Whiskey & Gunpowder
By James Kunstler
January 29, 2009
Saratoga Springs, New York, U.S.
State of Cringe
Just as Mr. Obama has danced into the oval office, we've arrived
at a moment when a lot of people have a hard time imagining
the future. This includes especially the mainstream media, which
has reached a state of zombification parallel to that of the banks.
But even in the mighty blogosphere, with its thousands of voices
unconstrained by craven advertisers or pandering managing
editors, the view forward dims as a dark and ominous fog rolls
over the landscape of possibilities.
For at least a year several story-lines have been slugging it out
inconclusively for supremacy of the Web-waves. The main event
has been the Deflationists versus the Inflationists. The first group
basically says that so much "money" is being welshed out of existence
that it dwarfs the new "money" being shoveled into
existence in the form of bail-outs, tarps, and office re-decoration
stipends. The Deflationists see the tattered remnants of the
consumer credit economy auguring ever deeper into a hole until
it is buried so far down that all the back-hoes ever sold will not be
able to dig it out. The competing Inflationists say that the massive
truckloads of shoveled-in "money" will soon overtake vanishing
"wealth" and, in the process, make the US dollar worthless.
Some of us see both outcomes in sequence: the deflationary "work
out" of bad debt currently underway -- of loans that will will never be
paid back, of acronymic paper securities revealed as frauds, of
"non-performing" contracts entering the swamps of foreclosure, of
banks pretending to still exist, of hallucinated "wealth" rushing into
the cosmic worm-hole of oblivion -- can only go for so long before
everyone who can go broke will go broke. Then, just as we find
ourselves a nation of empty pockets, the tsunami of shoveled-in
"money" designed to "reboot the consumer" (created not from
productive activity but just printed recklessly), will start churning
through the "economy," chasing products and commodities that
became scarce during the deflationary phase -- and the result is
hyper-inflation, the eraser of debt, destroyer of fortunes, and suicide
pill of feckless governments.
I guess the basic difference is that the hardcore Deflationists seem
to think that their process can go on forever. The society just gets
poorer and poorer until we're back at something like a scene out of
Pieter Bruegel the Elder. The Inflationists see a fork in the road
leading to more overt destruction, especially political turmoil as a lot
of negative emotion joins the work-out orgy and overwhelms
government.
But in this moment, the week after a new president's inauguration,
the deadly fog has rolled in and absolutely everyone dreads
what lurks on the other side of it, without being able to discern the
path through it. For example, the "bail-out fatigue" being reported
suggests that congress may just call a halt to money-shoveling.
Where would that leave Mr. Obama's urgent call for "stimulus?" Not
to mention further TARP injections for redecorating bank offices.
I've been skeptical of the "stimulus" as sketched out so far, aimed at
refurbishing the infrastructure of Happy Motoring. To me, this is the
epitome of a campaign to sustain the unsustainable -- since
car-dependency is absolutely the last thing we need to shore up and
promote. I haven't heard any talk so far about promoting walkable
communities, or any meaningful plan to get serious about fixing
passenger rail and integral public transit. Has Mr. Obama's circle
lost sight of the fact that we import more than two-thirds of the oil
we use, even during the current price hiatus? Or have they forgotten
how vulnerable this leaves us to the slightest geopolitical spasm in
such stable oil-exporting nations as Nigeria, Mexico, Venezuela,
Libya, Algeria, Columbia, Iran, and the Middle East states? And we're
going to rescue ourselves by driving cars?
I know it is difficult for Americans at every level to imagine a
different way-of-life, but we'd better start tuning up our
imaginations, because endless motoring is not our destiny
anymore. The message has not moved from the grassroots
up, and so at this perilous stage the message had better
come from the top down. Mr. Obama needs to go on TV
and tell the American public that we’re done cruisin' for
burgers. He could do that by drastically reviving his stimulus
proposal as it currently stands.
Putting aside whether this "stimulus" represents reckless money-
printing in an insolvent society, let's just take it at face-value and ask
where the "money" might be better directed:
-- We have to rehabilitate thousands of downtowns all over the
nation to accommodate the new re-scaled edition of local and
regional trade that will follow the death of national chain-store retail
of the WalMart ilk. Reactivated town centers and Main Streets are
indispensable features of walkable communities. The Congress for
the New Urbanism ought to be consulted on the procedures for
accomplishing this and for rehabilitating the traditional
neighborhoods connected to our Main Streets.
-- We have to reform food production (a.k.a. "farming"). Petro-
dependent agri-biz will go the same way as the chain stores. Its
equations will fail, especially in a credit-strapped society. That piece
of the picture is so dire right now, as we prepare for the planting
season, that many crops may not be put in for lack of front-money.
This portends, at least, much higher food prices at the end of the
year, if not outright scarcities and shortages. And the new
government wants to gold-plate highway off-ramps instead?
Earth to Rahm Emanuel: screw your head back on.
-- As mentioned above, we have to get passenger rail going again
because the airlines are going to die the next time there is an uptick
in oil prices, or a spot shortage of oil. Let's not be too grandiose and
attempt to build expensive high-speed or mag-lev networks --
certainly not right now -- because they require entirely new track
systems. Let's fix those regular tracks already out there, rusting in
the rain, or temporarily replaced by bike trails.
Those are three biggies for the moment and enough to keep this
society busy for a couple of years. But more to the point of this blog,
observers of all stripes are having trouble imagining any way out of
our multiple predicaments. All the possible actions tried so far have
seemed absurd. Why even try to prop up inflated house values when
the single most crucial need in this sector is for house prices to
return to parity with incomes so the shrinking pool of ordinary
people still employed can begin to think about buying one? Well, the
obvious explanation is that politicians can't bear the pain of watching
mass foreclosures and the ruination of families. This is pretty
understandable, and it is tragic indeed. Frankly, I don't know of any
political narcotic that can mitigate the pain that results from having
made poor choices in life -- even if those choices were promoted and
reinforced by the mighty ideology of "American Dreaming." Anyway,
the foreclosures are well underway now, and perhaps the salient
question is how long will the public's fury remain constrained while
they hear about Wall Street executives buying $80,000 area rugs?
Surely there is a tipping point of collective distress that is not too far
from where we're at now.
In the realm of TARPS and other continued bail-outs aimed at the
banks, the car-makers, and a host of other corporate special
pleaders, I wonder if we have already reached the saturation point.
But opinion on the Web is starkly divided and a prime manifestation
is the debate over whether it was a terrible blunder or the right
thingto let Lehman Brothers sink into bankruptcy. Both sides
make valid arguments, but virtually all the other super-banks right
now have lurched to death's door and we have no clear guidance
on what we should do about them. Each one is touted as "too big
to fail," as well as being interlocked with the others on credit default
swaps that would bring them all crashing down if one counter party
truly failed.
It seems to me that this is what lies at the heart of the present
situation. Nobody I've encountered in the sphere of opinion-and-
comment thinks that these banks will survive, and this outcome
beats a short path to the conclusion that the entire banking system
is fatally ill -- leading directly to a super-major crisis of political
economy in which the whole reeking, leaking system just crashes.
I think this is what lies behind Mr. Obama's appeals for very urgent
action.
But then we're back to square one: nobody, including Mr. O himself,
has really proposed a set of actions that have not already been
tried in the way of money-shoveling. So this will be a week in which,
perhaps, some wise and intrepid figures -- perhaps even the
president -- will articulate something we haven't heard before,
perhaps even something like bearing our hardships bravely. It'll be
a very interesting week, I'm sure.
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