Jan 5, 2017

This Post Strictly For You Genius Future National Leaders

Common Sense Commentary: It is too long and deep for most humans. I reprint it as a matter of historical record in case all the other bloggers and news services lose it. I don't agree with everything Kunstler says, but everything he says here must be recorded for posterity and future leaders. These secular predictions of 2017 will not all come to pass but most of them are in harmony with Biblical descriptions of the last days, and this from a strictly human, non spiritual viewpoint. RB

Jesus said...."And the lord commended the unjust steward, because he had done wisely: for the children of this world are in their generation wiser than the children of light." Luke 16:8


Forecast 2017: The Wheels Finally Come Off

By James Howard Kunstler

American Notes 

Apart from all the ill-feeling about the election, one constant ‘out there’ since November 8 is the Ayn Randian rapture that infects the money scene. Wall Street and big business believe that the country has passed through a magic portal into a new age of heroic businessmen-warriors (Trump, Rex T, Mnuchin, Wilbur Ross, et. al.) who will go forth creating untold wealth from super-savvy deal-making that un-does all the self-defeating malarkey of the detested Deep State technocratic regulation regime of recent years. The main signs in the sky, they say, are the virile near-penetration of the Dow Jones 20,000-point maidenhead and the rocket ride of Ole King Dollar to supremacy of the global currency-space.

I hate to pound sleet on this manic parade, but, to put it gently, mob psychology is outrunning both experience and reality. Let’s offer a few hypotheses regarding this supposed coming Trumptopian nirvana.

The current narrative weaves an expectation that manufacturing industry will return to the USA complete with all the 1962-vintage societal benefits of great-paying blue collar jobs, plus an orgy of infrastructure-building. I think both ideas are flawed, even allowing for good intentions. For one thing, most of the factories are either standing in ruin or scraped off the landscape. So, it’s not like we’re going to reactivate some mothballed sleeping giant of productive capacity. New state-of-the-art factories would require an Everest of private capital investment that is simply impossible to manifest in a system that is already leveraged up to its eyeballs. Even if we tried to accomplish it via some kind of main force government central planning and financing — going full-Soviet — there is no conceivable way to raise (borrow) the “money” without altogether destroying the value of our money (inflation), and the banking system with it.

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.

We also might have been in better shape now if, beginning twenty years ago, we began a major rebuild of our railway infrastructure. But we blew that off, too, and shortly it will be very difficult to get around this geographically large country by any mechanical means. It may be too late now to do anything about that for the financing reasons already touched on — and which I will elaborate on next. The bottom line is that President Donald Trump will be overwhelmed by a sea of financial troubles from the very get-go, and here’s why.

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.

Insiders surely have seen this coming for a long time. The people running this so-called Deep State of overblown and overgrown institutions probably acted at first with the good intentions of keeping the national lifestyle afloat. But in the end (now approaching) they stooped to too much duplicity and deceit in the desperate attempt to not just preserve the system, but to protect their own reputations and personal perquisites. And now there ought to be some question with the election of 2016 that they have engineered all of this system fragility to blow up on Mr. Trump’s watch, so they can blame him for it. It was going to blow up anyway. But 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. That’s what the now-ridiculed Peak Oil story was really about: not running out of oil, but not getting enough bang for our bucks pulling the remaining oil out of the earth to maintain our standard of living. I’ll return to this issue in more detail later. But that was what provoked America’s 21st century economic malaise. Everything we’ve done in finance since then has been an attempt to compensate for our fundamental problem with debt — borrowing from the future to maintain our current (unaffordable) standard of living. Our debt has grown ever larger and faster each year, and our methods for managing it have become more desperate and dishonest as that occurred.

The culprit at the center is America’s central bank, the Federal Reserve, which is actually not a government agency as it seems, but a consortium of the nation’s biggest private banks, lately known as Too-Big-To-Fail. The Fed was created in 1913, when the complexities of capital finance were multiplying in step with the complexities of industrial production, which, remember, was a new and evolving phenomenon of human history. Mankind had no prior experience with industrialism. We discovered toward the end of the 19th century — decades of unprecedented industrial growth — that the system’s dynamic produced booms accompanied by very destructive busts. The operations of banking usually outran the cycles of trade, industry, and war that were coloring evolving Modernity. So the Fed was created to smooth out these cycles. It had two basic mandates for this: acting as the lender of last resort between banks during financial panics so that some money would always be available in an emergency; and stabilizing the money supply and prices in the system. The Fed failed spectacularly to smooth out the cycles of boom and bust and to maintain the value of the dollar over time.

