Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts

When Consensus is Fractured

SUBHEAD: In 2020 we found ourselves in a world where we could not agree on what is reality.


By Richard Heinberg on 18 December 2020 for Resilience.org -
(https://www.resilience.org/stories/2020-12-18/2020-the-year-consensus-reality-fractured/)


Image above: Volunteers help clean up the parking lot outside a Best Buy store, Monday, Aug. 10, 2020, after vandals struck overnight in the Lincoln Park neighborhood in Chicago. From (https://www.hotsr.com/news/2020/aug/11/hundreds-ransack-downtown-chicago-businesses/).

Virtually everyone agrees that 2020 was an abomination. An entire industry of opinion writers is busying itself with end-of-year hand wringing, scouring every online thesaurus for adjectives to express just how horrible the last twelve months have been. 

But what facet of the awfulness to focus on? For the appalled chronicler, the most obvious starting points are the coronavirus pandemic, which has left illness, death, shuttered businesses, and lost jobs trailing in its wake, and the chaotic US presidential election, in which the soundly defeated incumbent has attacked and seriously weakened the very foundations of democracy on his way out the door. 

These two baskets of grim news (pandemic and election) have been accompanied by a shift in the national (and, to some extent, global) zeitgeist—a shift that’s been obvious to anyone paying attention, but that’s nevertheless challenging to capture in words. 

Let’s call it the fracturing of consensus reality. While it won’t be the top story of the year according to most news roundups, it may end up being just as impactful as anything else that’s happened during our latest orbit of the sun. And that’s saying something. 

What’s Real? Let’s All Agree As social and linguistic creatures, we humans—operating in groups—create shared mental worlds. We perceive sensory data, then we verbalize and conceptualize those perceptions, and finally we check our verbalized and conceptualized accounts of reality with other people. 

Over time, a consensus emerges. This language-mediated reality-building process is hardly new; it’s been going on since we all lived by hunting and gathering. Then, everybody within their little groups shared the same stories and the same basic mental map of the world.

After we adopted agriculture, social classes and full-time division of labor ensued. With slavery, kings, and a dramatic reduction in the social power of women, consensus reality became more of a Venn diagram, with the king having the final word in defining the overlapping region on the diagram representing consensus. 

Later, the emergence of writing and Big God religions enabled reality to be codified for empires, and elements of the dominant consensus (e.g., Roman law and Christianity) could be spread among alien cultures. 

For most Europeans, even as dynasties came and went, reality remained essentially whatever the Bible, the church, and the king or emperor said it was. Consensus reality was never consistent or complete and never a correct map of what it purported to represent; it was always an approximation skewed by power relations. 

Some people’s realities were privileged, while other people’s were marginalized, excluded, or intentionally destroyed. And there were always blind spots—actual trends, vulnerabilities, and consequences that nobody noticed or talked about, such as the gradual depletion of natural resources—that only became “real” when they could no longer be ignored. The modern era (from roughly 1500 on) brought new sources of diversity to the consensus-building process. 

As Europeans conquered societies around the globe, “reality” began to reflect the sounds and flavors of these diverse cultures; the result was everything from jazz to fusion cuisine. Meanwhile, the power of commerce greatly increased, reducing the influence of church and aristocracy. 

Increased diversity and a shift toward commercial primacy were accompanied by new integrative trends in the process of collective reality-building. Principal among these was the emergence of science—a self-correcting method for discovering objective truth. 

Of course, science had its blind spots, too (for example, it was often subject to commercial influence—witness the long lags in recognizing the nasty side effects of tobacco and pesticides), but it was persuasive: assertions could be tested by controlled experiment. 

Over the decades, science built formidable structures of knowledge that most people lacked the expertise or temerity to question, but that could be verified by anyone with the necessary resources. Reality became “enlightened.” Another integrative trend consisted of the development of new communication tools—the printing press, and later radio, movies, and television. 

Increasingly, through these media, nearly everyone was exposed to common facts, ideas, and images. The wealthy banker and the destitute farmer uprooted by the dust bowl were marinated in the same Hollywood imagery, and the same civics homilies taught in compulsory public schools. 

Cracks in the Modern Consensus The emerging global consensus suffered a couple of serious ruptures during the modern era. In Europe, fascism brought more than a new set of political power relations; it created a mental universe so dominated by notions of racial and national superiority that it demanded the rewriting of textbooks. 

And in Russia, communism built a narrative in which the dictatorship of the proletariat—under constant attack by the forces of capitalism—must ultimately prevail, leading to a workers’ paradise. 

Both fascists and communists used new mass communication tools (radio, movies, and newspapers) to give their consensus realities force and credibility. Even science could be repurposed to support alternate realities. In the Soviet Union, the state decided to back an alternative to natural selection and science-based agriculture. 

The originator of this heterodox set of views, Trofim Lysenko, became Director of the Soviet Union’s Academy of Agricultural Sciences, where—with Stalin’s approving help—he rooted out the study of Mendelian genetics and taught instead the theory that characteristics acquired by parents can be directly transmitted to their offspring. 

Opponents of Lysenko were accused of “mysticism, obscurantism, and backwardness,” then banished to Siberian work camps. As a result, biological science in the Soviet bloc was set back decades. After the defeat of fascism in WWII and the fall of the Soviet bloc, the West’s consensus—shaped largely by the US—seemed to become reunified and stabilized. 

Political scientist Francis Fukuyama called it “the end of history.” But blind spots persisted and grew. Some of these profoundly shaped not just the dominant worldview itself, but the contours of daily life for multitudes. 

One telling example: the so-called science of economics codified for nearly everyone the false assumption that perpetual growth in industrial activity is possible, and denied all evidence to the contrary. 

Economics concealed other blind spots as well, as it continually ignored widespread signs that the “free market” does not in fact benefit everyone, and that people do not actually behave like idealized rational self-interest-maximizing robots. 

Some persistent and periodically worsening cracks in the consensus ripped along economic, ethnic, or political fault lines: especially during the Jim Crow era, African-Americans and European-Americans in southern US states inhabited sharply different realities, and stark inequities have persisted to the present. 

Other cracks, fed by suspicions that powerful people were manipulating the consensus to their own benefit, led to what came to be known as conspiracy theories—including doubts about the official accounts of the JFK assassination and 9/11, as well as misgivings about the safety and “real” purpose of water fluoridation and vaccination. Meanwhile, communications media were evolving still further. 

While radio and television had a largely unifying effect during the 20th century, the internet and social media are proving to be disintegrative to consensus in the 21st. Algorithms capture users’ interests and prejudices and feed them news and opinion articles that lead them to have ever-more-extreme views. 

“Do you think the government is suppressing information about space aliens? You don’t know the half of it! Read this!” 

The radicalizing propensity of social media was a factor in the sudden political ascendancy of Donald Trump, who acted as both symptom and driver of consensus breakdown. As a real estate developer and reality TV personality, he seemed an exceedingly inexperienced and unlikely candidate for the top political office in the country, and arguably the world. His intellect and ethics were widely suspect. 

But he had the ability to give utterance to the grievances of a sector of the populace that feels left behind—people of mostly European ancestry in low-density towns and rural areas across the nation (in recent decades, most of America’s wealth and cultural attention has flowed to high-density, multi-ethnic cities). 

Even if Trump could not change the material circumstances of small-town families, he could make them feel as though they had a voice. Ironically—and perhaps therefore somehow even more fittingly—it was the voice of a gaudily privileged New Yorker. 

But it was an angry voice, and it spoke in words of few syllables. He was the first Twitter President. The Trump team’s communication strategy, in the immortal words of former top adviser Steve Bannon, was to “flood the zone with shit.” Disruption of consensus reality wasn’t a regrettable side effect of their efforts; it was a central goal. 2020: The Dam Breaks In short, prior to the year now ending, consensus reality in the US was already starting to crumble. But 2020 delivered two sledgehammer blows: a pandemic and a polarizing presidential election. First, the pandemic. 

As many observers have pointed out, COVID-19 has greatly varying infection and death rates by nation, and countries with higher levels of social cohesion have generally tended to do better at combatting the disease. 

The United States has fared the worst of all countries in raw numbers, with over 17 million total cases so far and over 300,000 deaths (about a dozen smaller countries, including Belgium and San Marino, have suffered higher per capita rates of infection and mortality). Currently the US is seeing over 200,000 new cases each day and roughly 2,500 deaths. 

Unless the trend changes, total mortality for the country may eventually begin to rival that of the 1918-1919 influenza pandemic, in which about 675,000 died (though the per capita death rate will almost certainly not be as grim, given today’s far larger population). 

 Why has the US suffered such a horrific outcome? 

Much of the blame certainly must be borne by President Trump and his political appointees and allies in the federal government. They mounted almost no coordinated national pandemic response; instead, states were left to formulate their own policies and to compete with each other for medical supplies. 

Messaging from the executive branch was likewise unhelpful or downright counterproductive: in the early weeks, when the virus was largely just a distant menace and preparations could have made a huge difference, the President dismissed the need for concern (on January 22, he told a CNBC interviewer, “We have it totally under control. It’s one person coming in from China, and we have it under control. It’s going to be just fine.”). 

