Far From Normal

“Far From Normal”
by James Howard Kunstler

(1)Those were the words that Fed chairman Ben Bernanke used to describe the financial markets (and by extension the economy) these heady spring days when everybody else with a rostrum, it seems, has pronounced the so-called liquidity crisis contained. There’s a great wish for American finance to return to business-as-usual — raking in fantastic fees for innovating new modes of tradable paper, and engineering mergers and buy-outs that generate huge fees plus $100 million kiss-offs for corporate CEOs in the noble struggle to dismantle America’s productive capacity — but apparently events are still out of hand.


(2) The Federal Reserve itself has been instrumental in promoting abnormality by doing everything possible to prevent the work-out of bad debts in the system. Since money is loaned into existence, and loans are debts, the work-out of bad debt suggests the discovery that a lot of money has disappeared — which is exactly the case. The Fed has postponed the work-out by sucking up truckloads of impaired, untradable securities in exchange for loans to giant banks who don’t have enough cash on hand to pay their janitors.


(3) Personally, my theory has been that the specter of peak oil pretty clearly implies the inability of industrial economies to continue producing real wealth in the customary way. In the face of this, either consciously or at a more mystical level, the worker bees in banking recognize that, in order to maintain their villas in the Hamptons, money has to be loaned into existence some other way (than in the service of industrial productivity).


(4) We’ve tried just about everything else. There was the so-called service economy, an attempt to replace manufacturing with hamburger sales. Then there was the information economy, in which work would be replaced with knowing about stuff. Then there was the tech thing, which was about bringing internet companies that existed only on the back of cocktail napkins to the initial public offering stage of capitalization — which allowed a few-hundred-or-so thirty-year-old smoothies to retire to vineyards in the Napa Valley, while hundreds of thousands of retirees lost half the value of their investment portfolios. Then there was the housing boom, which was all about the creation of more suburban sprawl under the theory that houses (or “homes” in the jargon of the realtors) represent an obvious sort of wealth, and therefore that using houses as collateral would allow humongous sums of money to be loaned into existence — along with massive fees for structuring the loans into bundles of bond-like thingies.


(5) This has all failed now because the racket went too far. Every possible candidate for a snookering got snookered. Too much collateral for which there were no takers went into the ground. The insane run-up in house values made a downward price movement inevitable, and as soon as the turnaround happened, it fell into the remorseless algebra of a deflationary death spiral. More importantly, however, this society ran out of tricks for loaning money into existence and instead began to experience the pain of money thought-to-be-in-existence being defaulted into a vapor — and worse, these defaults led to logarithmic chains of money destruction in its places of origin, the investment banks that had created the racket.


(6) The important part of this is that the money is gone. What makes matters truly eerie is that the “bubble” in suburban houses has occurred at exactly the moment in history when the chief enabling resource for suburban life — oil — has entered its scarcity stage.


(7) The logical conclusion of all this is not what the American public wants to hear: we have become a much poorer society and are now faced with the unavoidable task of making major changes in how we live. All the three-card-monte moves at the highest level of finance lately amount to an effort to avoid the unavoidable, acknowledging our losses. Certainly the political fallout of all this will be awesome. But it’s not about politics, really. It’s about the entire society’s inability to form a workable new consensus of reality.


(8) It’s hard to predict how long these institutions at the heart of our economic system can linger in the “far from normal” limbo of pretending that money has not been defaulted out of existence. Since the same process is underway in Great Britain and Spain, places beyond the control of Bernanke, Secretary Paulson, and the Boyz on Wall Street, and since actions and reactions there will affect the destiny of money here, its hard to escape the conclusion that we’re at most months away from the brutal recognition that Wall Street has managed to bankrupt itself (and, by extension, the United States). This is dark heart of the matter of which no one dares speak.


(9) Meantime, on the ground, every mook and minion in the land sees the gas pumps levitate beyond the $4 hash mark, and notes with bugged-out eyes the double-digit price stickers on common supermarket items, and feels the rush of blood from the extremities when some check-out clerk at the WalMart declares that a certain proffered credit card is maxed out, and some strangers in overalls — the neighbors say — managed to hot-wire the GMC Sierra in the driveway, and took it away….


The candidates for president will have a lot to talk about. I wonder if they’ll dare to.

I’m burnt out. Rough day. Staring at this column and not very happy with it and wondering it I should wait until tomorrow before even thinking about it. Did anyone else get the feeling you saw this same column two weeks ago? Or two months? I’m watching this documentary called “Overnight” about a failed attempt in Hollywood. Pretty good. Doom will be glad to hear I studied airlines and jetfuel in my spare time today (besides taking screenshots of my escapades on CFN).

