Here are excerpts from Kunstler following the weekend of the Fannie Mae / Freddie Mac bailouts:
Since [2005], the US economy and the financial part of it ... has been held together with baling wire, duct tape, and band-aids. All the debt run up by all parties -- home-owners, credit-card holders, business, banks, hedge funds, government -- is not being paid back reliably, and all the leveraged arrangements that depend on it being paid back are coming apart. Thus, capital disappears. The wealth of a nation disappears. All that remains is the pretense that we are still a wealthy society.
Fannie and Freddie are near the center of this black hole of debt. So far, the black hole has been "papered over" by the old stage magician's trick of diverting the audience's attention. The systemic wound that Bear Stearns represented, was covered up with a band-aid applied by the Federal Reserve's exchange of loans for worthless securities. In fact, the capital of Bear Stearns actually did disappear -- a mere residue of it, a few cents on the dollar, was shifted to JP Morgan as payment for taking the wrapper off the band-aid. But, basically, the money is gone.
One thing this points to is a truth that is uniformly overlooked by kibitzers: that what we developed over the past decade in America was not an "information economy" or a "consumer economy" but a suburban sprawl building economy, meaning an economy dedicated to building a living arrangement with no future. The climax of the sprawl building economy occurred in absolute lockstep with the climax of peak oil. You can date it virtually to the month -- May, 2005. After that, the future asserted itself and all the financial expectations bound up with sprawl-building went up in a vapor -- including the value of mortgages on suburban houses. Everything that followed has been an attempt to cover up this basic reality: that the way we live in America can't continue.
The reason our energy debate is so hollow and idiotic is because we can't face this basic reality.
A mere week later, Lehman Brothers and Merrill Lynch had both exited the financial scene and Kunstler wrote:
[A]s our industrial base waned, and our factories got old and brittle, and our labor force was steeply under-bid by cheaper labor forces, we embarked on a quest for "the new economy." This was represented in successive turns as the information economy, the consumer economy, the high-tech economy, et cetera. They were all ruses, aimed at concealing the truth -- which was that we had become a society no longer producing things of value, no longer generating real wealth. The final act of this farce has been the so-called "financial industry."
That "industry" turned out to be most earnestly devoted to the production of complex swindles. They were so finely engineered that it took twenty years for the swindles to stand revealed, and they were cleverly hitched to the primary thing that the American public vested its identity in: house-and-home. Thus, much of the public finds itself in very real danger of becoming homeless and broke.