Then, when it became clear that sickness was spreading and people were dying, Trump invented the term “China virus,” evidently seeking to deflect blame while still failing to forge a national response plan. Later in the year, as economic and political concerns took the spotlight, 

Trump returned to almost completely ignoring the disease, even omitting attendance, for weeks at a time, at meetings of his coronavirus task force. With no clear messaging from the President, it was essential that the appropriate federal agencies step in. But here again the response faltered. 

The Centers for Disease Control at first advised the public against mask wearing, despite clear evidence that masks were effective at stopping the spread of the disease. Only later, once masks became more widely available, did the CDC change its recommendation. 

But this self-contradiction had undercut the agency’s credibility. Many people continued to believe that mask wearing is ineffective, while the President encouraged his followers to see mask mandates as government overreach. Conspiracy theories immediately filled the vacuum of leadership and consistent government messaging. 

Millions of people, stuck at home under lockdowns, were spending more time than ever on social media and Google, exploring ideas and opinions about the coronavirus. A pair of YouTube documentaries titled “Plandemic” became instant sensations.

 Many people adopted the view that there simply is no pandemic, and that the “fake news” media ginned up the story as a way to enable globalist liberal elites to exert more control over citizens and the economy. Now that vaccines are on the horizon, the conspiracy mill is cranking harder and faster than ever. While the anti-vax movement has been slowly simmering for decades, its current leaders’ books are suddenly among the top-sellers on Amazon.

Up to a third of Americans say they will likely refuse to take a vaccine when it is available. While many people hope that the advent of vaccines will halt the pandemic in its tracks, anti-vax fervor, along with the soaring rate of infections, may mean that the disease will continue to spread and kill far into the new year. If Americans were divided prior to the pandemic, their tribalism only intensified as the decision about whether to wear a mask became an instantly visible expression of group identity. 

But division was deepened also by the fact that 2020 was a presidential election year. Elections are always polarizing. That’s the point: each voter must choose one candidate or another; “all of the above” is not an option. 

But this election season pushed the polarization needle far into the danger zone. Democrats steeped themselves in books and articles detailing accusations that Donald Trump presents all the clinical symptoms of narcissistic personality disorder, and that he is an authoritarian, a rapist, a tax cheat, a business fraudster, a Russian puppet, and a traitor.

At the same time, followers of QAnon (who is supposedly a patriotic government insider) spread the notion that leading Democrats are Satan-worshiping pedophiles running a global child sex-trafficking ring, while Trump—a messiah sent by God—heads a heroic behind-the-scenes effort to preserve decency, freedom, and Christianity (QAnon believers now occupy seats in Congress and many state houses). The election outcome was unequivocal. 

Biden bested Trump by 7 million popular votes, with electoral votes stacked 306 to 232. Even Republican election officials in swing states said the balloting went off with scarcely a hitch. But Trump, evidently unwilling to be seen as a loser (or perhaps wishing to avoid prosecution for financial crimes once he leaves office), claimed that the election was rigged and that he had actually won. 

A flurry of almost 60 lawsuits followed, two making their way to the Supreme Court; all were dismissed. No convincing evidence of widespread irregularities was produced. Nevertheless, Trump’s followers adopted the narrative that millions of dead people had voted for Biden, and that suitcases full of illicit Biden ballots had been surreptitiously delivered to vote tabulators. According to one poll, only a quarter of Republicans think Biden was legitimately elected.

 A steady drumbeat of evidence-free assertions resounding through right-wing media channels and parroted by Republican elected officials (who fear retribution from Trump’s base) has created a formidable alternate reality in which Trump won fair and square, while Biden is being falsely elevated to the highest office.

 Consensus Dynamics Cognitive dissonance—the holding of contradictory thoughts or beliefs—makes people miserable. And when a person’s own interpretation of reality runs counter to the consensus reality, some degree of paranoia or depression often results. 

Alternatively, a person unmoored from the dominant consensus may become a dedicated paradigm warrior intent on converting others to their own views, sometimes even by violence. The loss of consensus is therefore also problematic for society as a whole. 

People who have left the consensus behind may disregard or flout norms (such as longstanding informal rules with regard to elections and Congressional procedures). Society then becomes less capable of solving problems; and so, if economic, social, or environmental crises materialize, societal collapse of one sort or another becomes a real possibility. 

As individuals find themselves not just disagreeing on politics or religion, but living in different and directly conflicting mental universes, they individually experience cognitive pain and anguish. Families are torn apart, friendships severed. 

But the collective risks of consensus breakdown go deeper, and include the possibility of widespread rage, pushing society toward civil violence, coup, or state failure. If, as is often the case, the fracturing of consensus results in (or is caused by) strong feelings of grievance among one group against another, a cycle of retribution may ensue. 

Recent brain research by James Kimmel, Jr. at the Yale University School of Medicine shows that the brain on grievance craves retribution in much the same way a brain addicted to heroin craves more heroin. 

 Is the fracturing of consensus reality a symptom of societal decline due to other factors (such as economic crisis or limits to vital resources), or is it an independent variable, capable of causing collapse by itself? 

In my view, the former is more likely the case: if a society is doing well economically, it is usually able to resolve occasional cognitive contradictions over time. A polarizing demagogue (like Joseph McCarthy or George Wallace) may appear, but the status quo eventually reasserts itself.

However, if a society is experiencing an economic, political, or social emergency, consensus breakdown may contribute to a self-reinforcing process of collapse. People’s views of reality don’t diverge arbitrarily and without cause. They do so because people’s self-interests (which may differ by income, status, region, religion, or ethnicity) are becoming further divided. The divergence of worldviews is thus a secondary problem.

But once consensus begins to shatter, people’s interests are likely to diverge even further as bifurcating worldviews create economic and social islands. People may even separate geographically, moving to be closer to people with whom they share values and views. 

Further, if an increasing majority people in a given community are espousing a new shared belief, others may feel compelled to alter their previous beliefs in order to belong. The fragmentation of consensus reality isn’t just a war of ideas. It is a more profound and disturbing process both psychologically and socially. People who have abandoned, or who have been abandoned by, the consensus may find dubious new beliefs to cling to; but they may also become keenly aware of cultural blind spots that others continue to ignore. 

They feel themselves flung into a new universe; the experience can be either terrifying or thrilling, or both. One of the effects of loss of consensus is the lowering of social trust. Trust is the basis of cooperation, and high levels of cooperation are required for modern complex societies to function. 

According to surveys by Pew Research Center, 71 percent of Americans think interpersonal trust has weakened in the past 20 years. There is a strong correlation between low trust and Trump voters—which could be an explanation for why the pre-election 2020 polls were inaccurate: people who are distrustful not only disproportionately voted for Trump but also refused to participate in polling surveys. Because the costs to society of loss of consensus are obvious and considerable, societies invest heavily in maintaining a shared worldview. 

But if there are severe and growing flaws in that consensus, keeping it whole may not be an option. 

When consensus fractures into two directly competing narratives, some people may seek to resolve cognitive dissonance by claiming that the two narratives are equally valid. But this is a difficult stance to maintain, as the narratives are usually mutually exclusive. Take the current case with regard to the US presidential election: the main competing reality claims are not on equal footing with regard to facts or outcomes. 

The “Trump really won” claim is simply fantasy; the “Biden really won” claim is backed by clear evidence that will result in the actual inauguration of a new President. But, in a way, facts are beside the point. Over a third of Americans are so alienated from the consensus that they prefer to believe obviously fabricated lies rather than to acknowledge demonstrable proof. 

The new Republican “reality” is tenable not because it is based on anything physically verifiable, but because it is emotionally satisfying for people who refuse to accept the dominant narrative. In the post-Trump era, traditional Republican ideology (low taxes, states’ rights, limited government spending) becomes entirely expendable. 

Any argument that “owns the Dems” is good, regardless how specious. 

Democracy itself becomes an impediment to the goal of wrecking the consensus. Defenders of the dominant worldview can’t understand why anyone would be so upset with it. Isn’t it based on science and established values and traditions? 

Doesn’t the alternative represent a devolution into pseudoscience, conspiracy theories, and deepening dissension? 

To a certain extent, the fervor of the disestablishmentarian faction is traceable to economic and social trends mentioned earlier (the flow of wealth and power to coastal urban centers and the slow demographic shift of the country toward multi-ethnicity). The upholders of the mainstream consensus accept those trends, which their elites use to their own advantage, but they fail to take account of those left behind, or to see the holes and blind spots in the consensus they defend. 

 Perhaps the deepest blind spot in the current US consensus is that it has no satisfying and unifying vision, no coherent ideology; its main guiding value is simply “more.” Its implicit message: we must keep on doing what we’re doing (producing more wealth by turning more of nature into waste) because to do otherwise would result in economic Armageddon. 

The best we can do is to somehow avert catastrophic climate change and reduce extreme wealth inequality with technical work-arounds, even as we continue to do the very things that cause those problems. 