Comment away.

25 Replies to “Far From Normal”

  1. Lately, to stave off the deja vu of the columns’ subject matter, I pretend that it’s the emperor from the StarWars movies narrating JHK’s column….

    “but apparently events are still out of hand, young Skywalker…”

    “its hard to escape the conclusion that we’re at most months away from the brutal recognition that Senate has managed to bankrupt itself (and, by extension, the rebellion). This is the dark side of the matter of which no Jedi dares speak.”

  2. God, I hate the edits, JR. It’s like when someone says something and you don’t quite pick it all up, and you ask for a repeat, and they say “nevermind”. I can get homicidal over these, just a warning.

  3. OK, JR, you’re tired and you’re busy. But, please fill in the XXX parts, soon?

    I think JHK is getting a bit repetitive. I know I would by now.

    Yarra, that was some funny shit above. “Da-da-dah, da-da-dah, da-da, dee dee deet da….” Scoll lines into infinity.

  4. Oooh, JR’s doing airline economic shit. Nudge and I are supposed to be doing something for my physics pals (actually, I already begged her for her help). WE NEED HELP!! Now I beg you, too, Please JR, I will owe you beeg time!!!

    Seriously, I don’t know where to start. I do know we need to calculate the tipping point for domestic airlines based upon their fuel purchases. Unless the feds come to their rescue, they will/must go down over these escalating fuel costs

    We all [should] really care about this, being stuck out in the middle of freaking nowhere with no boats to catch, yet.

  5. So JR,
    Your aviation tipping point (tell me if I’m wrong).
    Some factors that would be important (INPO)
    a) Distance between destinations
    (short distance = more time climbing to height = more fuel/maintenance/reduced airframe life due to more de-pressurisations)
    b) % occupancy (no-brainer)
    c) Factors that might be mitigating, say
    less flights = higher occupancy = less aircraft = less cost = less time in holding patterns

    In today’s dollars – I’m guesing your answer isn’t <$20/gal.

  6. You’re guessing right.

    $13 = $450 dollar oil. We’ve got a long way to go. The Long Emergency may be our worst nightmare. We need a short one.

  7. «I think JHK is getting a bit repetitive. I know I would by now.»

    Yeah, he’s a bit of a One-Note Charlie: My new book’s out, financial markets are scrod, sleepwalking, peak oil, suburbia sucks, ethanol, food crisis, salad shooters, weeks or maybe months before it blows up.

    How many different ways are there to say that? And he does it once a week. I guess I keep going back partly to see if he’s going to find something else to rant about and mainly to hang out with y’all.

    Aviation tipping point? Which part of aviation? Budget airlines are already going down faster than Messaschits in WW2. I agree that short-hop flights are soon to be replaced with bus or train travel, but there will be a market for long-haul passenger service — especially trans-oceanic — as long as there’s business to conduct. There won’t be as *many* flights, ’cause they’ll want to fill those planes, but they’ll still be flying.

  8. This blog is such a relief. I feel like I’m teaching doomer kintergarden over at CFN.

    FAR, I hope you’re right about the airlines.

    You know who’s the Doomer’s Road Warrior hero? That would be Robert Hirsch. They got a story over at TOD on him today. He’s like a samurai. Few words spoken, but listen to him carefully, and watch his body language. The Peak Oil problem is “as massive as one can possibly imagine”. He’s talking Mad Max, coming soon to a neighborhood near you, folks.

  9. Doom… LOL. The latest “new” guy at CFN, Eternal Optimist, has to be Peak Life, asoka, or maybe even SF taking a piss.

    JR, you are a god! And I’m not talking about any piddling apprentice deity. How you find the energy (and time) to be the star of two blogs is mystery to me. Don’t think I take it for granted!

    p.s. — For the record, I don’t believe in black swans. Well maybe for some people, but not for those with a decent imagination, a willingness to think, and a state of mind ever cognizant of the possibility that a joker could be dealt at any time.

  10. For example, it wouldn’t surprise me in the slightest if one day I were to wake up to be advised (say, by some great system administrator in the sky) that my life wasn’t real at all, but rather a simulation of a possible life. Is there such as thing as an impossible life? Or an impossible sockpuppet? (These might be trick questions.) Note to Self: Think about money. It’s as good an anchor as any.

