Zombie Economics

By James Howard Kunstler for ClusterFuck Nation


Though Citicorp is deemed too big to fail, it's hardly reassuring to know that it's been allowed to sink its fangs into the Mother Zombie that the US Treasury has become and sucked out a multi-billion dollar dose of embalming fluid so it can go on pretending to be a bank for a while longer. I employ this somewhat clunky metaphor to point out that the US Government is no more solvent than the financial zombies it is keeping on walking-dead support. And so this serial mummery of weekend bailout schemes is as much of a fraud and a swindle as the algorithm-derived-securities shenanigans that induced the disease of bank zombification in the first place. The main question it raises is whether, eventually, the creation of evermore zombified US dollars will exceed the amount of previously-created US dollars now vanishing into oblivion through compressive debt deflation.

My guess, given the usual time-lag factor, is that the super-inflation snap-back will occur six to eighteen months from now. And the main result of all this will be our inability to buy the imported oil that comprises two-thirds of the oil we require to keep WalMart and Walt Disney World running. At some point, then, in the early months of the Obama administration, we'll learn that "change" is not a set of mere lifestyle choices but a wrenching transition away from all our familiar and comfortable habits into a stark and rigorous new economic landscape.

The credit economy is dead and the dead credit residue of that dead economy is going where dead things go. It came into the world as "money" and it is going out of this world as a death-dealing disease, and we're not going to get over this disease until we stop generating additional zombie money out of no productive activity whatsoever. The campaign to sustain the unsustainable is, besides war, the greatest pitfall this society can stumble into. It represents a squandering of our remaining scant resources and can only produce the kind of extreme political disappointment that wrecks nations and leads to major conflicts between them. I don't know how much Mr. Obama buys into the current adopt-a-zombie program -- his Treasury designee Timothy Geithner was apparently in on this weekend's Citicorp deal -- but the President would be wise to steer clear of whatever the walking dead in the Bush corner are still up to.

All the activities based on getting something-for-nothing are dead or dying now, in particular buying houses and cars on credit and so it should not be a surprise that the two major victims are the housing and car industries. Notice, by the way, that these are the two major ingredients of an economy based on building suburban sprawl. That's over, too. We're done building it and the stuff we've already built is destined to loose both money value and usefulness as the wrenching transition goes forward.

All this obviously begs the question: what kind of economy are we going to live in if the old one is toast? Well, it's also pretty obvious that it will have to be based on activities productively aimed at keeping human beings alive in an ecology that has a future. Once you grasp this, you will see that there is no reason to despair and more than enough for all of us to do, so we can recover from the zombie nation disease and get on with the next chapter of American history -- and I sure hope that Mr. Obama will get with the new program.

To be specific about this new economy, we're going to have to make things again, and raise things out of the earth, locally, and trade these things for money of some kind that we earn through our own productive activities. Don't make the mistake of thinking this is optional. The only other option is to go through a violent sociopolitical convulsion. We ought to know from prior examples in world history that this is not a desirable experience. So, to avoid that, we really have to put our shoulders to the wheel and get to work on things that matter, and do it at a scale that is consistent with what the world really has to offer right now, especially in terms of available energy.

In my view -- and I know this is controversial -- a much larger proportion of the US population will have to be employed in growing the food we eat. There are many ways of arranging this, some more fair than others, and I hope the better angels of our nature steer us in the direction of fairness and justice. The prospects of a devalued dollar imply that we very shortly will not be able to get the all the oil-and-gas based "inputs" that have made petro-agriculture possible the past century. The consequences of this are so unthinkable that we have not been thinking about it. And, of course, the further implications of current land-use allocation, and the property ownership issues entailed, suggests formidable difficulties in re-arranging the farming sector. The sooner we face all this, the better.

As the fiesta of "globalism" (Tom Friedman-style) draws to a close -- another consequence of currency problems -- we'll have to figure out how to make things in this country again. We will not be manufacturing things at the scale, or in the manner, we were used to in, say, 1962. We'll have to do it far more modestly, using much more meager amounts of energy than we did in the past. My guess is that we will get the electricity for doing this mostly from water. It may actually be too late -- from a remaining capital resources point-of-view -- to ramp up a new phase of the nuclear power industry (and there are plenty of arguments from the practical and economic to the ethical against it). But we have to hold a public discussion about it, if only to clear the air and get on with other things, namely the new activities of alt.energy. But I would hasten to warn readers (again!) that we'll probably have to do these things more modestly too (don't count on giant wind "farms"), and that we are liable to be disappointed by what they can actually provide for us (don't expect to run WalMart on wind, solar, algae-fuels, etc).