 The central lie of the consensus is that the rising tide of economic growth will lift all boats . . . eventually. But eventually never seems to come. As the folly of expecting endless economic growth on a finite planet starts to reveal itself—via the need for ever more drastic measures to maintain the appearance of growth and to prevent widespread destitution—something has to give. People who feel unfairly treated as the impossible perpetual-growth machine decelerates begin fleeing the consensus, even if doing so leads them to curse imaginary scapegoats and believe obvious fictions. 

 Can the Old Consensus Be Repaired? Can a New One Be Built? Joe Biden is central casting’s answer to the call for a tried-and-true figurehead to restore the old consensus. Anyone who’s not swept up in anti-elite fervor probably finds it easy to sympathize with his exhortation to bring America back together, and his intention to be President of all the people, including those who voted against him.

However, Biden faces daunting if not insurmountable challenges. These arise not just from fervent, defeated, and angry Trumpists, who may attempt to run a “shadow” presidency, countering every action of the new administration. 

There are also hurdles inherent in the taming of the pandemic and the stabilization of the economy. Less widely acknowledged but perhaps most formidable of all is the challenge of finally coming to terms with the blind spots and lies embedded in the worldview that still runs the machinery of our economy and government. Consumerism—a way of organizing the economy that is fundamentally at odds with nature’s limits—is so deeply and implicitly woven into the warp and weft of modern America that only a cathartic collapse and renewal is likely to expunge it. 

The best Biden can likely do, even if he has the strategic brilliance to propose a Rural New Deal, is to be a competent placeholder. The perplexing fact is that we don’t know what kind of new consensus may emerge, or when. 

Indeed, it is entirely possible that, in the context of energy and economic decline, the human ideasphere will remain fragmented from now onward. However, I’d like to think that a new consensus is indeed possible, and that it will comprise the best of what we humans have learned so far. 

And, though what follows is entirely speculative, it seems appropriate to close this essay with an exploration of what that consensus might look like. Science would be an obvious candidate for inclusion, blind spots and all: its self-correcting mechanism tends to deliver improving approximations of truth with regard to physical reality. 

Of course, in a world with a smaller and slower economy and much less energy available, only comparatively small and simple experiments might be possible, but it’s the method that matters. 

 Science can’t tell us much about values and goals. For those, knowledge is less important than wisdom. And wisdom comes from intelligent self-control. As sages have always taught, it is in the taming of selfish urges that we find compassion and contentment. 

After the environmental and social mayhem that our two-century fossil-fueled consumerist mania will ultimately and undoubtedly unleash, I think we are likely to develop a strong and healthy collective skepticism regarding the aggregation of power for its own sake. 

A sustainability-oriented worldview would acknowledge the ongoing need for a low and stable population relative to environmental carrying capacity. And it would prize sufficiency, equity, resilience, and happiness above accumulation and ostentatious display. 

Our remarkable human capacities for language and tool making have gotten us into plenty of trouble over the millennia, never more so than now. A healthy consensus worldview would channel those outsized abilities away from geopolitical dominance and the production of wealth for the few, and toward the democratic (rather than just elite) production of beauty in all its possible forms—including poetry, literature, movement, music, art, drama, and architecture. And it would guide aesthetic appreciation toward the enhancement and emulation of nature.

Finally, a future consensus would take account of varying human needs, proclivities, modes of expression, histories, brain chemistry, and more, seeking reconciliation and community rather than exploitation and dominance. 

Such a consensus reality, such a culture, is far from where we are now. Between here and there sits a valley we must cross. If we travel together, we have a better chance of arriving safely on the other side. That requires healing the divisions among us, if and when we disagree. 

Have a peaceful holiday season.

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Re-opening won't fix our economy

SUBHEAD: Our national economy is too fragile, brittle, bankrupt, corrupt and hopelessly perverse.

By Charles Hugh Smith on 26 May 2020 for Of Two Minds -
(http://charleshughsmith.blogspot.com/2020/05/re-opening-economy-wont-fix-whats-broken.html)


Image above: Illustration of the ruins of Las Vegas with the Bellagio Casino in the left foreground and Caesar's Palace to the right for the story "Underneath Us" by Alex TIllson. From (http://alextillson.com/writing/underneath-us/).

The stock market is in a frenzy of euphoria at the re-opening of the economy. Too bad the re-opening won't fix what's broken. As I've been noting recently, the real problem is the systemic fragility of the U.S. economy, which has lurched from one new extreme to the next to maintain a thin, brittle veneer of normalcy.

Fragile economies cannot survive any impact with reality that disrupts the distortions that are keeping the illusion of "growth" from shattering. 

For the past two decades, every collision with reality cracked the illusion, and the "fix" was to duct-tape the pieces together with new extremes of money-creation, debt, risk and speculative excess.

While the stock market has soared, the real world falls apart. If your region needs a new bridge built, count on about 20 years to get all the "stakeholders" to agree and get the thing actually built. 

Count on the cost quintupling from $500 million to $2.5 billion. Count on corners being cut as costs skyrocket, so those cheap steel bolts from China that are already rusting before the bridge is even finished? Oops. Replacing them will add millions to the already bloated budget.

Want to add a passenger stop on an existing railroad line? Count on 20 years to get it done.

The complexity thicket of every regulatory agency with the power to say "no" basically guarantees the project will never get approved, because every one of these bureaucracies justifies its existence by saying "no." Sorry, you need another study, another environmental review, and so on.

Need a new landfill? I hope you started the process 15 years ago, so you'll get approval in only five more years. Every agency with the power to say "no" will stretch out the approval, so they have guaranteed "work" for another decade or two.

Did your subway fares double? Was the excuse repairing a crumbling system? Did the work get done on budget and on time? You must be joking, right? All the fare increase did was cover the costs of skyrocketing salaries, pensions and administrative costs. Repairs to the tracks and cars-- that's extra. 

Let's float a $1 billion bond so nobody have to tighten their belts, and have riders pay for it indirectly, through higher taxes to pay the exorbitant costs of 20 years of interest on the bond.

Have you been thrown off your bicycle by the giant potholes in the city's "bike lanes"? The city reluctantly admits that these streets that haven't been maintained for decades--yes, decades. 

The city once paid for street maintenance out of its general budget, but alas, that's been eaten up by skyrocketing salaries, pensions and administrative costs, so now we need to float $100 million bond to fund filling potholes.

If all goes according to plan (ha-ha), we should be able to re-pave the streets that have been crumbling for 20 years in... the next 20 years.

These real-world examples are just four of thousands of manifestations of a broken system. Rather than make tough choices that drain power and wealth from vested interests, we simply borrow more money, in ever increasing amounts, to keep the entrenched interests and elites happy.

There are two "solutions" in the status quo: dump the debt on taxpayers or on powerless debt-serfs--for example, college students. (See chart below of the $1.6 trillion that's stripmining student debt-serfs.)

Who benefits from selling all the municipal bonds, bundled student loans, etc. to investors starving for a yield above 0.1%? Wall Street, of course.

The problem is that while debt has soared, productivity and earned income have stagnated. The statistical narrative has been ruthlessly gamed to hide the erosion of living standards, but even with the bogus "low inflation" of official statistics, wages for the bottom 95% have stagnated for decades.

Measures of productivity have also been gamed to mask the ugly reality that the vast majority of the U.S. economy is stagnating under the weight of interest payments on debt, mal-investments in speculative gambles, higher junk fees and taxes, crushing regulatory compliance, high costs imposed by monopolies and cartels and a well-cloaked decline in the quality of just about everything the bottom 95% uses or owns.

What little productivity gains have been made have been skimmed by the top 5%. Coupled with the Federal Reserve's single-minded goosing of the one signaling device it controls, the stock market, the top 0.1% in America own more wealth than the bottom 80%.

If productivity stagnates and winners take all, the wages of the bottom 95% cannot rise. Real wealth is only created by increases in the productivity of labor and capital; everything else is phantom wealth.

The only way stagnant incomes can support more debt is if interest rates decline. Presto, the Fed dropped interest rates to near-zero a decade ago. 

Of course you and I can't actually borrow millions for 0.1%; that privilege is reserved for financiers and other financial parasites and predators.

Debt-serfs were able to refinance their crushing mortgages to save a few bucks, and so they can afford to 1) take on more debt and 2) pay higher taxes to fund the ballooning public debt.

Every one of these extremes has increased the systemic fragility of the American economy. This fragility is reflected in the impoverishment of the bottom 95%, the thin line between solvency and bankruptcy, the decay of public trust in institutions run for the benefit of entrenched interests, and the quickening erosion of America's social contract.

Re-opening a fragile, brittle, bankrupt, hopelessly perverse and corrupt "normal" won't fix what's broken.
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Dance Macabre

SUBHEAD: Hundreds of kinds of services no longer have customers who can afford their offerings.

