Kunstler: "The condition of the country is pretty awful as we turn the corner onto 2017."

It's been a while since we checked in with Clusterfuck Nation, where James Howard Kunstler chronicles precisely that.

Here are a few of Kunstler's observations in vastly truncated form. Set aside 25 minutes, pour a nice coffee or stiff drink, and enjoy the ride.

Spoiler alert: We're doomed, folks.

---

Forecast 2017: The Wheels Finally Come Off

American Notes

If by some magic any new industrial capacity were built, much of the work in it would be performed by robotics, not brawny men in blue shirts, and certainly not at the equivalent of the old United Auto Workers $35-an-hour assembly line wage. We have not faced the fact that the manufacturing fiesta based on fossil fuels was a one-time thing due to special historical circumstances and will not be repeated. The future of manufacturing in America is frighteningly modest. We’ll actually be lucky if we can make a few vital necessities by means of hydro-electric or direct water power, and that will be about the extent of it. Some of you may recognize this as the World Made By Hand scenario. I’ll stick by that.

Similarly for “infrastructure” spending touted by the forces of Trump as the coming panacea for economic malaise. I suspect most people assume this means a trillion-dollar stimulus spend on highways and their accessories. Well, that also assumes that we expect another fifty years of Happy Motoring and suburban living. Fuggeddabowdit. We’re in the twilight of motoring anyway you cut it, despite all the chatter about electric cars and “driverless” cars. We won’t have the electric capacity to switch over the Happy Motoring fleet from gasoline. The oil industry itself is already headed for collapse on its sinking energy-return-on-investment. And our problems with money and debt are so severe that the motoring paradigm is more prone to fail on the basis of car loan scarcity and unworthy borrowers before the fueling issues even kick in. Every year, fewer Americans can afford to buy any kind of car — the way they’re used to buying them, on installment loans. The industry has gone the limit to help them — seven-year loans for used cars! — but they have no more room to maneuver. The car financing system is broken. Bear in mind the original suburbanization of America back in the 20th century — along with its accessory automobiles — must be regarded as the greatest misallocation of resources in the history of the world. So, a rebuild of all this stuff would represent more and possibly even greater malinvestment. We could have applied our post-WW2 treasure to building beautiful walkable towns and cities with some capacity for adaptive re-use, but we blew it in order to enjoy life in a one-time demolition derby. Life is tragic. Societies make poor choices sometimes, and then there are consequences.

Designated Bag-Holder

The American people have been punked by their own government and their central bank, the Federal Reserve, for years and the jig is now up. In 2017 both will lose their authority and legitimacy, a very grave matter for the survival of this republic ... had Hillary Clinton won the election, at least the right gang would have had to take the blame — the people in charge for the past twenty years. Instead, Donald Trump has been elected Designated Bag-Holder.

About That “Big Fat Ugly Bubble” and its Consequences, Part 1: History Lesson

The USA ran out of growth capacity around the turn of the millennium because we ran out of affordable energy to run our techno-industrial economy. It was hard to see this with seemingly plenty of oil available. And, of course, the computer tech fiesta was blossoming, but for all that glitzy stuff to attract dwindling real capital, other old stuff had to go, and did go, and when all was said and done the computers did not generate much wealth or social value. In fact, the diminishing returns and blowback of computer tech were arguably more damaging than beneficial to society and its economy. Look at where the middle class is today. Computer tech gave the magical appearance of growth while actually undermining it. By affordable energy I mean energy with a greater-than 30-to-one energy-return-on-investment, which is the ratio you need for the kind of life we lead.

Debt was the meat-and-potatoes of the Fed’s wizardry, but the “secret sauce” of Fed magic was fraud, in the form of market interventions, manipulations, regulatory negligence, and just plain systematic lying about the numbers that defined the economy. It amounted to nationalized financial racketeering. Under the consecutive Grand Vizierships of Greenspan and Ben Bernanke, control fraud (using official authority to cover up misconduct) was perfected by banking executives, eventuating in the mortgage securities fiasco of 2008, which took down the housing market and the economy. (That housing market, by the way, was made up mainly of suburban houses, the sine qua non of the greatest misallocation of resources in the history of the world.)