In any case, we're not going back to a "consumer" economy. We're heading into a hard work economy in which people derive their pleasures and gratification more traditionally -- mainly through the company of their fellow human beings (which is saying a lot, for those of you who have forgotten what that's about). Our current investments in "education" -- i.e. training people to become marketing executives for chain stores -- will delude Americans for a while about what kind of work is really available. But before long, the younger adults will realize that there are enormous opportunities for them in a new and very different economy. We will still have commerce -- even if it's not the K-Mart blue-light-special variety -- and the coming generation will have to rebuild all the local, multi-layered networks of commercial inter-dependency that were destroyed by the rise of the chain stores. In short, get ready for local business. It will surely be part-and-parcel of our local food-growing and manufacturing activities.

I hate to keep harping on this -- but since nobody else is really talking about it, at least in the organs of public discussion, the job is left to me -- we have to get cracking on the revival of the railroad system in this country, if we expect to remain a united country. This is such a no-brainer that the absence of any talk about it is a prime symptom of the zombie disease that has eaten away our brains. Automobiles (the way we use them) and airplanes are utterly dependent on liquid hydrocarbon fuels, and you can be certain we'll have trouble getting them. You can run trains by other means -- electricity being state-of-the-art in those parts of the world that do it most successfully. I know that California just voted to create a high-speed rail link between Los Angeles and San Francisco. It's an optimistic sign, but it shows more than a little techno-grandiose over-reach. High speed rail would require a mega-expensive re-do of the tracks. We need to scale our ambitions for this more realistically. California (and every other region of America) would benefit much more from normal-speed trains running every hour on the hour on tracks that already exist than from a mega-expensive, grandiose sci-fi program that might not get built for ten years. The dregs of the Big Three automakers can and should be reorganized to produce the rolling stock for a revived railroad system.

Even amidst the financial carnage underway right now, the public is enjoying a respite from high-priced gasoline, but it is due to be short-lived. As I've already said, we are in danger not just of oil prices going way back up again, but of losing access to our supplies from the exporting countries. In other words, we're just as likely to face shortages as high prices, and soon. Oil shortages are certain to produce a political freak-out here unless we get our heads screwed on right -- and this means that Mr. Obama had better prepare quickly for a comprehensive action plan in the face of such an emergency (which has to include a robust public information initiative).

In the meantime, Mr. Obama must dissociate himself from all activities aimed at the care-and-feeding of zombies. Mr. Obama is correct that there is one president and one government at a time, and since this is the case in reality, he must avoid being contaminated by the choices they make as their clock ticks out. Obviously, world markets might be more disturbed if Mr. Obama were to step up and actively contradict everything that is being done to cultivate zombies right now. He is in a very delicate position. But being a man of intelligence and sensibility, he may successfully navigate this rough passage.

That this melt-down is building straight into the Christmas holidays is one of those accidents of history that leaves one reeling in wonder and nausea. The cable networks better be prepared to bombard the public with round-the-clock showings of It's A Wonderful Life, because they're going to need all the moral support they can get as zombies stalk through the silent night, holy night.

"What is the most beautiful thing I can do?"

Money and the Crisis of Civilization

Charles Eisenstein

Suppose you give me a million dollars with the instructions, "Invest this profitably, and I'll pay you well." I'm a sharp dresser -- why not? So I go out onto the street and hand out stacks of bills to random passers-by. Ten thousand dollars each. In return, each scribbles out an IOU for $20,000, payable in five years. I come back to you and say, "Look at these IOUs! I have generated a 20% annual return on your investment." You are very pleased, and pay me an enormous commission.

Now I've got a big stack of IOUs, so I use these "assets" as collateral to borrow even more money, which I lend out to even more people, or sell them to others like myself who do the same. I also buy insurance to cover me in case the borrowers default -- and I pay for it with those self-same IOUs! Round and round it goes, each new loan becoming somebody's asset on which to borrow yet more money. We all rake in huge commissions and bonuses, as the total face value of all the assets we've created from that initial million dollars is now fifty times that.

Then one day, the first batch of IOUs comes due. But guess what? The person who scribbled his name on the IOU can't pay me back right now. In fact, lots of the borrowers can't. I try to hush this embarrassing fact up as long as possible, but pretty soon you get suspicious. You want your million dollars back -- in cash. I try to sell the IOUs and their derivatives that I hold, but everyone else is suspicious too, and no one buys them. The insurance company tries to cover my losses, but it can only do so by selling the IOUs I gave it!

So finally, the government steps in and buys the IOUs, bails out the insurance company and everyone else holding the IOUs and the derivatives stacked on them. Their total value is way more than a million dollars now. I and my fellow entrepreneurs retire with our lucre. Everyone else pays for it.

This is the first level of what has happened in the financial industry over the past decade. It is a huge transfer of wealth to the financial elite, to be funded by US taxpayers, foreign corporations and governments, and ultimately the foreign workers who subsidize US debt indirectly via the lower purchasing power of their wages. However, to see the current crisis as merely the result of a big con is to miss its true significance.