By James Kunstler on 18 May 2020 for Kunstler.com
(https://kunstler.com/clusterfuck-nation/dance-macabre/)


Image above: Painting from the 16th or 17th century illustrating the "Dance Macabre". From (https://www.ancient-origins.net/news-history-archaeology/dance-macabre-how-dead-danced-living-medieval-society-009063).

Western Civ’s most infamous encounter with pandemic disease, so far, was the big first wave of the Black Death that had a marathon run from 1346 to 1353. That bug was the real deal. It killed folks left and right, every age group, every social station, and it killed them ugly.

Few who caught it survived. Up to half the population of Europe perished, along with a lot of their social and economic ways.

The cause of the Black Death was subject to every possible explanation except the actual one, Yersina pestis, a bacterium associated with rats and their insect parasites, fleas and lice, who also enjoyed an association with humans living in the generally squalid conditions of the day — the ancient Roman habit of bathing long forgotten.

At the top of their list of causes was an angry God, and his wicked erstwhile subordinate, Satan.

The “experts” of that time tended to cluster in the church hierarchy, with its drear obsessions and compulsions. The squishy boundary between the supernatural and reality loosed all manner of derangement.

The Jews came in for much vilification, leading to massacres in Strasbourg, Mainz, and Cologne. On the whole, the episode represented a terrific humbling of humanity. The allegory of the Dance Macabre summed it up in mankind’s universal antic journey to the Palookaville of death.

On the plus side, as modern interpolators might say, the bubonic plague winnowed down Europe’s population to a scale more congenial with its resource base. After that big first wave of the disease, land was cheaper and human labor better rewarded.

Eventually, more food got around. Incidentally, the plague provoked nostalgia for the classical antiquity of Greece and Rome, especially among the scholars of Florence, launching the extravaganzas of the Renaissance, the Enlightenment, and eventually our own pageant of techno-supremacist Modernity.

Covid-19 seems rather a punk-ass illness compared to the Black Death. Its victims by far are people already on a fast track to the last roundup. We know exactly what causes it, if not so exactly its origin, and yet the response among our experts has been far more ambiguous than those long-ago bishops of Christendom to the Great Plague.

The various scientists, physicians, public health officers, and politicians seem, to the casual observer, about equally divided between those who consider the corona virus a grave threat and those who insist it’s hardly worse than any annual flu. What is one to believe? Or do?

Which brings us to the verge of the Great Opening-up. The current nostalgia for pre-Covid-19 business-as-usual is understandably intense.

Gone especially from daily life are all the ceremonies of human togetherness, from gatherings of friends to the casual shoulder-rubbings of urban life to the crowded venues of the lively arts to the great moiling orgies of pro sports.

The life of the perpetual jigsaw puzzle, YouTube, and Netflix has proved inadequate to human aspiration. Gone, too, are livelihoods, revenue streams, and rewarding roles in everyday existence. The itch to get out and do, get out and make, get out and be, is overwhelming.

Behind those plain yearnings, though, looms the specter of a system that appeared to be already foundering before Covid-19 entered the scene. There is, at least, considerable agreement that the disease catalyzed the disorders of finance and economy and accelerated the damage — just not among the people most responsible for engineering the fragilities that actually crashed things.

Jerome Powell, Pope of the Church of the Federal Reserve, went on the 60-Minutes show Sunday night to reassure the nation that things will eventually get back to normal. “I think you’ll see the economy recover steadily through the second half of this year.”

Yessir, if you say so. Were his fingers crossed? You couldn’t tell because the camera had him framed in a head-shot. Personally, I think the Fed Chairman was blowing smoke up the nation’s wazoo.

Spooky as it’s been, the Covid-19 virus has also been a great cover-story for the natural collapse of a severely unbalanced, ecologically unsound, and dishonestly represented set of arrangements that are now unspooling at horrifying speed.

The car industry is dying. The airline industry is laying out its fleet of big birds in desert graveyards. The college racketeering operation went off a cliff, along with medical profiteering. Agribusiness no longer has a business model.

Hundreds of kinds of services no longer have customers who can afford their offerings from acupuncture to zymurgy.

None of that will be fixed by injections of miracle money borrowed from ourselves in quantities that would turn every US citizen into a millionaire — if it wasn’t just pounded down the rat-holes of the stock and bond markets. The big question about the Great Opening-up is when the recognition of all that turns to raw emotion.

Covid-19 may still be with us then, but it will be the least of our problems.

The masks will come off. The dance will commence.
.

World after the COVID-19 Pandemic

SUBHEAD: The pandemic will changes the world. Here are the thoughts of several global thinkers.

By contributors to Foreign Policy Magazine on 20 March 2020 -
(https://foreignpolicy.com/2020/03/20/world-order-after-coroanvirus-pandemic/)


Image above: Illustration of fight against 2019 Novel Coronavirus pandemic. From original article.

Like the fall of the Berlin Wall or the collapse of Lehman Brothers, the coronavirus pandemic is a world-shattering event whose far-ranging consequences we can only begin to imagine today.

This much is certain: Just as this disease has shattered lives, disrupted markets and exposed the competence (or lack thereof) of governments, it will lead to permanent shifts in political and economic power in ways that will become apparent only later.

To help us make sense of the ground shifting beneath our feet as this crisis unfolds, Foreign Policy asked 12 leading thinkers from around the world to weigh in with their predictions for the global order after the pandemic.



A World Less Open, Prosperous, and Free

By Stephen M. Walt

The pandemic will strengthen the state and reinforce nationalism. Governments of all types will adopt emergency measures to manage the crisis, and many will be loath to relinquish these new powers when the crisis is over.

COVID-19 will also accelerate the shift in power and influence from West to East. South Korea and Singapore have responded best, and China has reacted well after its early mistakes. The response in Europe and America has been slow and haphazard by comparison, further tarnishing the aura of the Western “brand.”

What won’t change is the fundamentally conflictive nature of world politics.

Previous plagues—including the influenza epidemic of 1918-1919—did not end great-power rivalry nor usher in a new era of global cooperation. Neither will COVID-19. We will see a further retreat from hyperglobalization, as citizens look to national governments to protect them and as states and firms seek to reduce future vulnerabilities.

In short, COVID-19 will create a world that is less open, less prosperous, and less free. It did not have to be this way, but the combination of a deadly virus, inadequate planning, and incompetent leadership has placed humanity on a new and worrisome path.



The End of Globalization as We Know It

By Robin Niblett

The coronavirus pandemic could be the straw that breaks the camel’s back of economic globalization.

China’s growing economic and military power had already provoked a bipartisan determination in the United States to decouple China from U.S.-sourced high technology and intellectual property and try to force allies to follow suit.

Increasing public and political pressure to meet carbon emissions reduction targets had already called into question many companies’ reliance on long-distance supply chains. Now, COVID-19 is forcing governments, companies, and societies to strengthen their capacity to cope with extended periods of economic self-isolation.

It seems highly unlikely in this context that the world will return to the idea of mutually beneficial globalization that defined the early 21st century. And without the incentive to protect the shared gains from global economic integration, the architecture of global economic governance established in the 20th century will quickly atrophy.

It will then take enormous self-discipline for political leaders to sustain international cooperation and not retreat into overt geopolitical competition.

Proving to their citizens that they can manage the COVID-19 crisis will buy leaders some political capital. But those who fail will find it hard to resist the temptation to blame others for their failure.



A More China-Centric Globalization

By Kishore Mahbubani

The COVID-19 pandemic will not fundamentally alter global economic directions. It will only accelerate a change that had already begun: a move away from U.S.-centric globalization to a more China-centric globalization.

Why will this trend continue? The American population has lost faith in globalization and international trade. Free trade agreements are toxic, with or without U.S. President Donald Trump. By contrast, China has not lost faith.

Why not?

There are deeper historical reasons. Chinese leaders now know well that China’s century of humiliation from 1842 to 1949 was a result of its own complacency and a futile effort by its leaders to cut it off from the world. By contrast, the past few decades of economic resurgence were a result of global engagement.

The Chinese people have also experienced an explosion of cultural confidence. They believe they can compete anywhere.

Consequently, as I document in my new book, Has China Won?, the United States has two choices. If its primary goal is to maintain global primacy, it will have to engage in a zero-sum geopolitical contest, politically and economically, with China.

However, if the goal of the United States is to improve the well-being of the American people—whose social condition has deteriorated—it should cooperate with China. Wiser counsel would suggest that cooperation would be the better choice. However, given the toxic U.S. political environment toward China, wiser counsel may not prevail.



Democracies Will Come out of Their Shell

By G. John Ikenberry

In the short term, the crisis will give fuel to all the various camps in the Western grand strategy debate. The nationalists and anti-globalists, the China hawks, and even the liberal internationalists will all see new evidence for the urgency of their views.

Given the economic damage and social collapse that is unfolding, it is hard to see anything other than a reinforcement of the movement toward nationalism, great-power rivalry, strategic decoupling, and the like.

But just like in the 1930s and ’40s, there might also be a slower-evolving countercurrent, a sort of hardheaded internationalism similar to the one that Franklin D. Roosevelt and a few other statesmen began to articulate before and during the war. The 1930s collapse of the world economy showed how connected modern societies were and how vulnerable they were to what FDR called contagion.