Sixteen years after the Fed’s creation, America entered its worst economic downturn ever, the Great Depression, which was only mitigated by the colossal abnormality of World War Two. America emerged from that episode as the last industrial society standing amid everyone else’s smoldering ruins. That gave us an extraordinary advantage in world trade lasting roughly thirty years. That high tide of the era of seeming “normality” — the 1950s and 60s, which the Trumpian-minded might recall as “great” — started unraveling in the 1970s, which was not coincidentally the moment of America’s all-time oil production peak.

In 1977, the Fed was given a third mission of promoting maximum employment with a trick-bag of tools for manipulating the money supply and credit creation that have proven to be fatally mischievous. This new task elevated Fed officials, and especially its chairperson, to the status of viziers — magicians using occult mathematical models and formulas — to cast spells capable of controlling the macro economy the way wizards are thought to control external reality. Their pretenses seemed to work for reasons unrelated to the spells they were learning to cast.

It is still largely unrecognized that America recovered from the financial disorder of the 1970s not because of the charms of “Reaganomics” but for the simple reason that the last giant finds of oil with greater than 30-to-one energy-return-on-investment came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. That allowed the USA and the West generally to extend the techno-industrial fiesta another twenty years. As that bounty tapered down around the year 2000, the system wobbled again and the viziers of the Fed ramped up their magical operations, led by the Grand Vizier (or “Maestro”) Alan Greenspan, who worked the control rods of interest rates as though the financial system were a great nuclear powered pipe organ that could be revved up and tamped down by a wondrous Fed control panel. This period of Fed spell-casting was characterized by ever more systemically complex finance, growing systemic fragility, pervasive institutionalized accounting fraud, and ever-greater bubbles and busts. Deregulation, especially the 1998 repeal of the Glass-Steagall Act of 1932, sealed America’s financial fate.

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.)

Of course, nobody paid a criminal penalty for any of this misconduct besides the maverick Ponzi artist Bernie Madoff, and a few other small fish. The regulators looked the other way, on orders from their bosses. Unlike the earlier Savings and Loan bank crisis of the late 1980s, none of the leading bank officer perps went to jail. The damage of the 2008 crash was epic and never repaired, only papered over with more debt, more deceit, and more racketeering.

The supposed remedy, the Dodd-Frank Act of 2010, was a cover for continued pervasive fraud and the institutional “capture” of government by the banking industry and its handmaidens, really a fascist melding of banking and government, a swindle machine in which anything goes and nothing matters. The frauds have only been rechanneled since 2008 into college loans, car loans, corporate stock buyback monkey business, currency arbitrage shenanigans, private equity asset-stripping, and the gigantic black box of derivatives trading.

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

Under Bernanke’s successor, UC-Berkeley Professor Janet Yellen, the emphasis in Fed policy has been an elaborate game of “data-dependent” foot-dragging — a lot of talk with no action — with the data itself largely fraudulent, especially the easily gamed employment and GDP numbers that supposedly determine the rise or fall of interest rate policy. In short, the racketeering continues while the authorities quail in the face of accumulated and now inescapable debt quandaries ever more certain to end in systemic collapse.

Get this: the Fed is completely full of __it. 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     it jobs.)

That 4.6 unemployment figure is the main pillar of the Fed’s “data.” They interpret it as meaning the economy is roaring and has their full confidence. They‘re lying about that, of course. They have been touting “the recovery” (from the crash of 2008) continually and heralding a program of “normalizing” interest rates upward for two years. In 2015 they didn’t do anything until the very last Fed meeting of the year when they raised the Fed Funds rate 25 basis point (that’s a measly one-quarter of a percent). They raised, they said, because they were “confident” about the economy. No, that’s not why. They did it because they talked about it all year without doing anything and their credibility was on the line. They also promised four rate hikes altogether in 2016, which they then failed to carry out.

