Hope Equals Truth About Our National Bankruptcy

People of good intentions and progressive predilection are scratching their heads wondering just how President Barack Obama managed to turn himself into George W. Bush Lite with sugar-on-top just twelve weeks after that fateful walk down the US Capitol’s east stairway to the waiting helicopter. I’m hardly the first observer to note that Mr. Obama’s actions in the face of an epochal finance fiasco and economic collapse are a mere extension of the pre-January-20 policies, carried out by much the same cast of characters.

The assumption up until now was something about the reassuring value of continuity — if we could just prop up an ailing set of banks for a little while, the US public could resume a revolving credit way-of-life within an economy dedicated to building more suburban houses and selling all the needed accessories from supersized “family” cars to cappuccino machines. This would keep everyone employed at the jobs they were qualified for — finish carpenters, realtors, pool installers, mortgage brokers, advertising account executives, Williams-Sonoma product demonstrators, showroom sales agents, doctors of liposuction, and so on.

This was a dumb strategy for such a supposedly bright group of people surrounding Mr. Obama. That old economy was dead on arrival January 20th. Even the kindest physicians don’t put corpses on life support. This particular corpse has been placed in the world’s cushiest intensive care unit, with transfusions running about a trillion dollars a month — not to mention hefty bonuses for the attending nurses. Instead, a fast and furious wake might have been held, with the corpse of the old economy laid out on a granite countertop for all to toast and bid farewell. President Obama might have led this exercise with some aplomb — even while directing his new justice department warriors to round up a host of suspects in the old economy’s suspicious death.

What it comes down to, apparently, is a leadership elite across all sectors — politics, business, academia, media — that is incapable of processing the truth, and then conveying it to the broad American public. Alas, this also appears to be a common theme in history, with a commonly tragic outcome, which is that elites get ruthlessly dumped and replaced by new elites, often composed of zealots, maniacs, nincompoops, and others generally ill-disposed to the able management of complex affairs. It’s called the “circulation of elites,” and in times of crisis it tends to take on a kind of downward spiraling flavor, with each gang of discredited leaders tossed out for a progressively worse one until a kind of exhaustion is reached — whereupon the archetypal man-on-a-white-horse arrives on the scene.

Mr. Obama looked to be the man-on-a-white-horse — on the exhaustion of Reagan-Bush Jesus-Republicanism — but he’s coming off more like Philippe Égalité (Louis Philippe Joseph d’Orléans, duc d’Orléans) in 1793, with perhaps Newt Gingrich waiting offstage to become Robespierre in 2012 — and some obscure US Army captain now toiling in Kirkuk slated to become the American Napoleon of 2015. As you’ve surely heard a thousand times now, history doesn’t repeat itself but it rhymes. The enormities of Wall Street today are a little like those of the French Ancien Régime at Versailles. If America encounters the sort of disruptions of food and energy supplies that are brewing on the horizon, and unemployment keeps arcing up its current trajectory, civil uproars could easily follow. Readers think I joke about the Hamptons going up in flames. But the antics of the bankers, hedge funders, the CEOs, the Madoffs, and even the P. Diddy’s of our time, are liable to attract murderous attention as the public mood moves from sour to wrathful.

So, what people of good intention and progressive predilection want to know is how come Mr. Obama doesn’t just lay out the truth, undertake the hard job of cutting the nation’s losses, and get on with setting this society on a new course. The truth is that we’re comprehensively bankrupt, and no amount of shuffling certificates around will avail to alter that. The bad debt has to be “worked out” — i.e. written off, subjected to liquidation of remaining assets and collateral, reorganized under the bankruptcy statutes, and put behind us. We have to work very hard to reconfigure the physical arrangement of life in the USA, moving away from the losses of our suburbs, reactivating our towns, downscaling our biggest cities, re-scaling our farms and food production, switching out our Happy Motoring system for public transit and walkable neighborhoods, rebuilding local networks of commerce, and figuring out a way to make a few things of value again.

What’s happened instead is what I most feared: that our politicians would mount a massive campaign to sustain the unsustainable. That’s what all the TARP and TARF and PPIT and bailouts are about. It will all amount to an exercise in futility and could easily end up wrecking the USA in every sense of the term. If Mr. Obama doesn’t get with a better program, then we are going to face a Long Emergency as grueling as the French Revolution. One very plain and straightforward example at hand is the announcement last week of a plan to build a high-speed rail network. To be blunt about it, this is perfectly ******* stupid. It will require a whole new track network, because high speed trains can’t run on the old rights of way with their less forgiving curve ratios and grades. We would be so much better off simply fixing up and reactivating the normal-speed track system that is sitting out there rusting in the rain — and save our more grandiose visions for a later time.