The United States was less threatened by other great powers than by the deep forces—and Dr. Jekyll and Mr. Hyde character—of modernity. What FDR and other internationalists conjured was a postwar order that would rebuild an open system with new forms of protection and capacities to manage interdependence.

The United States couldn’t simply hide within its borders, but to operate in an open postwar order required the building of a global infrastructure of multilateral cooperation.

So the United States and other Western democracies might travel through this same sequence of reactions driven by a cascading sense of vulnerability; the response might be more nationalist at first, but over the longer term, the democracies will come out of their shells to find a new type of pragmatic and protective internationalism.



Lower Profits, but More Stability

By Shannon K. O’Neil

COVID-19 is undermining the basic tenets of global manufacturing. Companies will now rethink and shrink the multistep, multicountry supply chains that dominate production today.

Global supply chains were already coming under fire—economically, due to rising Chinese labor costs, U.S. President Donald Trump’s trade war, and advances in robotics, automation, and 3D printing, as well as politically, due to real and perceived job losses, especially in mature economies.

COVID-19 has now broken many of these links: Factory closings in afflicted areas have left other manufacturers—as well as hospitals, pharmacies, supermarkets, and retail stores—bereft of inventories and products.

On the other side of the pandemic, more companies will demand to know more about where their supplies come from and will trade off efficiency for redundancy. Governments will intervene as well, forcing what they consider strategic industries to have domestic backup plans and reserves. Profitability will fall, but supply stability should rise.



This Pandemic Can Serve a Useful Purpose

By Shivshankar Menon

It is early days yet, but three things seem apparent. First, the coronavirus pandemic will change our politics, both within states and between them. It is to the power of government that societies—even libertarians—have turned.

Government’s relative success in overcoming the pandemic and its economic effects will exacerbate or diminish security issues and the recent polarization within societies

Either way, government is back. Experience so far shows that authoritarians or populists are no better at handling the pandemic. Indeed, the countries that responded early and successfully, such as Korea and Taiwan, have been democracies—not those run by populist or authoritarian leaders.

Secondly, this is not yet the end of an interconnected world. The pandemic itself is proof of our interdependence.

But in all polities, there is already a turning inward, a search for autonomy and control of one’s own fate. We are headed for a poorer, meaner, and smaller world.

Finally, there are signs of hope and good sense. India took the initiative to convene a video conference of all South Asian leaders to craft a common regional response to the threat. If the pandemic shocks us into recognizing our real interest in cooperating multilaterally on the big global issues facing us, it will have served a useful purpose.



American Power Will Need a New Strategy

By Joseph S. Nye, Jr.

In 2017, U.S. President Donald Trump announced a new national security strategy that focuses on great-power competition. COVID-19 shows this strategy to be inadequate. Even if the United States prevails as a great power, it cannot protect its security by acting alone.

As Richard Danzig summarized the problem in 2018: “Twenty-first century technologies are global not just in their distribution, but also in their consequences.

Pathogens, AI systems, computer viruses, and radiation that others may accidentally release could become as much our problem as theirs. Agreed reporting systems, shared controls, common contingency plans, norms, and treaties must be pursued as means of moderating our numerous mutual risks.”

On transnational threats like COVID-19 and climate change, it is not enough to think of American power over other nations. The key to success is also learning the importance of power with others. Every country puts its national interest first; the important question is how broadly or narrowly this interest is defined. COVID-19 shows we are failing to adjust our strategy to this new world.



The History of COVID-19 Will Be Written by the Victors

By John Allen

As it has always been, history will be written by the “victors” of the COVID-19 crisis. Every nation, and increasingly every individual, is experiencing the societal strain of this disease in new and powerful ways.

Inevitably, those nations that persevere—both by virtue of their unique political and economic systems, as well as from a public health perspective—will claim success over those who experience a different, more devastating outcome.

To some, this will appear as a great and definitive triumph for democracy, multilateralism, and universal health care. To others, it will showcase the clear “benefits” of decisive, authoritarian rule.

Either way, this crisis will reshuffle the international power structure in ways we can only begin to imagine. COVID-19 will continue to depress economic activity and increase tension between countries.

Over the long term, the pandemic will likely significantly reduce the productive capacity of the global economy, especially if businesses close and individuals detach from the labor force. This risk of dislocation is especially great for developing nations and others with a large share of economically vulnerable workers.

The international system will, in turn, come under great pressure, resulting in instability and widespread conflict within and across countries.



A Dramatic New Stage in Global Capitalism

By Laurie Garrett

The fundamental shock to the world’s financial and economic system is the recognition that global supply chains and distribution networks are deeply vulnerable to disruption. The coronavirus pandemic will therefore not only have long-lasting economic effects, but lead to a more fundamental change.

Globalization allowed companies to farm out manufacturing all over the world and deliver their products to markets on a just-in-time basis, bypassing the costs of warehousing. Inventories that sat on shelves for more than a few days were considered market failures

Supply had to be sourced and shipped on a carefully orchestrated, global level. COVID-19 has proven that pathogens can not only infect people but poison the entire just-in-time system.

Given the scale of financial market losses the world has experienced since February, companies are likely to come out of this pandemic decidedly gun-shy about the just-in-time model and about globally dispersed production.

The result could be a dramatic new stage in global capitalism, in which supply chains are brought closer to home and filled with redundancies to protect against future disruption. That may cut into companies’ near-term profits but render the entire system more resilient.



More Failed States

By Richard N. Haass

Permanent is not a word I am fond of, as little or nothing is, but I would think the coronavirus crisis will ​at least for a few years lead most governments ​to turn inward, focusing on what takes place within their borders rather than ​on what happens beyond them.

I anticipate greater moves toward selective self-sufficiency (and, as a result, decoupling) given supply chain vulnerability; even greater opposition to large-scale immigration; and a reduced ​willingness or commitment to tackle regional or global problems (including climate change) given the perceived need to dedicate resources to rebuild at home and deal with economic consequences of the crisis​.
I would expect many countries will have difficulty recovering from the crisis, with state weakness and failed states becoming an even more prevalent feature of the world. The crisis will likely contribute to the ongoing deterioration of Sino-American relations and the weakening of European integration.

On the positive side, we should see some modest strengthening of global public health governance. But overall, a crisis rooted in globalization will weaken rather than add to the world’s willingness and ability to deal with it.



The United States Has Failed the Leadership Test

By Kori Schake


The United States will no longer be seen as an international leader because of its government’s narrow self-interest and bungling incompetence.

The global effects of this pandemic could have been greatly attenuated by having international organizations provide more and earlier information, which would have given governments time to prepare and direct resources to where they’re most needed.

This is something the United States could have organized, showing that while it is self-interested, it is not solely self-interested. Washington has failed the leadership test, and the world is worse off for it.



In Every Country, We See the Power of the Human Spirit

By Nicholas Burns

The COVID-19 pandemic is the greatest global crisis of this century. Its depth and scale are enormous. The public health crisis threatens each of the 7.8 billion people on Earth. The financial and economic crisis could exceed in its impact the Great Recession of 2008-2009.

Each crisis alone could provide a seismic shock that permanently changes the international system and balance of power as we know it.

To date, international collaboration has been woefully insufficient. If the United States and China, the world’s most powerful countries, cannot put aside their war of words over which of them is responsible for the crisis and lead more effectively, both countries’ credibility may be significantly diminished.

If the European Union cannot provide more targeted assistance to its 500 million citizens, national governments might take back more power from Brussels in the future. In the United States, what is most at stake is the ability of the federal government to provide effective measures to stem the crisis.

In every country, however, there are many examples of the power of the human spirit—of doctors, nurses, political leaders, and ordinary citizens demonstrating resilience, effectiveness, and leadership. That provides hope that men and women around the world can prevail in response to this extraordinary challenge.

Things Have Changed

SUBHEAD: Something old and played-out is limping offstage, and something new is stepping on.

By James Kunstler for Kunstler.com on 16 March 2020 -
(https://kunstler.com/clusterfuck-nation/things-have-changed/)


Image above: Painting by Mark Bryan in 2012  titled "The Causeway". From (https://www.artofmarkbryan.com/landscape/). Click to enlarge.

At least in wartime, the bars stay open. That’s how you know this is a different thing altogether from whatever else you’ve seen in your lifetime.

Even those of us who signed up for this trip — that is, who expected a long emergency — may be a little bit in cosmic awe at just how much shit is flying into the ol’ fan. I know I am. The gods must have glugged down a mighty draft of Dulcolax.

Did you get the feeling, as I did, watching the Sanders-Biden debate the other night — the inadequate versus the irrelevant — that the world they were blathering about possibly doesn’t exist anymore?

The world of institutions that actually function? Like, the ones that conjure up whatever sum of money you demand to keep all the wheels spinning? 

Remember that Hemingway line about the guy who went broke? Slowly, then all at once. That’s us.

Medicare for all now? Really? 