After that December 2015 rate hike, the stock markets tanked 10 percent. By springtime, the markets appeared to be bouncing back, so the Fed started talking about more rate hikes again. They talked it up all year without acting, an impressive act of fakery. The surprise Brexit vote gave them the heebie jeebies. They laid low. Meanwhile, the US election season was on. The Fed denies this, but they did not raise interest rates for eleven months in 2016 solely because they wanted to make the Democratic administration look good heading into the November vote, and they knew the economy was fragile. Once Hillary was nominated they were determined to usher her into the White House on a high tide of fake good economic news.

When she lost the election the stock markets surprised everyone by entering a super-bubblicious Trumpxuberance rally. There is a narrative for that too in the media chatter and it is simpleminded nonsense based on the sheer hope that Trumponomics will be great for business. More on that below.

Roaring stock markets were a secondary pillar of the Fed’s economic world-view. The post-election 2000 point upsurge in the Dow, along with the historically low 4.6 unemployment number, gave the Fed the opportunity on December 15 to do the same thing they did the previous year: cover their asses and preserve some credibility by hiking the Fed Funds rate one-quarter percent. You’d think if they were really confident in the economy — especially given the year–end rally — they would venture to raise by half a percent or more. They are not confident. They are lying with their fingers crossed.

The Fed Funds rate is one thing. As it happens, the Fed does not directly control the interest rates on US treasury bonds, and they have been rising shockingly through the second half of 2016. The crucial ten-year treasury rate has gone up a hundred percent since the summer. Because bond values move inversely to bond rates, the price of treasuries has tanked, inducing trillions of dollars in losses to bond-holders around the world. The bond market is many times larger than the stock markets. Bonds have been in a bull market since the early 1980s and that bull rolled over in mid-2016. A bear market is now on, meaning bond-holders are dumping their bonds. China and Saudi Arabia are among the leading dumpers of US Treasuries because they need the money for one reason or another. They will dump more in 2017 because both countries are in deep economic trouble. Too many bond sellers and not enough buyers in the market drive interest rates up. Rates have a lot of room to move up, since they started at near-zero. Accordingly, their value has a long way to fall.

Bonds, of course, represent debt. Total US debt has doubled under President Obama from around ten trillion to twenty trillion dollars (as it doubled under Bush Two from five to ten trillion dollars). The reason, as stated above, is that we don’t produce enough to cover the cost of our national way of life, so we have to borrow continually at ever-greater volume. Every year, the Treasury has to pay interest on all that debt. It’s a lot of money. This year, with interest rates starting out at historically unprecedented lows (not seen ever in recorded history), the Treasury paid over a quarter-trillion dollars in interest. By the way, the government borrows money to make these interest payments too. An interest rate rise of one percent, would drive the annual US debt higher by $190 billion. As the late, great Senator Everett Dirkson (R-Ill) once pungently remarked: “…a billion here, a billion there, sooner or later you’re talking about real money.”

A sharply rising interest rate on the ten-year Treasury bond will thunder through the system. A lot of other basic interest costs are keyed to the ten-year bond rate, especially home mortgages, apartment rentals (landlords hold mortgages), and car payments. When the ten year bond rate goes up, so do mortgage payments. When mortgage rates go up, house prices go down, because fewer people are in a position to buy a house at higher mortgage rates, and rents go up (more competition among people who can’t buy a house). Zero Interest Rate Policy (ZIRP), in force for ten years, has driven house prices back to stratospheric levels. They are now primed to fall, perhaps severely, leaving many homeowners “underwater,” with houses worth way less on the market than the amount of mortgage left to pay off. The re-financing market is dead. Housing starts were already down by a stunning 19 percent in November. Automobile sales are rolling over. Manufacturing and retail sales numbers are down at year end. What’s up: stocks, stocks, stocks.