I don’t like to be misunderstood. With the airlines in a business death spiral, and mass motoring doomed, we need a national passenger rail system desperately. But we already have one that used to be the envy of the world before we abandoned it. And we don’t have either the time or the resources to build a new parallel network.

But grandiosity is just another way that we lie to ourselves about where we’re at and what is really possible. Surely Mr. Obama knows that hope fades where the light of truth doesn’t shine. He is a charming fellow. I don’t especially want to see Newt Gingrich chop his head off.

The Joker in the Deck

Things come out of the woodwork. All of a sudden it’s a mutant H1N1 swine flu, with bird and human DNA accessories. We don’t know where this is taking us. It could be a media blowover, like SARS, or it could be a big deal, shutting down travel and assemblies of humans. It would be a very big deal if it killed, proportionately, as much of the population as the 1918 flu event — the worldwide toll then was roughly 30 -100-million out of a global population around 1.7 billion. Now the world population is over 6.5 billion. The only thing anyone can predict at the moment is that there will be a lot of very worried health officials and politicians out there in the days ahead.

This flu epidemic comes just as global economy itself lies comatose in the economic intensive care unit, with IV lines of dollars, euros, yen, and renminbis transfusing its hollowed-out carcass. It’s an odd time for attention to be diverted from that awful spectacle. The cash transfusions have sent the Cable TV gang into raptures of “optimism” — meaning they expect debt securitization to resume as before, along with Yuletide-level credit card shopping sprees in the malls, a mass splurging on new cars, and a renewed frenzy of house-building in the Florida buzzard flats. Those “green shoots” and sprouting “mustard seeds” they report seeing may themselves be a flu-like symptom. I don’t know what the so-called Mexican swine flu will lead to, but the global economy as we’ve known it is a goner.

Even if the Mexican swine flu turns out to be something of a false alarm, it will require billions of dollars in unexpected new outlays for prevention operations here in the USA — reinforcing the false idea that the nation has bottomless resources (the same idea that has been driving the bail-out fiesta). My guess is that the fear emanating from the story will be a potent generator of paranoia in the meantime, leading to widespread closures of things, canceling of events, restrictions on travel (official or otherwise), and a sell off in the financial markets. And that’s if the flu turns out not to amount to anything.

If the flu is the real deal, it will surely drive a stake through the faintly-beating heart of that invalid global economy, and possibly even continental-scaled economies like the US, the Euro-zone, and China — any place where things and people have to move long distances to keep life going. The US, obviously, suffers in this instance from its proximity to Mexico, and the fact that so much of our food comes from places that employ casual Mexican labor. A serious flu outbreak would be a short path to food shortages in the US, with our three-day supermarket inventories and just-in-time shipping methods. It would not be such a bad idea now to lay in supplies of beans, brown rice, cooking oil, onions, and toilet paper.

In any case, the banking-and-investments sector has been on autopilot for a few weeks. Lesser banks are crashing around the country (Idaho, Florida, California last week), but the remaining Big Boyz are still lurching through the landscape like so many Frankenbanks, jazzed up on electric surges of digital cash. There are ever more hints of a peasant uprising against the castle of privilege, but no sign just yet of the flaming brands and shaking fists from the village below. This flu thing will put the schnitz on their distempers for a while.

James Howard Kunstler

April 29, 2009

P.S.: Of high interest to those confused and perplexed over President Obama’s actions so far in the banking fiasco, I commend a great piece by fellow blogger-on-the-margins Charles Hugh Smith: Obama’s Secret Plan. This analysis is low on the paranoia and high on the Machiavellian maneuvering insight.

The basic idea is that Mr. Obama has gone along with all the TARPing and PPIPing because it was tactically the only way that he could give the Wall Street plutocrats enough rope to hang themselves — and that this was the only reality-based strategy that could get public opinion in the mood for real change. It explains a lot, if it’s true. Alternately, it would be very sad to learn that Mr. Obama really believes he can rev back up a securitized-debt-and-consumption fiesta by turning the Federal Reserve into an ATM.