More like, a year from now every physician in America may be the equivalent of the old country doc toting a black bag around to home visits. Unfortunately, there aren’t enough horses left in America, and the few buggies we’ve got are all in the museum.

The mega financial bubble-of-bubbles is deflating with frightful velocity precisely because of the efforts since 2008 to artificially inflate it. The Federal Reserve gave it one final blast Sunday night — while everybody else was counting their rolls of toilet paper — and the effect was like blowing hot air into a shredded Zeppelin. Stock futures are “limit down” as I write, before the Wall Street open. 

Gold is getting pounded into the ground like a grape stake and silver is so low it looks like the hedge fund managers are down to pawning grandma’s table service. (Hint, the PMs will bounce back hard; the rest, probably not so much.)

Nobody really knows how deep and how harsh this gets (and perhaps the ones who have a clue ain’t sayin’). But the situation presents two salient questions: how much disorder is entailed in this ordeal? And what does the world look like when the convulsion phase of this thing is over?

Americans have never been through anything remotely like this. The disorders of the Civil War were sharp and horrendous military operations conducted mostly in cornfields, pastures, and woods (yes, and some small cities like Richmond, pop. 38,000, and Atlanta, pop. 10,000). When the smoke cleared, battered Dixieland emerged to numb civil order. 

Up in Yankeedom, the New York draft riots ran for a week around the small patch of Manhattan island, but everybody else went along with Mr. Lincoln’s program.

After all that, America got on quickly with the lively business of the 19th century: railroads, mines, factories, and all that. The world wars took place in foreign lands, and the home-front scene of the 1940s now looks nostalgically idyllic.

The stresses mounting on the national scene today reflect the extreme fragilities of the way-of-life we constructed since then, and an awful lot of bad choices we made in the process, like suburbanizing the nation and making everybody a hostage to happy motoring. 

I won’t belabor that point, except to ask how are those vast regions of the country going to manage daily life as the supply chains wobble? I’d say a shortage of toilet paper may only be the beginning of their problems.

The cities — at least, the few that didn’t already implode from the inside out — made assumptions about how big and tall they could grow which don’t jibe with the new circumstances chugging ferociously down the line.

Just think what a lockdown of the global economy will do to all those residential skyscraper projects lately hoisted up in New York, San Francisco and Boston? I’ll tell you: They are assets instantly converted into liabilities. 

And how will these cities even begin to pay for maintaining their complex infrastructures and services when the money for all that no longer exists and there’s no way to pretend that it will ever come back? Answer: They won’t be able to keep borrowing and they won’t manage. These cities will depopulate and there will be battles over who gets to live in the parts that still may have some value, like riverfronts.

I guess just about everybody can now see the idiocy of concentrating the nation’s commercial life in super-gigantic organisms like Big Box stores. It seemed like a good idea at the time, like so many blunders in history, and now that time is over. 

Any ecology thrives on redundancy — a lot of players doing similar things at the appropriate scale — and America’s chain retail model for a commercial ecology was an obvious fiasco waiting to happen. 

The people who run that, and other people who run other things in our society, must be wondering whether those supply-chains from China will come back. It’s no different than the cargo cults of the Solomon Islanders circa 1947, after the military airplanes stopped landing with all their magical goodies: time to go back to fishing from the dugout canoe.

The foolish, idiotic identity politics ginned up by the Left and their racially-inflamed, sexually-disturbed scribes in the Thinking Class have successfully destroyed the last shred of an American common culture that held the country together through earlier vicissitudes. So, one concludes that we’ll be left stewing in poisonous tensions, and perhaps some violent conflicts, before those matters head toward some sort of resolution.

Where does this all lead? Eventually, to a land and a people who operate their society in a very different way at a much more modest scale. The task of reorganizing our national life is immense. (There will be plenty to do, so don’t worry about that.) 

You can forget about the grandiose techno-narcissistic visions of electrified motoring and a robotic nirvana of perpetual sex-crazed leisure. Everything we do has to be downscaled, from whatever manufacturing we can cobble back together to rebuilding commercial ecosystems at a finer grain from region to region — in other words, what we now call small business, geared locally.

Expect giant AgriBiz to founder on a shortage of capital, especially, and expect smaller farms to organize emergently, worked by more humans working together. That is, if we want to keep eating. Expect the small towns in the well-watered parts of the country to revive while the groaning metroplexes spiral down into entropic sclerosis.

Consider the value of our vast inland waterway system and the opportunities to move goods on them, when the trucking industry unravels. Consider lending a hand at rebuilding the railroad system in this country.

There will be economic roles and social roles for all those willing to step up to some responsibility. Young people may see tremendous opportunity replacing the wounded economic dinosaurs wobbling across the landscape. It’ll be all about going local and regional and making yourself useful in exchange for a livelihood and the esteem of others around you — aka, your community.

Government has been working tirelessly to make itself superfluous, if not completely ineffectual, impotent, and rather loathsome in the face of this crisis that has been slowly-but-visibly building for half a century.

Something old and played-out is limping offstage, and something new is stepping on. Aren’t you glad you watched all those debates?

IB Editor Juan Wilson's note: I have admired James Kunstler from around 2005 when I read his book 'The Long Emergency'.  The subtitle of the book was "Surviving the converging catastrophes of the twenty-first century". The book changed my life as if I had found myself standing on a trapdoor and then realized it was about to open wide. Jim had kn the delicacy and weakness of our civilization's dependence on fossil fuels. Back then my wife Linda and I were visiting upstate New York each summer. One year, around 2007, we visited Jim in Saratoga, NY, near his home. I found him sharp, amusing, and observant. Back then I was earning part of my living as a movie script consultant. After Jim wrote his fictional novel 'World Made By Hand' in 2008, I talked to him about trying to turn the book into a movie. He had some interest so I connected with his agent and followed through with treatment that included a opening segment that described the experience of his protagonist, Robert Earle, in the fast transformation of his suburban lifestyle as the Grid brakes down and he relocates to upstate New York  Jim and his agent turned it down. We have remained friendly acquaintances   Following his publication of 'Too Much Magic: Wishful Thinking, Technology And The Fate Of The Nation' in 2012 Linda and I visited Jim in his new haunt in upstate Greenwich, New York. He had bought some acreage not accessed by a public road and built a deer proof eight foot high fence all around it. The place featured a large vegetable garden and extensive arbor of fruit trees. He was hunkering down for an end of times. Well folks, the take away from his latest post to his website indicates that the time is ripe for a major breakdown. I'm hoping that if we can avoid a nuclear war, or other substantial suicidal behavior humans may end up with a smaller population in a more stable environment with less pollution. One can only hope. But as Betty Davis says in the 1950's movie 'All About Eve' - "Fasten your seat belts. It's going to be a bumpy night!"
.

The Final Act

SUBHEAD: In 2019 the US budget deficit was more than a trillion dollars - 16% more than 2018.

By Dmitry Orlov on 19 December 2019 for Club Orlov -
(https://cluborlov.blogspot.com/2019/12/the-final-act.html)

Image above A tidal wave of debt failure heading for home. From original article.

[IB Publisher's note: Hunker down for Merry Christmas... and as much as a Happy New Year as possible. Things may seem to be coming apart at the seams... but then again they always are - just as new things always come along and thrive. We are having our annual eggnog party tonight and we hope you find a glowing light in this darkest time of the year. In a couple of days the sky will be brighter, and isn't that is what Christmas time is all about. We know winter is coming, but there are signs it too will wane into spring.]

In processing the flow of information about the goings on in the US, it is impossible to get rid of a most unsettling sense of unreality—of a population trapped in a dark cave filled with little glowing screens, all displaying different images yet all broadcasting essentially the same message.

That message is that everything is fine, same as ever, and can go on and on. But whatever it is that’s going on can’t go on forever, and therefore it won’t. More specifically, a certain coal mine canary has recently died, and I want to tell you about it.

It’s easy to see why that particular message is stuck on replay even as the situation changes irrevocably. As of 2019, 90% of the media in the United States is controlled by four media conglomerates:\
  • Disney ABC
  • Viacom CBS
  • Comcast NBC-Universal
  •  AT&T Time-Warner
Together they have formed a corporate media monoculture designed to most effectively maximize shareholder value.

As I wrote in Reinventing Collapse in 2008, “...In a consumer society, anything that puts people off their shopping is dangerously disruptive, and all consumers sense this. Any expression of the truth about our lack of prospects for continued existence as a highly developed, prosperous industrial society is disruptive to the consumerist collective unconscious.

There is a herd instinct to reject it, and therefore it fails, not through any overt action, but by failing to turn a profit because it is unpopular.”

Two years earlier, in a slideshow optimistically titled “Closing the Collapse Gap” (between the USSR and the USA), I wrote: “...It seems that there is a fair chance that the US economy will collapse sometime within the foreseeable future. It also would seem that we won’t be particularly well-prepared for it.