Yet investors did not execute the usual end-of-year profit-taking in the expectation that Trump would lower the capital gains tax in 2017, so why sell now? You can wait until January 3, 2017 to sell, and then not have to pay tax on your profits until April of 2018. Will investors start dumping in the first trading days of 2017? I think so. And will that selling beget a stampede for the exits? And what will happen if the interest rate on the ten-year bond hits three percent? (It doesn’t have far to go). Or maybe even four percent? What happens is the stock markets go down in the first quarter of 2017. My forecast is 20 percent down on the S & P. That will only be a preview of coming attractions once Trump gets his mitts on the levers of power. A still bigger crash ahead later in the year!

Why Trump Can’t Pull a Reagan 

When Reagan came into office in 1981, inflation was raging largely because of the effects of the oil crises of 1973 and 1979, which had produced the “stagflation” that confounded the reigning economists’ models (they knew nothing about the relationship between energy dynamics and capital formation). The Fed Funds rate was almost 20 percent in 1981. It had a lot of room to move down. The national debt was less than one trillion (Reagan eventually ran it up to $2.8 trillion). Reagan was able to endure a sharp recession early in his first term — and voodoo economics got him through all the rest of his tenure, with both inflation and interest “normalizing” — as mentioned earlier, he enjoyed the bonanza of the last great non-OPEC oil discoveries coming on-line during his two terms, which ramped up economic activity and growth.

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.

Also early in 2017, the Fed will abandon its “dot plot” talk about further interest rate hikes. They may also surrender their credibility in the process. The system can’t take the strain of three interest rate rises in 2017. It may be that Janet Yellen has raised the Fed Funds rate a total of one-half a percent in two years solely to be able to lower them again when the real economy finally tanks under that strain of incessant central bank chicanery. By the second quarter of 2017, following a 20 percent stock dump, the Fed will start making noises about Quantitative Easing 4 (QE), or they will cook up some other program that accomplishes the same thing under a new cockamamie label. More QE (or something like it) will drive the dollar back down and gold back up. The housing market will be in the toilet and the rest of the economy will follow it down the drain. By the end of Trump’s first year in office, there will be another, greater, dump in the stock markets after the initial 20 percent drop in the first quarter. America will be great again, all right: we’ll be entering a depression greater than the Great Depression of the 1930s.

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.

Harvard economist Kenneth Rogoff literally wrote the book on this (The Curse of Cash; Princeton University Press, 2016), a mendacious argument that cash money merely enables drug dealers and terrorists to operate and has no useful place otherwise in a regular economy. Rogoff appeared to be angling for the Treasury slot in Hillary’s cabinet, and would have fit in perfectly with this totalitarian assault on the public’s financial liberty — but, as we know, Hillary didn’t make it.

Efforts to eliminate cash are already underway around the world. The EU officially discontinued the €500 note from circulation. Ken Rogoff’s Harvard colleague, Larry Summers, was calling for abolition of the $100 bill a year ago. Sweden is successfully herding its people out of fiat krona. India’s Prime Minister Narendra Modi pulled a fast one in November by banning the 1000 and 500 rupee note (worth respectively $14 and $7), and threw India’s economy into an epileptic seizure. The idea was to discipline tax evaders who operate in a cash economy. The catch was that more than 85 percent of India’s economy operates on a cash basis among people too poor to have bank accounts and credit cards — including millions of truck drivers and ordinary laborers. Naturally, the Indian economy froze. Nobody could get paid. Food rotted in stalled trucks. ATM withdrawals were limited to a few day’s walking-around-money. Citizens could not even exchange their 1000 and 500 rupee notes at the banks without going through onerous time-consuming bureaucratic rigmarole, including fingerprinting and the submission of tax records. The process caused discouraging long queues to form at the banks, and was probably designed to discourage the exchange of the 1000 and 500 rupee notes altogether and instead just retire them from circulation — which means a lot of poor people lost the minimal cash savings they had.

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. Financial author James Rickards calls this the “Ice-Nine” program, in reference to the isotope of water in Kurt Vonnegut’s sci-fi novel Cat’s Cradle that freezes the world in a horrifying chain reaction. Rickards’ Ice-Nine financial nightmare would include features like freezing bank accounts, bail-ins (confiscation of accounts), limits on ATM withdrawals, and the “gating” of investment funds. Ice-Nine would be invoked in a banking emergency — say, a derivatives “accident” that took out some Too-Big-Too-Fail giant, or really anything that triggered the extreme fault lines in the ultra-fragile system that the world’s money elites have cobbled together to keep the garbage barge of global finance from sinking. In his recent book, The Road to Ruin, Rickards reminds readers that the emergency act signed by Bush Two after 9/11 has remained in effect under Obama, so that America is “just one phone call away from martial law.”

