Fracking crystal_ball_griraffes

Published on January 1st, 2013 | by Guest Contributor

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Kunstler’s 2013 forecast part 2: Fracking on the global hamster wheel of futility


By James Howard Kunstler

(Yesterday we talked about the ghost of peak oil past; today we talk about the fracked-up global present, and tomorrow we take a look at what is yet to come, and make a few predictions.)

The Current Situation

We’re now entering the seventh year of a smoke-and-mirrors, extend-and-pretend, can-kicking phase of history in which everything crystal ball Some rights reserved by griraffespossible is being done to conceal the true condition of the economy, with the vain hope of somehow holding things together until a miracle rescue remedy — some new kind of cheap or even free energy — comes on the scene to save all our complex arrangements from implosion.

The chief device to delay the reckoning has been accounting fraud in banking and government, essentially mis-reporting everything on all balance sheets and in statistical reports to give the appearance of well-being where there is actually grave illness, like the cosmetics and prosthetics Michael Jackson used in his final years to pretend he still had a face on the front of his head.

The secondary tactic has been intervention in markets wherever possible and the intemperate manipulation of interest rates, all of which has the effect of defeating the principle purpose of markets: price discovery — the process by which the true value of things is established based on what people will freely pay.

For instance: the price of money-on-loan. The functionally less-than-zero percent interest rates on money loaned between giant institutions like central banks and their client “primary dealers” (the Too Big To Fails) essentially pays these outfits for borrowing, which is obviously a distortion in the natural order of things (because it violates the second law of thermodynamics: entropy) as well as being an arrant racket.

The campaign of intervention and manipulation also deeply impairs the other purpose of markets, capital formation, by the resultant mismanagement and misallocation of whatever real surplus wealth remains in this society. What’s more, it allows these TBTF banks to become ever-bigger monsters which hold everybody else hostage by threatening to crash the system if they are molested or interfered with.

Which brings us to the third tactic for pretending everything is all right: complete lack of enforcement and regulation by all the authorities charged with making sure that rules are followed in money matters. This includes the alphabet soup of agencies from the Securities and Exchange Commission to the Commodities Futures Trading Commission, to the Federal Housing Authority, and so on (the list of responsible parties is very long) not to mention the Big Kahunas: the US Department of Justice, and the federal and state courts.

Aside from Bernie Madoff and a few Hedge Fund mavericks nipped for insider trading and arrant fraud, absolutely nobody in the TBTF banking community has been prosecuted or even charged for the monumental swindles of our time, while the regulators have behaved in ways that would be considered criminally negligent at best, and sheer racketeering at less-than-best, in any self-respecting polity.

The crime runs so deep and thick through all the levels of money management and regulation that one can say the whole system has gone rogue, up to the President of the US himself, the chief enforcement officer of the land, who has not lifted a finger to discipline any of the parties involved. The fact that Jon Corzine, late of MF Global, is still at large says it all.

Fourth-and-finally, the news media in league with the public relations industry have undertaken a campaign of happy talk to persuade the public that everything is okay and all the machinations cited above are kosher so that there is absolutely no political agitation over these crimes against their own interest, which is to say, the public interest. The PR/media happy talk racket is also aimed at maintaining various subsidiary fictions about the economy, such as the fibs that the housing market is bouncing back, that “recovery” is ongoing, and that the channel-stuffing monkeyshines of the car industry amount to booming sales of new vehicles.

Perhaps the most pernicious big lie is the bundle of fairy tales surrounding shale oil and shale gas, including the idea that America will shortly become “energy independent” or that we have “a hundred years of shale gas” as President Obama was mis-advised to tell the nation.

It is pernicious because it gives us collectively an excuse to do nothing about changing our behavior or preparing for the new arrangements in daily life that the future will require of us.

-> Next page: The shale/fracking Ponzi scheme



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