I think we all sense that we are nearing the end of an era. On the most superficial level, it is the era of unregulated casino-style financial manipulation that is ending. But the current efforts of the political elites to fix the crisis at this level will only reveal its deeper dimensions. In fact, the crisis goes "all the way to the bottom." It arises from the very nature of money and property in the world today, and it will persist and continue to intensify until money itself is transformed. A process centuries in the making is in its final stages of unfoldment.

Money as we know it today has crisis and collapse built into its basic design. That is because money seeks interest, bears interest, and indeed is born of interest.

Read the rest...

Food Crisis on the Way

Submitted by Richard Heinberg on October 15, 2008 - 2:39pm.

A perfect storm is brewing in the global food system, and North Americans and Europeans may not be spared this time.

Contributing factors:

The economic crash is still unfolding (no need for explanation here, just pick up any newspaper). It is inherently deflationary in nature because trillions of electronic dollars and euros are simply vanishing on a weekly basis. Efforts by central banks and the US Treasury to re-inflate the system are so far proving ineffective. This ultimately means less money in the pockets of consumers. If things go badly, it will mean NO money in the pockets of a great many would-be consumers.

Meanwhile input costs to farmers are at an all-time high, despite the recent fall in oil and natural gas prices. Moreover, farmers need loans in the course of their normal operations, and loans are hard to get now. That means many farmers just won’t plant as much as they ordinarily would. Many will decide they just can’t afford their hobby any more and go looking for work that actually pays.

On top of this we have the trends that have already led to high food prices in recent months—biofuels mandates, weather impacts (and crop failures) due to climate change, and higher transport costs for farm inputs and outputs.

Meanwhile, farmers’ incomes are not rising—just the opposite. Even though food prices are leading the inflation index, none of the expanding portion of the food dollar is finding its way into the pockets of the people who make the whole system go.

Michael Pollan’s excellent article in the most recent New York Times Sunday Magazine describes what we should be doing to avert a looming food crisis. Every nation and every state and region needs to be formulating a food plan along these lines.

Otherwise, we will be leaving our food system to the vagaries of the market, as we are doing with our energy system (see my previous commentary). The consequences are likely to be similar: less food to go around, extremely volatile prices, and farmers dropping out just when we need more of them.

The time available for the formulation and implementation of an effective policy response is very brief indeed.

Time to start planning next year’s garden.

Ok, Now What?

Sharon Astyk October 5th, 2008

There are certain things in my life that fall in the category of “hideously unpleasant things I am pretty certain I can’t do jack about.” Among them are drilling in ANWR and the fact that everyone on earth wants to talk about the unbelievably boring Sarah Palin. I know many of you devote a lot of passion to protesting these things, and I’m sorry I just can’t do it - that is, I don’t think that people who are cold and without energy are ever going to turn down oil from environmentally sensitive places - in fact, I think they’d be willing to power their cars with baby harp seals (and not in a nice way) if that would work. I recognize that most people simply have to say what they think about Sarah Palin, and her hominess/titillating family gossip/experience holding off Russia with her bare hands and I might as well just listen to the 9,000 description of Tina Fay’s impression. And I knew we were going to pass a bailout bill, no matter how much it made my stomach clench up with horror. All of these things are bad, bad things that it is good to protest - but protest so that you can say you tried, not with the expectation that the laws of nature will somehow be refuted.

Why was the bailout destined to pass? Well, the most obvious reason is this - shockingly (and apparently a lot of very dim people in Washington did find this shocking), the stock market reacted to the news that they weren’t getting 700+billion dollars worth of free money pretty much like toddlers not getting lollipops. From what I’ve heard of the reaction on the House floor on Monday, the fact that the markets had their heart set on their lollipops was news. Meanwhile, it seems like foreign governments were also unhappy at the lack of lollipops, and exerted some pressure. Apparently that was pretty shocking too. And like the absentee upper class parents most congresspeople probably were, they gave in to pressure. We do not elect our government for their courage, but for their willingness to dance to the flutes of power - we want them to reflect the will of the people. And they do - the will of the people with the power to undercut their wealth and power. Unfortunately, neither you nor I are one of them.

More importantly, we’re having an election. Now the US has been afflicted with the current campaign season since, if I recall correctly, 1066, when the Normans invaded England and Hillary Clinton declared her candidacy. But pretty soon we’re actually going to have an election. And even though the bailout is not going to do jack to spare us economic disaster, if they hadn’t passed one, it would have been far to easy to hold those who did not pass it responsible for whatever comes down the pike. Now everyone gets to hold up their hands and say they tried their very hardest, really truly they did, but they just couldn’t save everyone. Central among the people who they couldn’t save (because they tried so hard) will be widows and orphans, single parents and kids, and you and me. It turns out they were so busy rescuing the rich that the fact that they let the much larger group of poor drown was just an accident.