As things stand, the US economy is poised to perform something like a disappearing act.” And now, 12 years later, I believe I am finally watching what amounts to preparations for that act’s final rehearsal; the ballet troupe is doing stretching exercises and the fat lady is singing arpegios to warm up…

Clearly, this final act is yet to be performed. The media replay loop continues to play, keeping the populace convinced that the future will resemble the past (except, perhaps, it will have more wind generators, solar panels and electric cars).

The populace continues to be persuaded to go out and shop for (or, more frequently now, order online) things it doesn’t need, to be paid for by money it doesn’t have.

Of course, there have been changes. The populace in the US has been doing progressively worse. Drug addiction and suicide rates have skyrocketed while rates of childbirth have plummeted. The purchase of a home is now out of reach for the vast majority of young couples.

Artificially rosy unemployment statistics hide the 100 million or so people who are considered “not in labor force” (because they lost their jobs some time ago and haven’t been able to find another one).

Uniquely among developed nations, life expectancy among white males—historically the most economically active and prosperous part of the population—has been dropping.

These are all negatives, but neither any one of them nor any combination of them adds up to anything that could cause the US economy to undergo a spontaneous existence failure.

Nevertheless, it is possible to build a convincing case that Rome is, to put it figuratively, burning. To continue with the metaphor, evidence that there is some fiddling going on is particularly compelling.

Overall, there is a steady backing away from addressing the substance of any problem and a concerted effort to maintain appearances at all cost.

Take the trade war with China, which has been going on since early 2018. Trump has recently declared a major victory in it, but upon examination signs victory are impossible to discern.

In 2017 the US ran a $750 billion trade deficit with China on $3.3 trillion of trade (22.7%). In 2018 it has jumped to $930 billion on $3.8 trillion of trade (24.4%).

China has found ways to parry each of Trump’s thrusts by imposing countertariffs. After two years of this sort of World War I-style trench warfare, in which the US has been slowly losing ground, it became clear that the US doesn’t have any means to put pressure on China.

And so Trump suddenly declares victory; not a full victory (that will have to wait until after Trump is reelected for his second term) but a victory nonetheless, because the Chinese have supposedly agreed to buy an extra $200 billion worth of US exports, $50 billion of them of agricultural exports from states that voted for Trump in 2016. But Trump is lying to his supporters.

Over the past two years the Chinese have imported roughly $24 billion of agricultural commodities from the US, and sources close to the trade talks have said that the Chinese have agreed to increase these imports by just $16 billion, putting the total $10 billion short of the $50 billion mark.

Even then, the US agricultural sector would have to rapidly scale up production by a factor of 1.6—and this is not at all likely.

The farmers will discover this only after they vote to reelect Trump, but that’s not Trump’s problem. Nor was it Trump’s problem when in 2017 the Chinese promised to buy $120 billion of US liquified natural gas exports and then the US wasn’t able to provide anywhere near that volume.

And now that Russia’s Power of Siberia pipeline is operational and ramping up volumes, while US fracking companies are going bankrupt left and right, the question has become largely moot.

The AG promise is just a replay of the LNG promise at a smaller scale. Appearances are all that matter, and appearances are what Trump delivers every time.

And if his voters want to believe—who’s to stop them? Even though it is clearly heading toward a defeat for the US as a whole, the trade war with China is definitely a huge positive for Trump: all he has to do to win personally is periodically deliver promises that others won’t keep—but that’s not his problem.

Another net benefit for Trump is the never-ending impeachment saga. It has kept him in the media limelight and has allowed him to pretend that he is prevailing heroically against great odds while making his opposition look ridiculous in the eyes of his supporters.

After the “Russian meddling” fable unraveled, an even more preposterous rationale for impeachment has taken its place.

An attempt to impeach Trump for refusing to cooperate with a congressional investigation is in the process of failing, since anyone with more intelligence than a bucket of California penis fish should know that it is up to the courts, not up to the legislature, to resolve disputes between the legislature and the executive.

All that remains now is an alleged abuse of power by Trump. Apparently, it is a no-no for a US president to ask a foreign leader to investigate a US presidential candidate for a variety of crimes such as corruption, bribery and money-laundering.

This may all seem quite ridiculous, but it serves a purpose: it allows Trump to clean up on free publicity and to continue fiddling (tweeting, in his case) as Rome burns.

But what has set fire under Rome is not the decrepitating state of US society, or the permanent and permanently worsening trade imbalance with China, or the never-ending impeachment farce. It is the incipient failure of the US dollar.

 For those who have been paying careful attention, the surreal nature of the proceedings, and the fact that results no longer matter—only appearances do—have become perfectly obvious, but they are a tiny minority.

What has allowed the politicians and the media to exploit the general public’s innate normalcy bias and to keep the media replay loop going without too many people catching on to what’s really happening was (note the past tense!)... the ability of the US government (with the assistance of the Federal Reserve, which is a government-linked but essentially private entity) to paper over the gaping chasm in the nation’s finances by issuing debt, in the form of US Treasury paper.

The US Treasury has been able to exploit its “exorbitant privilege” to issue internationally recognized and traded debt instruments denominated in its own currency—the US dollar—which has been the world’s main reserve currency for many decades.

The reserve currency status has conveyed a certain aura of security and reliability (paper money is, after all, pretty much just a confidence game) and has supported the world’s largest and most liquid financial market.

Anybody anywhere could put up US Treasury paper as collateral for a loan and get a low interest rate because that paper was considered as good as “real money” (whatever that means). And then that scheme suddenly broke.

It is difficult to say what caused the confidence game to fail. It could be just the inexorable and ever-accelerating increase in US government debt. It could be the blatant decoupling between the growth rate of the US economy and the rate of increase of its indebtedness.

It could also be the fact that much of the world is making a concerted effort to walk away from the US dollar as a reserve currency and as a means of exchange in international trade (Russia has sold off almost all of its US debt; China’s hoard is much larger but it is also gradually selling it off).

It is unclear what was the ultimate cause, but what is clear is that in August of 2019 something finally snapped, and USTs went from “good as real money” to “stuff nobody wants to hold.”

I first wrote about this in September when it became clear that real trouble was brewing in the market for US debt. Now, three months later, the situation has gone from bad to worse, and it would appear that the market for USTs definitevely broke.

I will try to sketch out what that means for the US economy and society later on (spoiler alert: nothing good) but for now I just want to lay out some of what has happened.

In the meantime please take your normalcy bias and put it some place safe (in case you need it later, although I have no idea what for).

Previously, when it was clear that an overburden of bad debt could trigger financial collapse at any moment, the Federal Reserve (which is in charge of printing money) engaged in something it euphemistically called “quantitative easing” (“QE”).

It printed lots of US dollars in exchange for various bits of USTs, along with other financial garbage, with the goal of later selling the USTs while hiding the garbage, thereby preserving the appearance that USTs are sovereign debt supported by the full faith and credit of the US government rather than just some waste paper clogging up its vaults.

But when it declared “quantitative easing” to be over and tried selling the USTs, all hell immediately broke loose and it was forced to go right back to buying them up, in a scheme that has been sarcastically referred to as “not QE.”

 Euphemisms aside, what is happening is properly called “debt monetization”: it’s when a government “borrows” money not by selling its debt in exchange for money that already exists but simply printing the money using paper and ink, or magic digits inside a very secure computer.

Let’s go over some of the relevant details.

“Not QE” actually started well before it was announced and proceeded in stealth mode. Over six weeks starting in September 2019, the Fed monetized an average of $20.5 billion per week.

This rate is compatible with the extent of its previous efforts at “quantitative easing” at their height. It was forced to do so because the REPO rate on USTs spiked to ten times the rate set by the Fed.
Note: REPO stands for “repurchase agreement”; it is where one party borrows short-term from another party, using USTs (and other supposedly very safe debt instruments) as collateral, much as a pawn shop will give you money for a watch and then allow you to buy it back.
The huge spike in interest rates signaled that USTs were no longer seen as particularly safe collateral and the Fed had to step in and start throwing freshly minted dollars at the problem. And it never stopped.

In fact, the problem grew larger; so large, that now, at the year’s end, the Fed has committed $500 billion of printing press output to making sure that nobody runs out of cash.

It is commonly thought that the Fed’s action has to do with short-term debt, and is therefore a short-term problem, but that’s simply not the case. Since early August (the start of stealth-mode “not QE”) the Fed has vacuumed up $179 billion with of USTs, of which USTs with terms longer than a year made up $108 billion, or 60%.

Compare these numbers to the total borrowing by the US government over the same period, which amounted to $659 billion, of which $368 billion was short-term debt and $291 billion long-term.

Thus, over this period the Fed has monetized 29.4% of new long-term debt and 24.4% of short-term debt. This should help put your mind at ease if you suspected that this isn’t a short-term problem but weren’t sure. It’s a long-term, structural problem.

Next, let’s consider whether the problem is being solved or is getting worse. Rest assured, it is getting worse. Looking at the numbers for October and November, the Fed monetized over half (50.7%) of new US government debt.

A straight-line projection is that if it took the Fed to go from 0% to 50% in four months, then it will go from 50% to 100% in another four—by April Fool’s 2020. But who’s to say that the increase will be linear rather than exponential?

