Kunstler: A Harsh Season

The banking “industry” slept like a dog through the climax of the political primary season. Meanwhile, the banks sucked in scores of billions in cheap loans from the Federal Reserve, using bundles of devalued-to-worthless “innovative” securities as collateral. This dodge has worked for about three months, allowing them to pay their employees and cover their electric bills, and is now collapsing because American society can’t maintain the flow of repayment on current debts and can’t take on any additional debt – meaning both the regular “churn” of revenue flowing to the banks is impaired at the same time that fees for originating new loans cannot be generated. Uh Oh.

Out there in the cul-de-sacs and the strip malls, people are months behind in their mortgage payments, maxed out on their plastic, handing over their car keys to the lien-holders, and feeding their kids Spam filets. Truckers get paid less for their loads than the cost of transporting the load. The airlines have financial cancer and will be dead in eighteen months. Container ship costs are heading out-of-sight. Municipalities are going broke. A weekend flood just destroyed part of the Midwest corn crop. And, of course, oil prices took a jagged turn upward last Friday en route to their next stop: $150-a-barrel.

The New York Times reported Monday that rural Americans are being hit hardest by the rise in gasoline prices. Duh. It's worst, naturally, in the big southern states where wages are low and the distances are vast. There's a reason why Nascar is the second-biggest religion down there: the automobile rescued southerners from the tyranny of geography. Cheap gas allowed them to build a "new " economy based mainly on the construction of suburban sprawl. In the process it deified the pickup truck. Guess what? The rural South made a big mistake. The Dukes of Hazard show is now drawing to a close. They are about to take a turn back to being what they were before the Second World War: an agricultural backwater. God knows what will happen to asteroid belts of "production housing" and big box shopping outside the relatively tiny pre-automobile cores of places like Houston and Atlanta.

The New York Times made a particularly inane point in their lead business section story today (Rural U.S. Takes Worst Hit as Gas Tops $4 Average) saying:

...Sociologists and economists who study rural poverty say the gasoline crisis in the rural South, if it persists, could accelerate population loss and decrease the tax base in some areas as more people move closer to urban manufacturing jobs.

Is it possible, nobody informed the reporters (and editors!) that A.) America has already hemorrhaged manufacturing jobs; and B.) That much of the little manufacturing that remains is not located in any cities per se?

So we now head into the general election. One thing the pundits of the mainstream media seem to miss is how much more room for economic carnage there is in the months remaining. They seem to be laying their current odds on the idea that McCain and Obama are starting on a "level playing field." In fact, McCain is already up to his hips in trouble from his sheer association with the Republican establishment, which will be so badly discredited by the shattered economy that it may actually go the same route as the 19th century whig party and dissolve in a putrid vapor of fecklessness. By November, the Republicans will be viewed as the party that wrecked the nation, and McCain will be in a hole so deep (still on the 20-yard-line by the way) that nobody will be able to see his lips move.

It was a relief, at long last, to see the odious Hillary step aside on Saturday -- though she could not have engineered a more self-glorifying exit. There is talk, all of a sudden, about a President Obama perhaps stashing Hillary in the Supreme Court seat currently occupied by Ruth Badar Ginsburg, whose health is failing. I'd like to see Hillary packed off there. It would get her out of the senate. You can't really grandstand on the Supreme Court. The nation -- if it remains a nation -- could forget about her.

Well, here we are about twenty minutes from Wall Street's Monday open. I imagine it's going to be quite a day. Over 90-degrees and oil cutting its overnight losses. Praise the lord and pass the Xanax.

NVDL: Well Jim's fears proved to be unfounded in the microcosm of just today. That said, I have breached the topic in broad strokes, and it is staggering how intelligent people don't even begin to have a grasp of what is going on. I emailed a well-respected economics reporter, and provided oil drum links in the article. It was the first time the writer had ever seen or thought about these topics and thanked me for the info. And this reporter basically had one of the best reactions I've seen in a while to what is quickly becoming a foregone conclusion. There is still a very large group who are confused, and hopeful. Trapped in daydreams of how life used to be.

The mainstream though is starting to 'get it'. The front page of the Sunday Times said it best:
It’s Crunch Time: Signs that consumers are not coping (in SA) include:

# Nearly 2000 properties across the country are being auctioned each month;

# Some property sellers are so desperate they are settling for as little as half their asking price; and

# Vehicle repossessions have shot up by 25% — one bank took back 1400 vehicles in the first two months of this year.
Of course, 3 months ago if you were talking about high fuel prices or anything else along those lines you were still being called 'negative'. Now, of course it's too late. You can be positive, great, go for it. But also enjoy saying bye bye to your house, carand the feel good factor that you fought to hard to maintain. But hey, stay positive folks. You'll need to now. And that includes me. My landlady said she will be increasing my rent by R500 to R4000 p.m. Yay.