Oh, and raping and pillaging is fun. One doesn’t just quit a hobby like that cold turkey. Shock doctrine capitalism is the name of the game, and the perpetrators aren’t ready to admit that the game is over - and of course, with Congress in their pockets, it isn’t.

There are other reasons, of course, and you can read more about them in lots of the usual spots. But the truth is that despite the mass outpouring of anger at the bailout, despite the fact that the people spoke, not because they were too stupid to understand that the economy was tanking, but because they didn’t want to throw good money after bad - despite all that, the bailout was inevitable and it happened. And the only good thing I can say about this is that when the economy tanks anyway, that anger may actually be a useful tool in making some change. I hope everyone out there will remember this week not only when it comes time to vote this round, but the next and the next. Some things you may not be able to stop, but that doesn’t mean you have to forgive.

So now what? What comes next in ordinary people’s lives? Well, what comes next is another series of crises. The stock market didn’t even get a bounce out of the bailout package. Sure, some things will do a little better for a short while, maybe even enough to get through the election. But don’t count on it - things are falling apart faster than anyone can glue them back together. Which means that Paulson and Bernanke are going to be back again and again and again - next to prop up the FDIC or bail out some other organization that they swear is too big to fail. And then, when the money runs out and there’s no more on offer, they will explain to us that if we’d just authorized that last print run of cash, or if we had just been better people, or hadn’t taken so much debt, or had listened to them sooner, it would all be alright, but now, well, the money’s all gone, so no point in trying to relieve the plight of ordinary people who didn’t want to give them money anyway. You can bet that the cause of the problem will be you - your failures, your credit card debt, your wanting a house, as though you (collectively, in the millions) all acted alone to take down the economy on our own private grassy knolls.

What can we do about it? Protest - because it came closer to working here than I think anyone expected it to, and it may well work sooner or later. Call and fight and be angry - don’t let them wear your anger out. Clarify - make sure that the message gets out whose fault this really is. Vote, of course, because even the lesser of two evils can be quite lesser.

But more importantly, to the extent it is possible, we need to build redundancies into the systems we depend on that don’t depend on wall street, or the stuff we shortly won’t have any money for anyway. That means everyone out there needs to look around them and ask what small piece of the infrastructure of their lives (and the lives of their community members) they can take some responsibility for. We need to all look and ask “what is my job in this new world we’re awakening to?” What the heck can I do to help mitigate this disaster?

Maybe you already know your job - it is the thing you care about, the work you do already for free or for money, in every second of spare time or 10 hours a day. You do something that matters - you provide health care, grow food, teach, mend what’s broken, feed the hungry, fight for justice - you do good work, and now you have to figure out a way to keep the work going without as much money or energy.

Or maybe you are head down in a health care crisis, a new baby, a family shift - and all you can do is prepare and protect yourselves and your families as best you can. You haven’t the time and energy to do much more than that - and your job is to get through this, so that later, you can do the work that needs doing. That’s ok - but as soon as you can, make a little time, even if it is just to check in on your neighbors or start carpooling to the grocery store.

Maybe you don’t know what your role is. Maybe you do have a little time or energy that could be used to build community, fix things, help others, but you are shy, and you don’t know what to do. And I can’t tell you exactly what you should do - you know your talents and skills best. Maybe you are a natural organizer and leader, and you should get started with your community’s victory garden movement, building the community health center or getting neighbors to pool their resources to get a shared transport network up. Maybe you are more comfortable following, in some already existing role - and it is time to get out to the local food pantry and start figuring out where they are going to get enough food to help all the hungry. Maybe you care most about kids, or elders or women or the hispanic or black or asian community, and that’s where you should concentrate your energies. Maybe you want to work with members of your faith, your family or your friends. Great - do it. But do it now.

We’re all going to need reliable sources of food.
We’re all going to need some transportation.
We’re going to need health care, and emergency services.
We’re all going to need good work - even if it is only for food.
We’re going to need ways to keep people housed, to connect folks who need homes with those who can’t keep them unless they rent some space.
A lot of people are going to need warm clothes and blankets.
A lot of people are going to need a meal, a helping hand, help with disabled family members and elders.
And folks, when the formal economy falls away, when we cannot trust our government to act in our interests, all of us have to get acting to compensate, to keep the wolf from the door.

The truth is that the bailout, on one level, was the final reminder of what Hurricane Katrina taught us, that no one is coming with a helicopter to rescue us. Fortunately, some of us have boats, and the rest of us can build life rafts, and there’s a lot we can do to rescue ourselves.

What now? It is all hands on deck, folks.

Sharon