Tuesday, November 27, 2007

After the Collapse



Clusterfuck Nation by Jim Kunstler, author of "The Long Emergency"
But I must say, at the risk once again of sounding extreme, that the structural and systemic sickness in the finance realm is now so severe that it is hard to imagine we will get through the month of December without some major trauma in the markets. In fact, I'd go so far as to predict a thousand-point drop (or more) in the Dow just in this week after Thanksgiving. Real wealth "out there" is evaporating like popsicles dropped on the floor of Hell's fifth circle. It is coming out of the system whether the Big Boyz or anybody else likes it or not, and its absence will assert itself.


At the risk of sounding even more extreme, I would be hard put to believe any reports that "consumer" spending in the days following Thanksgiving will match the hopes and wishes of economic officialdom. My own hunch is that average Americans are so maxed out on debt that they don't know whether to shit or go blind. Perhaps lot of them are willing to take a last step into fatal insolvency in order to put a plasma TV screen under the Christmas tree and appear as heroes to their families. If that's the case, it would only imply a greater bloodbath in credit card default thundering through the system in February and March, which would only deepen the carnage in collateralized debt instruments further up the food chain.


That stuff probably has a long way to unwind, even as the "train" of losses hits the immovable obstacle of reality and the "boxcars" of consequence fly off the rails. The slow-motion train wreck could sweep away an awful lot of familiar things in its path -- banks, companies, government-sponsored enterprises, whole industries, whole economies, nations, up to and including the prospects for civilized existence, if severe hardship leads to war, which it often does.


It's an extreme prediction.
Mr. kunstler is probably closer to the truth however than many of us would like to believe. When he says losses in world financial sectors due to derivatives are far worse then any report would indicate, I believe that to be the case and have suspected that for a while now.

Where he postulates that the real after effects could wipe out banks, industries and possibly lead to war, he is, unfortunately, probably accurate. If one simply glances backward at history it's not hard to see how it might play out. After the banking panic of 1907, which had global consequences, it was not long before the world entered the Great War, (WWI) and the damage done to Mexico's economy during the panic is believed to have been the catalyst for their civil war in 1910.
Where Mr. Kunstler mentions and impending "global contest for remaining fossil fuel resources", you can bet it won't be a friendly contest. You only have to remember what Japan did in 1941 when the US Navy blockaded much needed oils shipments from reaching Japanese ports. The Japanese got a little cranky and bombed one of our ports... Pearl Harbor.

War? Ya...

China, who's been engaged in an unparalleled military build up for most of a decade now, will probably want to see some return on that investment. I won't be surprised to read news reports of Chinese war ships parked in the arctic claiming resources up there for itself soon. Nor will I be surprised if I hear they are cruising the North sea oil fields leaning on Britain and Norway to 'share the love or else'.

Then there is Russia. The former Soviet Union lost some of its' military might in the early 1990s but not all. Russia has been enjoying an economic boom recently and as a result has a few extra rubbles to poor into upgrading its' military machine. They have taken to showing off some of this modern hardware just off the coast of Norway as recently as last week, with Russian fighter jets making multiple incursions into Norwegian airspace earlier in the year, just in case there are doubters here.

If America looks weak, it may be an invitation to the two remaining global military powers to make a grab for resources anywhere they choose with only each other to contend with.
As the global economy deteriorates look for increased crankiness around the globe and wars to follow as surely as testy drug addicts going through withdrawals.
Vern

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