Whichever it is, the trend is unmistakable: the market in US government debt—once the deepest and most liquid market in the world—is dead. The only thing propping up the value of USTs is the Fed’s printing press. And the only thing propping up the value of the output of the Fed’s printing press is… what is it, exactly?

Exactly!

Let’s add one more salient detail. Over the course of 2020, $4.665 trillion of USTs will mature and will need to be rolled over into new USTs. This is an all-time record, and this is on top of new debt that will have to be issued in order for the US government to be able to stay open.

Over the past year the US budget deficit has amounted to $1.022 trillion, which is a 15.8% increase over the previous year. If this trend continues, the new deficit will be around $1.183 trillion. In order to keep the wheels of finance from grinding to a halt, over 2020 the Fed will have to monetize, or print, close to $6 trillion.

It appears likely that at some point over the coming months Fed chairman Jerome Powell will have to announce “not not QE,” and then “not not not QE,” and then “Milk-milk-lemonade, ’round the corner fudge is made!” and run for the unigender restroom sobbing inconsolably.

And then Donald Trump will be forced to channel Boris Yeltsin, who, on August 14, 1998, summoned all the presidential gravitas he could muster and spoke the following sage words:

«Девальвации рубля не будет. Это твердо и четко. Мое утверждение — не просто моя фантазия, и не потому, что я не хотел бы девальвации. Мое утверждение базируется на том, что все просчитано. Работа по отслеживанию положения проводится каждые сутки. Положение полностью контролируется».
“There will be no ruble devaluation. This is my firm and clear position. My assertion is not just a product of my fantasy, and not because I don’t want devaluation to happen. My assertion is based on the fact that everything is taken into account. The work on reassessing the situation is being conducted daily. The situation is entirely under control.” (My translation.)
And then three days later the Russian government declared sovereign default. The ruble dropped by 2/3 against the US dollar and the Russian economy, which was at that time extremely import-dependent, crashed hard. In a similar scenario, the US economy will crash much harder.

Like Russia in 1998, the US is extremely import-dependent. But here the US government is not the only large borrower: most of US corporations are zombified corpses bloated with debt.

For many years they have been borrowing at artificially low interest rates in order to buy up their own shares and prop up their value in a ridiculous effort to maximize shareholder value in the face of stalling economic growth.

If they become unable to roll over their debt at artificially low interest rates (which will go away once the Fed definitively loses control of the situation) then they will automatically be forced to declare bankruptcy and liquidate.

If you want to maintain an optimistic outlook in spite of all of this, here is a book you might want to read.

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The Scenarios of the Collapse

SUBHEAD: It would be wise to start making contingency plans. Something ‘biblical’ is approaching.

By Tuomas Malinen on 11 January 2019 for GNS Economics  -
(https://gnseconomics.com/en_US/2019/01/11/the-scenarios-of-the-collapse/)


Image above: Painting of  "Noah's Ark" (1846) by American painter Edward Hicks. From (https://en.wikipedia.org/wiki/Noah%27s_Ark).

2019 has started more calmly after a very volatile year-end in the markets. Focus has been on the trade deal between China and the US and the words of the central bankers, most notably those of Jay Powell. However, this is all just a distraction, a side-show.

The market volatility was only the first sign of an approaching global economic crisis, as we warned in December 2017.

As the recent PMI figures across the globe show, a global downturn has started and the world is utterly unprepared for it. The global imbalances that have been growing for years cannot lead to anything else than a global crisis . However, there are different paths the crisis could take.

Here, we present three scenarios that the global economy is likely to follow, when the global downturn morphs into something much more sinister. We’ll start with the most likely scenario: Global Depression.

Scenario I: Global Depression

In a depression, everything that has been driven the economic expansion goes into reverse. Asset markets experience severe contraction (in excess of 50 percent), credit becomes restricted, corporations and households de-lever fiercely, and global trade flows stall (for more details see Q-review 2/2018). Gross Domestic Production (GDP) falls dramatically, between 10 to 25 percent.

Unemployment skyrockets. The standard means of stimulus by central banks (CBs) and governments are exhausted without any notable improvement in the economic environment.

The implosion of the current asset bubble will start a relentless unwinding of leverage and risk in the global financial system. Because major CBs are still “all-in” with rates pinned at or near historic lows, and balance sheets bloated to extreme levels, their ability to respond will be highly restricted.

Governments are also highly-indebted, and when interest rates rise, some sovereigns are likely to default, aggravating the global banking crisis, which will probably be in motion already. Combined with the zombified global business sector and a hard landing in China, these factors will lead the world economy into a depression.

However, a possibility of something even more ominous is lurking in the background.

Scenario II: Systemic Meltdown

Systemic crisis would mean that the global financial melts down due to an existential deficit of trust between counterparties within the system. Before 2008, a systemic meltdown was mostly a theoretical construct.

However, in mid-October in 2008, global leaders were faced with the possibility that banks would not open on Monday. The inter-bank markets had frozen, because no one knew the amount of the losses banks carried on their books.

The global financial system was grinding to a halt. Politicians and central bankers saved the day by guaranteeing bank deposits and by providing capital and extraordinary guarantees to keep the important financial institutions standing and credit flowing.

Now the problem is that many of these measures are already in play and when the next crisis hits, the solvency of governments and CBs will also be in question.

This creates a perilous situation because, for example, the shares of the Global Systemically Important Banks have been falling since the beginning of last year, which was also the time when the balance sheet normalization (QT) program of the Fed kicked into full gear.

This is no coincidence and it implies that troubles are, once again, brewing in the banking sector.

Because a crash in the asset values would affect the collateral of banks and because global depression would lead to a massive increase in loan losses, the already-impaired banking sector could, again, face collapse.

However, this time around, there is very little authorities can do to stem the panic. These factors make the systemic meltdown an ominously-likely scenario.

Systemic meltdown would mean that all banking actions, distribution of money, loans, swaps, banking services, etc., through the banking sector would stop. Credit cards would cease to function, ATMs would not give out money and loans could not be originated or rolled-over.

Following the likely collapse of global trade, the world economy would also collapse. This would imply that the global GDP would experience a harrowing fall of 20 to 40 percent. Modern societies would cease to exist in their current form.

Scenario III: The Fairy Tale

Could this all be averted somehow? We’ve been pondering this for two years now, and our resounding answer is no. The leverage in the system usually results in a crash at some point, and asset bubbles very rarely deflate in a controlled manner.

However, CBs can probably still postpone the inevitable, if they could re-start Quantitative Easing (QE) programs or find some other way to push artificial central bank liquidity into the financial markets.

To soften the eventual blow, and as an extremely desperate measure, central banks could, at least in theory, engage in a “QE-squared”. In it, major central banks would buy a hefty chunk of global risk assets, estimated to total $400 trillion.

This would mean that the balance sheet of major Central Banks would need to expand at least five-fold from the current level of approximately $20 trillion.

To cover the crippling losses to their collective balance sheets that these purchases would be likely to inflict, they would need to use their money-printing ability to paper them over.

CBs earn seigniorage-revenue from all the money they create. This is the difference between the nominal value and the production costs of the money.

Because production costs of digital entries are very close to zero, the seigniorage revenue CBs receive from each entry is close to 1-to-1. Still, this would mean that they would need to create new money in the range of tens of trillions of US dollars.

By comparison, in 2017, the global nominal GDP of the world was approximately $75 trillion.

To distribute such incomprehensible sums of new money, CBs would need to give it directly to consumers and governments.

Even in normal circumstances, the production side of the economy would be unlikely to be able to respond to such a massive increase in (artificially created) demand, and this time there would have been wide-spread corporate bankruptcies driven by global depression.

A hyper-inflation would be likely to follow.

There’s also the alternative that CBs would make a complete U-turn and continue to backstop market losses.

This would be the “way of Japan”, where the BoJ already owns over 40% of the sovereign bond universe. It would eventually mean the effective nationalization of capital markets which would continue to function in name only.

We have no historical experience with what the expropriation of modern capital markets would cause.

However, it would be unlikely to be anything good as capital markets have been around for several centuries, and they are extremely important in allocating financial capital efficiently. If CBs take a permanent active role in the capital markets, it would lead to financial market socialism.

 It would be likely to bring similar horrors as regular socialism in the form of lost incentives (breaking down of the risk-reward relationship) and inflated asset values.

It is unlikely that global central bankers would be willing, or that they would be allowed, to do so.

The Endgame Nears


The global balance sheet of CBs turned in August 2018. This marks the start of global QT and thus the end of the most reckless monetary policy experiment in history.

When this is combined with the slow-down in China, the engine of the world economy since 2008,  we have finally entered the endgame of at the current business cycle.

The desperate measures of central bankers and China enacted after the financial crisis have pushed the global debt and financial alchemy to never-seen heights.

The global financial system has become rigged with leverage, moral hazard and regulatory failures to a point where a “purge” has become all-but-impossible to avoid. This is the end.

Still, every company, household and government should start to make contingency plans. Something ‘biblical’ is approaching.

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