would be “racist.” And, lo and behold, the media rarely speak about the narcotics epidemic.

Indeed, it is hard to escape the conclusion that an enormous amount of laundered drug money is making its way into the political campaigns, especially though not exclusively into Demonic Party warchests. Hence the political resistance to building a wall along the southern border or to sending back those aliens who overstay their visas. Accordingly, the debate had very little to no talk about this grave matter.

Thus, while of passing popular interest, news about the current market gyrations, portrayed by the media as only one side show among many, are but another distraction from the growing Marxism and massive corruption in DC. We can, therefore, expect only more propaganda aimed at continuing the status quo in the expanding cesspool that is American federal politics.

Makati1 on Tue, 22nd Sep 2015 5:02 am

Did you know…?

“Currency Wars, Battles, And Hostile Actions”

“… it is difficult not to conclude that our own government has been increasingly implementing policies contrary to our Constitution and the will or benefit of its own people as well as people of other sovereign nations. Regardless of which political party is in power, representation of our citizens has been supplanted by the will of a small elite. Taking into account strategic actions of government or its actual controlling elite over the last century, one is forced to conclude that “they” have waged a long term nonphysical, highly destructive financial war against its own people. ”

http://www.marketoracle.co.uk/Article52331.html

Opinion backed up by facts by the trainload. LOL

Hello on Tue, 22nd Sep 2015 6:58 am