Another method for depriving citizens of their financial liberty would be for the government to declare that retirement accounts had to contain a set percentage of US Treasury paper — once again herding people into a financial corral against their will — in order to prop up the value of bonds and tamp down interest rates. David McAlvany (his excellent podcast here) makes the interesting point that if herding the public into the digital financial corral was a key ingredient to “making America great again,” who could object? — because now you’d be opposing American greatness! Trump inherited a much bigger problem than Barack Obama did in 2009. Obama still had enough soft-soap left in the machine to blow more bubbles. Trump arrives on the scene with the machine out of bubble-blowing mojo. He’ll be overwhelmed by financial disorder in 2017 and then the nation’s focus will turn to a tumultuous political scene

Wild in the Streets

The public is just plain ______ off, and remains ______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 ___ 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.

Even under the most favorable circumstances, a stimulus program would not likely get out of congress until much later in 2017, and I personally doubt that it will get through at all. The so-far-fortunate retirees plugged into pensions represent another potential trouble spot. Pension funds are going bust all over the country from the incapacity to stay solvent in a near-ZIRP environment. In 2016, fissures started to show in places like the Dallas Police and Firemen’s Pension fund, when pensioners’ redemptions were shut down. There are pension funds all over the country floundering from the same conditions, since the Fed took the “fix” out of “fixed income.” In the absence of decent “yield,” the pension funds have been herded into risky stock markets, and if those markets blow up, the pension funds are going to blow with them… and then the pensioners’ lives are going to blow up… and then maybe civil order dissolves around the country.

That may be the moment when President Trump and his militarily-weighted cabinet appointees opt for martial law. What a ........ 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 ______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 ......... 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 Red Guard-like action on campus may continue, though it’s hard to imagine the “Snowflakes” besting their infantile hijinks of 2016. What they are demonstrating now is that coercive identity politics is just a new form of leisure-time recreation on campus, like Ultimate Frisbee and the beer blasts of old! Have fun wrecking faculty careers and basking in the Facebook feed! A few still-sane people of all political persuasions are sick of their censorious attacks, reckless persecutions, and insults to reality — such as the mandatory “white privilege” trainings and gender identity personal pronoun crusades. I predict that there will be a revolt among the university trustees and boards of directors against college presidents and deans who pander to the Maoist hysteria, as the damage to higher education and intellectual freedom more generally finally manifests in dropping enrollments and the loss of public funding.

There is every sign that black and white racial conflict will grow worse in the year ahead. The week after Christmas 2016 saw an impressive number of shopping mall mass melees of black teens all over the country. For years, the media went along with the hyperbolic story that innocent black men were being killed by police for no reason — when the overwhelming majority of those cases involved victims brandishing guns or grossly misbehaving in some way liable to get themselves in trouble. Victimology still rules in America. It’s a psychological defense mechanism to relieve the Dem / Prog’s shame and anxiety with the outcome of the long civil rights campaign — namely, black family disintegration, educational failure, and a shocking rate of black-on-black murder. A subsidiary grievance industry, lately led by Black Lives Matter, fans the flames of vengeance against the universal villain, Whitey, whose “privilege” keeps other people down (except, notice, immigrants from China, Korea, Vietnam, India, and other places where Whitey is absent.)

So, now Left and Right are both equally ______ off. It also means you have two adversarial groups who might give themselves permission to turn violent to justify their grievances. If the financial markets tank and the economy freefalls, it is easy to imagine the potential for violent conflict between the Dem / Progs with their Black Lives matter proxies against the Trumpista lumpenproles. It would be a terrible tragic distraction from the business of repairing the common weal, the economy, and the common culture — but so was the Civil War

The Oil Quandary

The reports of Peak Oil’s death are exaggerated, to borrow a gag from Mr. Twain. It’s just been playing out in ways that many of us didn’t quite anticipate and it is still at the heart of our economic predicament — which is that you can’t rationalize an annual debt growth rate of 8 percent if your actual economic growth rate is under 4 percent (paraphrasing Chris Martenson at Peak Prosperity.com).