About That “Big Fat Ugly Bubble” and its Consequences, Part 2: 2017, the Year of Living Anxiously

Get this: the Fed is completely full of shit. It is terrified of the conditions it has set up and it has no idea what to do next. The “data” that it claims to be so dependent on is arrantly fake. The government’s official unemployment number at Christmas 2016 was 4.6 percent. It’s a compound lie. The 4.6 percent does not include the 95 million people out of the workforce, most of them able-bodied, who have simply run through their unemployment benefits and given up looking for work. Nor does it figure in the fact that roughly 90 percent of the new jobs created are part time jobs, many of them held by people working several jobs (because they have to, to pay the bills). Nor does it detail the quality of the jobs created (minimum wage shit jobs.)

Why Trump Can’t Pull a Reagan

Today, the US is in a box and Trump comes on the scene with nowhere to move. Too much debt can only be managed if interest rates are kept low. Everybody and his mother around the world is dumping US Treasuries. With a bear market in bonds on, the Fed as buyer of last resort will have to sop up whatever comes on the market to keep the interest rate from rising above three percent on the ten-year, and even that may not prevent it. Trump’s vaunted infrastructure stimulus plan will be impossible to carry out without the Fed monetizing the necessary debt. So stimulus implies bigger deficits, which means more bonded debt that nobody wants to buy. The result will be inflation and accordingly further upward pressure on interest rates. Higher interest rates, in turn, will negatively impact economic activity, lowering tax revenue, inducing larger fiscal imbalances and greater instability.

Trump may never even get the stimulus he seeks. The Republican controlled-congress has vowed not to increase the national debt. How can Trump fulfill his pledge to cut taxes and bring on stimulus without hugely increasing the debt? If there is war over spending between Trump and Congress, Congress is likely to win, since they control the fiscal purse strings. Of course, Donald Trump cannot abide not winning. Hostilities between them may become permanent early in Trump’s term and bring on even more dangerous paralysis of governance.

Desperate Measures

One of the other big and dark trends of the past year has been the move of governments around the world — and among the economist / necromancers who advise them — to ban cash from the scene in order to herd all citizens into a digital banking system that will allow the authorities to track all financial transactions and suck every possible cent of taxes into national coffers. It would also be an opportunity for the bank-and government cabal to impose negative interest rates (NIRP) on bank accounts so that money herded into the digital system could be surreptitiously “taxed” by charging account holders just for being there (against their will). It’s a little hard to see how that might happen just now in a broad rising rate environment, but it would be the natural accompaniment to banning cash — and renewed aggressive QE (QE forever!) might do the trick.

It’s hard to see the US government banning cash as clumsily as India did, but they have other ways to herd the multitudes into the black box of all-digital banking.

Wild in the Streets

The public is just plain pissed off, and remains pissed off after the Trump Victory. Their anger has been fermenting for decades as their economic prospects dwindled and they began to understand how it all worked against them. The battered middle class might have gotten a temporary thrill from the election, but an awful lot of them are still out of work, or working at the humiliating shit-jobs that replaced their old lost jobs in the old real stuff economy. Worse is coming their way in 2017. Theirs is a true existential crisis.

That may be the moment when President Trump and his militarily-weighted cabinet appointees opt for martial law. What a goddamned mess that will be. There is no civilized country on earth with as many small arms per capita than the USA, and despite the fearsome appearance of militarized police forces, you cannot overstate how much deadly mischief a small number of pissed-off people can make with automatic rifles, rocket-propelled-grenades, Semtex plastic explosive, and other fun stuff. It could morph easily to a literal war on bankers and Wall Street in particular, especially if Ice-Nine goes into effect. Bear in mind that a lot of veterans of the endless Middle East wars belong to this suffering economic class, and they actually have some training in the warrior arts.

Their political counterparts in the Democrat / Prog coastal elite, hardcore Hillary, PC-and-unicorn crowd are moving through their post-election Kubler-Ross Transect-of-Grief from denial to anger too. So both sides are quite pissed off and primed for conflict. The Left will certainly do everything possible to oppose Trump and try to make him look bad, whether it’s in the public interest to do so or not. They will throw every monkey-wrench possible into the machinery of governance, up to and including the (mostly Democratic Party weighted) Federal Reserve hierarchy, whose interest rate “dot plot” could be truly a plot to exact revenge on Trump. Of course, that would blow up in their faces since proportionately the coastal elites own much more stock than the Trumpenlumpenprole red-staters, and they could be wiped out in a significant market crash triggered by rising interest rates. But that’s the thing about political rage: it’s the opposite of rational.