  11. Eternal Oriface is not asoka, but it is somebody. hmmm. asoka isn’t breaking game face these days, he’s got political objectives, and he is plotting and deliberate. He drops in to to a job. He’s like a ninja. He doesn’t fuck around.

  12. Holmes, it’s not our friend Peakie, he’s too dumb to be playing like EO. May guess is it’s SF or wombat, playing games. Agree with SB, it’s not asoka. It could be a newbie, but I doubt it.

  13. Thinking about not having enough money to pay off your debts will really keep you grounded there, Holmes. The UPL is getting a good grounding lesson these days.

  14. D3PO, I have some thoughts about debt… but I need to zonk out & I’ve probably brought it up before. I’ll mention it tomorrow either here or CFN.

    But after tomorrow, I’m likely to be scarce the rest of the week. Daughter Dearest is graduating & my family’s coming in from out of state to help celebrate. (It’s a special occasion, y’know.)

  15. Well, dear Doctor… I meant “anchor” metaphysically — in the Heidegger sense (if I may), but your point is still a good one.

    I saw some interesting comments in that TOD link you posted… apparently I’m not the only person who thinks L.A. is as a good a place to be as any. Well, at least for awhile.

    Upon further reflection, I’m going with your suggestion of wombat. Although, asoka is still my second guess. I’ve seen him do some great out-of-character comedy. Besides, he might be getting bored with plugging Obama, especially now that the Democratic race is substantially over and done.

  16. I sure would be surprised if it was asoka in this case. But I’ll say this: I remember a year or more ago when asoka went nuts on OEO or one of the OEOs or dangerbird or one of those/that guy(s) about global warming. It was a smackdown extraordinaire, and no mercy from asoka. He ended it with “You sir are a troll”. And nothing more was said. I’m tellin you the guy is a ninja.

    I say peaklife if it is in fact a sockpuppet, because he’s a coniver and a poser.

    Holmes, I struggle with embracing the notion of black swans also (well, you may not struggle as much as me), but I would say most people (or the masses as a whole) do not meet your qualifications stated above, and for them it’s black swans all the time. And Taleb doesn’t seem to throw it all to the wind as pure randomness, but acknowledges that there are some open-minded individuals who see connections and possibilities where most see nothing, hence the gray swan. They may not have predicted a specific outcome but were open to or allowed the possibility for it and therefore were not shocked or surprised. JR, correct me if I have misrepresented this aspect of BS.

    My own take is perhaps such people have learned to not run with the herd, and they avail themselves to unconventional thought and perspective, and understand and manage their own biases, ego, and limitations much better than most. In this way they are more free to see and learn, and able to accept a broader array of possibilities, including scenarios that might otherwise seem counterintuitive and/or counter to beliefs preferences or liking. And maybe not from raw intellect but rather from a sort of humbleness that opens more doors. I’m sure intellect helps it along though. Hmm, I’m getting too far out on this limb.

  17. Hey, Eternal Optimist has an e-mail address on his typekey profile – jes sayin…

  18. http://novalight.net/NOVALIGHT.swf

    That was me, by the way, just didn’t feel like signing in. I found that sight just by googling the name on the email Yarra pointed to.

    The first thing I thought looking at the design was “Scientology.”

    I just checked in to CFN and he’s posted his “real” website novalight.org


  19. Holy Hannah! I didn’t see EO coming out of the closet like that.
    Hey JR- I saw you trying to get Learsy to accept PO. Might as well just bang your head on the wall for all that you’ll get him to make that admission. You think JHK is repetitive, Learsy is rerun hell.

  20. I’m usually around, but you keep way later hours than I

    I think KTM is relatively new but he’s at it with a vengeance. It’s heartening to see more people talking about it openly even when posters like Rolo try to shoot him (and you)down. I actually came to PO through HuffPo- a female poster, I don’t remember who, is an ASPOassociate or something.

  21. Maybe it was the Catholic school PTSD, aggravated by today’s arrival of He who SEEs, or both, but on the way home from work today I had a flashback of an old and nearly forgotten DC comic book cover for ‘Haunted Tank’, where the hero, tank commander Jeb Stuart, lays severely wounded and sprawled across the hull. In the turret opening and clutching the 50 cal. is a Catholic nun with a bewildered look on her face, as a swarm of Nazis rush forward toward the tank with guns blazing. A bubble above Jeb says “For God’s sake sister!… Fire! To which she replies, “I… I can’t kill!”

  22. JR, I looked at yours and KTMs arguments at Huffpo. Great stuff. Like you turned a fire hose on him.

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