We haven’t run out of oil, but we have run out of oil that is rationally economical to pull out of the ground. The so-called “shale oil miracle” extended the oil age a few years by debt-financed legerdemain. Yes, we drove US oil production way up, almost back up to the 1970 peak production level around 10 million barrels-a-day (b/d). The trouble was that the companies producing it didn’t make a red cent in the process. They just ran up a huge amount of debt to pursue the shale project. The pursuit was on wholeheartedly beginning around 2006, because (1) the Peak Oil story was scaring folks, including folks in the oil industry, and (2) the market price of crude oil soared after 2004 and shale looked like a possibly winning venture — especially since conventional exploration in recent years was turning up almost nothing of significance.

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. Readers also know from these commentaries and from my books that I expect we will have to make big changes in our living arrangements up ahead as the techno-industrial fiesta winds down. I won’t reiterate the particulars here, but 2017 is the hinge year for that. The strains on global finance are so spectacular that something’s got give. President Trump is sure to be overwhelmed by epic dislocations in markets, currencies, debt, and misguided central bank efforts to hold back the tides of a necessary re-set — a re-set which will see a lot of wealth vanish and a lot of pain inflicted on the losers of wealth, including whole societies.

We have three major European elections to look forward to in 2017: The Netherlands and France in the Spring, and Germany in the fall. Geert Wilders (a member of the Trump Big Hair Club), is virulently against the “Islamisation” of his country. He has campaigned previously to leave the European Union and for the return to the old guilder currency. Should the right-wing Marine LePen win in France, the EU experiment will likely end — she has made express promises to take France out of the EU. Angela Merkel has made herself impressively unpopular by opening the gates to a flood of immigrants fleeing the breakdown zones of the Middle East and Africa. And then, because of the Schengen Agreement (free passage across EU borders), the immigrants were unleashed on the rest of Europe.

Those of us paying attention may have easily lost count of the terror atrocities carried out across Europe by Islamic fanatics. Charlie Hebdo, Bataclan, the Bastille Day truck attack in Nice, the Brussels airport, the Berlin Christmas Market were only the most recent and spectacular. For years, individuals have been stabbed, had their heads cut off, throats cut, been blown up, machine-gunned. Take a look at this comprehensive list going back to 2001. You may be astonished. In that light, it’s pretty hard to keep waving the “diversity” banner, and I sense that Europe has had enough of it. One big question is whether the new European right-wing leaders will actually move as far as mass deportations. I rather think they will.

The UK “Brexit” vote was surprise all right. (I hit a white-tailed deer on the Maine Turnpike at 70mph that June morning, uccchhh, and lived to tell about it.) Now there’s a fair chance that Parliament will find a way to wiggle out of Brexit. Noises are also emanating out of Brussels to the effect that the EU could loosen up some of their rules — e.g. the Schengen Agreement — to induce Britain to stay in the EU. But there are so many other fissures and fragilities in that system that the Brexit may not matter anymore. The European banking system is melting down and there is absolutely no way to rescue it on the macro EU scale. Italy was heading for a banking crackup before Christmas. Deutsche Bank has been whirling around the drain for a couple of years. When the US markets and banks shudder in 2017, Europe will get the vapors. Hence, I’ll forecast breakup of the EU by this time next year.

We’ve come to the pass where “all that is solid melts into air,” in the poetic phrase of old Karl Marx. Marx was referring to the “specter” of communism that loomed over burgeoning industrial society of the mid-19th century, and indeed it turned into quite a world struggle through the century that followed. But now communism is down for the count and we begin to see what is truly melting into air: Modernity itself, this colossal, hulking, grinding, machine of destruction that threatens the global eco-system, and all its sub-systems including the human realms of money and politics.