There’s no sign that the Democrat / Progs have recognized that their poisonous identity politics played a significant role in their electoral defeat. They will not abandon that endeavor in 2017. They will double-down on it. And as that happens, the Democratic Party will go the way of the Whigs in 1856 — with a whimper, not a bang. God knows who or what will replace them as a credible opposition to Trumpist crypto-Republicanism, although Trump himself stands a good chance of leading that party to oblivion, too, if my forecast of a big financial blow-up comes to pass.

The Oil Quandary

The pattern nicely describes the dynamic advanced by Joseph Tainter in his seminal work, The Collapse of Complex Societies: namely that over-investments in complexity lead to diminishing returns. That is, as you keep making your systems extra-hyper-complex, you get less value back for doing it, until you get to the point where there’s no benefit whatsoever, and then the system implodes. And that is exactly what has happened with oil and the economy that was engineered to run on it, and the financial system that evolved to manage the wealth it used to produce.

Vagrant Thoughts on Geopolitics

As I write just before New Year’s Eve, President Obama is trying to start World War Three with Russia as a parting gift to the voting public. I’m among the skeptics who think that the “Russia Hacks Election story” is a ruse to divert the public’s attention from the stupendous failure of the Democratic Party to win, as expected. Rather, Wikileaks should get the Pulitzer Prize for revealing so much about the nefarious workings of the Clinton Foundation and the Democratic National Committee.

Regular readers know I didn’t vote for Trump, that I heaped considerable abuse on him in the campaign commentaries. But I didn’t take any comfort in the nostrum about being “better off with the Devil you know (Hillary) than the one you don’t know (Trump).” Both candidates were awful, and the condition of the country is pretty awful as we turn the corner onto 2017.

If you’ve gotten this far, I commend and admire you hugely for your remarkable patience. Have a happy 2017 everybody, and don’t let our Trumpadelic president get you down.

Conservatives to Padgett: "The heaviest road users are the ones who get the biggest subsidies."

Narcissus, still gazing at that pesky erection.

Wanna know what's really funny?

The Padgett-led heavy trucking coalition seeks to sue the city of New Albany for failing to maintain city streets suitable for their interstate-grade vehicles.

And yet, when it comes to overall maintenance of roads in this nation, note the disparity.

The Congressional Budget Office estimates that trucks already cost the public as much as $129 billion annually more than they pay in road user fees.

Whoa! That's a lot of TIF bonds.

But wait, because here's the punch line: In the article below, which explicates "asphalt socialism" in our autocentric nation, the air is being let out of the truckers' tires not by liberal leftist pinko fags, but by the Padgett Political Action Committee to Elect Republicans' very own beloved conservative element.

That's rich, indeed. The hypocrisy flies over their heads as quickly as the dump trucks speed down Spring.

I'm reprinting the entire article here, because it's just too good to excerpt.

House Republicans’ Asphalt Socialism, by Joe Cortright (The American Conservative)

The House of Representatives has hit on a clever new strategy for funding the bankrupt Highway Trust Fund: raid the Federal Reserve. Their plan calls for transferring nearly $60 billion from the profits earned on the Federal Reserve’s operations—basically fees paid by member banks—to bail out the Highway Trust Fund.

For years, many macro economists have been urging the Federal Reserve to stimulate the economy by using its power to effectively print money in the form of a “helicopter drop”—simply crediting every American with a certain amount of extra dollars in their bank accounts. The idea has been suggested as a way to jump start consumer spending in a moribund or deflationary economy by economists of some stature, including Ben Bernanke and Milton Friedman. The idea was advanced as a way of accelerating the sluggish growth we’re currently experiencing in an article in Foreign Affairs. But while it might make theoretical sense to economist, it was simply politically impossible, because as The Economist intoned, the idea of a helicopter drop would be anathema to Republicans.

But when it comes to a helicopter drop for highways, there’s no such problem. Remarkably, the proposal to tap the Federal Reserve’s funds comes not from radical Keynesians, but from the Republicans in the very conservative House of Representatives. And apparently, the same people who preach personal responsibility in almost every other field of endeavor want to insulate automobile drivers from paying the costs of the roads they drive on. While they may espouse the virtues for the free market in almost everything else, this position makes them “asphalt socialists” when it comes to transportation.

