James Howard Kunstler: Debt hairball is choking the global economy
Europe may soon be choking on that plat du jour of government a la Hollandaise with the side of chopped Greek salad. The whole world, in fact, has got something like a giant hairball stuck in its craw.
The hairball is composed of filaments of lies wound over a core of supernatural indebtedness. The lies are promises that the debt will be paid back.
For two months, the financial markets have gone sideways on a cushion of the European Central Bank’s long-term refinancing operations and the hot air of austerity chatter. The illusion of remaining airborne may dissolve now with the Hollandaise denunciation of Franco-German team spirit while a centripetal vortex of unpaid obligations sucks notional wealth through the event horizon of massive deflation.
Things are heating up, in other words. Wake up, sleepyheads! Welcome to the rest of the year 2012.
Paul Krugman, the Nobel Prize winning Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and op-ed columnist for The New York Times, is so amusing this morning that I, too, almost upchucked my “Paleo” diet breakfast of salmon hash with four eggs (pas de Hollandaise).
Krugman writes in his column:
What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist – that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.
What an excellent misrepresentation of reality by one of the official molders of public opinion and policy in this exceptional land. I would attempt to debate his statement above that spending less government money is proposed to encourage consumers, blah blah. It is proposed because government doesn’t have the money to spend and has run out of the ability to borrow more money due to the bad odor now wafting off the world’s compost heap of sovereign bond paper. Everyone is going broke simultaneously, including putative lenders, i.e. buyers of bonds, who are the same ones selling them.
I like the way Krugman avers offhandedly to the concept of “depression.” I believe this is a new thing for him to admit a certain absence of “green shoots” on the spring economic scene. Heretofore his halftime act between two presidential terms has been sheer cheerleading, but I guess he forgot to bring his pompoms to the office yesterday.
I would refer to the situation as something more severe than a “depression,” which merely suggests a valley between peaks. I would say that we are instead out on the arid buzzard flats beside the deep blue sea where modernity is shortly to drown itself in a fugue of suicidal bad faith.
All of which is to say the pretense that has reigned since 2008 (viz: “recovery”) may not float through the rest of 2012. Surely in the USA, we are approaching a dark inflection point where the fall elections collide with the broken promises now gathering into the shitstorm vulgarly called “Taxmageddon.”
The event horizon for that extravaganza of financial lightning strikes is officially January 1, but the effects will be felt long before that as households, businesses, pension funds, municipal governments, and various branches of the US military prepare to roll over and die.
Enjoy the European sideshow for now because the roustabouts are still setting the props for the act in the center ring. When the clown cars pull into the political conventions this summer, I would like to see these circus troupes greeted by large and lively mobs of furious citizens hurling objurgations at the likes of Barack Obama and Willard “Mitt” Romney.
This is probably the least we can do to register some objection to the two useless parties’ way of running things. Also, by the way, I would wonder what the generals over in the Pentagon will think (or might do!) as they see their country fall to tatters.