The idea that Modernity itself might go down is inconceivable to those in thrall to the Religion of Progress, which declares that the world (and life in it) only gets better and better every year. This would appear demonstrably untrue, just in the visible damage to the landscape and the living things that struggle to dwell there. The most obvious problem with Modernity has been human population overshoot. The truth is, we’re not going to do a darn thing about it. There won’t be any policy or protocol, despite the good intentions of the groups inveighing against it. It will just go on… until it can’t, to paraphrase the late Herb Stein. Of course, people still have sex under conditions of hardship, so the population may plateau for a while until we are well into the long emergency. But the usual suspects of starvation, disease, and war are all still out there, doing their thing, and will only ramp up their operations.

The reason the Middle East and North Africa are melting down most conspicuously is because they are geographically among the places least well endowed for supporting the swollen populations they acquired over the past two hundred years. Iraq, Syria, the whole Arabian peninsula. Egypt, Libya, et. al. are all deserts artificially supported by the perquisites of Modernity: cheap energy, fertilizers made from that, irrigation,  money derived from it, and continuing life-support subsidies from even wealthier modern nations outside the region. In recent years that life-support has flipped into deadly violence imposed from both within and without, as homegrown Sunni and Shiite vie for supremacy and their puppeteers in the First World rush in with bombers, rockets, and small arms to “help.”

Iraq and Libya were already goners in 2016. They’ll never be politically stable again in the modern sense. Egypt is still headed down the drain despite the grip of General al-Sisi and his army. In all these places the “youth bulge” has no prospects for earning a living or supporting a family. The young men, especially, put their energy into Jihad, revolution, and civil war because there’s nothing else to do. Making war may be thrilling, but it won’t lead to a better future because those benefits of Modernity are running out and there’s nothing to replace them.

Syria is the current goner-du-jour. Whatever it ends up being, either under Assad or someone else, it will not be stable the way it was. The USA ended up arming and funding the Sunni Salafist “bad guys” there because they opposed Shiite Iran and its regional proxy Hezbollah plus Assad. Russia eventually came in on that side on the theory that another failed state is not in the world’s interests. President Obama blinked after he drew his infamous “line in the sand” years ago and now America is too spooked to act directly. In fact, the Russians and Assad have the best chance of restoring a semblance of order, but America’s support for the “moderate” Salafists will necessarily keep undermining that. In the meantime, all this activity has sparked a demographic emergency as refugees flee the country for Europe and elsewhere, creating greater tensions where they land. Trump could stop the flow of US arms to our favored maniacs in Syria. He may see the practical benefit of letting Russia be the policeman on the beat there, and maybe he can sort out the underlying competing interest between the Russian-sponsored gas pipeline proposed to cross Syria and the American-sponsored one — a dynamic underlying all the mayhem there — and make some kind of “deal.”

The situation will grow increasingly acute in Saudi Arabia, where population growth outstrips the ability of oil production to pay for it. Their old “elephant” oil fields are aging out and they know quite well that they cannot depend on oil wealth many decades ahead. The trouble is, they have no realistic replacement for it, despite noises about creating other industries. The truth is, the country was cursed by its oil. It grew its population too much too fast in one of the most inhospitable corners of the globe, and it will take only a modest decline in oil income to destabilize the place altogether. To buffer that, Saudi leaders plan an IPO for shares in Saudi Aramaco — which was originally composed of American and western oil companies nationalized decades ago. That may get them a few hundred billion or so in walking-around money that won’t last very long considering that just about everybody in the nation is on the dole.

The big news in that corner of the world last year was the collapse of Yemen, which occupies a big slab on Saudi Arabia’s southern border. That poor ___ country is the latest Middle East basket-case and Saudi military operations there continue to date, using airplanes and weapons supplied by Uncle Sam — just another case of feeding Jihadist wrath.
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I had to cut this short. The entirety is about oil, Russia and China here:
http://kunstler.com/clusterfuck-nation/forecast-2017-wheels-finally-come-off/

My Comment:
So where is all this havoc leading up... or down to? The goal line. End of game. Final groanings of Earth, The Red Zone of evil against good. The last days of the human race. The Rapture of the Bride of Christ. The short reign of Antichrist. The 1000 year Millinial Kingdom of Christ on Earth. Eternal Hell and Eternal Heaven. Be sure your core beliefs are correct and in harmony with God's word. RB

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