The best estimates are that drivers now pay only a tiny fraction of the direct costs of building and operating roads, not to mention causing huge externalities in the form of crash-related injuries and deaths and pollution. As we’ve noted before, the heaviest road users are the ones who get the biggest subsidies: The Congressional Budget Office estimates that trucks already cost the public as much as $129 billion annually more than they pay in road user fees. And a report from TransitCenter and the Frontier Group recently detailed the $7.3 billion in parking tax subsidies drivers get every year as well.

(Even with these subsidies, however, increasing fuel efficiency and the decline in per capita driving have pushed down revenues for the Highway Trust Fund, and contributed to the current crisis.)

While this latest chapter of dysfunctional public finance and ideological hypocrisy is playing out at the federal level, it’s equally prevalent in the way states and localities treat driving, too. Local governments have parking requirements that drive up the cost and drive down the supply of housing to subsidize car ownership. In Seattle, parking requirements add something on the order of $250 a month to the price of a typical apartment.

The new transportation bill will favor cars in other ways, too. Local highway projects will get an 80 percent federal match, but transit projects will get only 50 percent. Meanwhile, important sources of funds for transit, pedestrian, and bicycle programs, including TIGER grants and the Transportation Alternatives Program, were cut or imperiled.

While advocates of the road system regularly cloak their arguments in the rhetoric of choice and the free market, our transportation system is actually characterized by heavy government intervention on behalf of private vehicles. Massive, taxpayer-supported subsidies effectively bribe people to drive, and insulate them from the financial consequences their choices impose on others.

Drivers want more roads—as long as they don’t actually have to pay for them. The fact that there’s no stomach for increasing the gas tax—even though gasoline prices have fallen by more than a dollar a gallon in the past year—shows that when put to the test of the marketplace, there’s actually little demand for more transportation.

The irony, of course, is that transportation is clearly one policy area where traditional free market principles would put a serious dent in the problems of traffic congestion, air pollution, and safety. If car users faced anything close to the actual costs of building and operating roads (and mitigating or preventing the injuries and pollution effects), we’d see much less driving, and much less demand for additional capacity.

Will we get our cut? Or better yet, will we make it count?

(Originally published by Lloyd Wimp at his View from the Highway blog.)

----

This past Monday (October 20), along with John Miller and Pat Woosley of NA Community Housing, I had the pleasure of attending a live teleconferenced seminar sponsored by the Federal Reserve System entitled Confronting the Neighborhood Impacts of Foreclosure.

The local venue for this all day event was held at the Louisville Branch of the Federal Reserve Bank of St. Louis. Others in attendance from Corydon, Louisville, and elsewhere who deal with housing issues in one way or another in their respective locales.

The panel consisted of Mayors and Housing Department officials from cities around the country, Federal Reserve Board Members, representatives from NeighborWorks America, National Housing Institute, National Community Stabilization Trust, JP Morgan Chase, and Enterprise Community Partners to name a few.

The presentation centered around the small portion ($3.92 Billion) of the $700 Billion that has been set aside to be deal with foreclosure issues at the local level and how best to utilize those limited funds. It is information that any city government could find useful in these trying times.

While most of the legal and financial jargon was well above my pay grade, I found a much of what was presented to be germane to our own local conversation.

There were numerous examples of how municipalities from other states have successfully dealt with such financial crises of the past three decades, instances brought on by plant closings, which led to job losses and a decline in population followed by deterioration of housing stock in what were once thriving neighborhoods.

Such things as increased code enforcement, city/county owned land banks, greenfields, small neighborhood parks, urban agriculture, mixed use properties, and much more were sited as successful ways to deal with vacant and abandoned property.

The folks who had initiated these programs in their own communities suggested a variety of ways to tweak them to fit in cities of all sizes in all states in order for them to get the biggest bang for the bucks available.

Does it mean that an adjustment in thinking will be required ? Yes, but it also means that we do not have to reinvent the wheel. Templates are available to any who choose to look at them.

Click on this link and you will find access to Power Point © presentations from previous sessions in this series. This particular meeting should be available there within the next few days.

Other links of interest include:

NeighborWorks America

Enterprise Community Partners

Housing Partnership Network

Local Initiatives Support Corporation

Genesee County Land Bank