Guest Post : Two Decades Of Greed - The Unraveling

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Submitted byJim Quinn of The Burning Platform

Two Decades Of Greed - The Unraveling

We are currently in the midst of a Fourth Turning. This twenty year
Crisis began during the 2005 – 2008 timeframe with the collapse of the
housing bubble and subsequent repercussions on the worldwide financial
system. It is progressing as expected, with the financial crisis
deepening and leading to tensions across the world. It will eventually
morph into military conflict, as all prior Fourth Turnings have. The
progression from High to Awakening through the Unraveling took from
1946 until 2006. The most treacherous period of the Saeculm is upon us.
The intensity of a Crisis is very much dependent upon how a country and
its citizens prepare for the Crisis during the final years of the
Unraveling. The last Unraveling period in U.S. history from 1984
through 2005 was symbolized by Boomer greed, materialism, debt and
selfishness. When Michael Lewis graduated from Princeton University in
1985 and joined Salomon Brothers, I’m sure he didn’t realize that he
would end up book-ending the Unraveling period in his two best-selling
books about Wall Street.

In his latest book, The Big Short: Inside the Doomsday Machine, Lewis seems bewildered by the fact that his first book Liar’s Poker, written in 1989,  didn’t dissuade college students from pursuing careers on Wall Street. If Lewis had read The Fourth Turning
by Strauss & Howe when it was published in 1997, he would have
understood why the people on Wall Street couldn’t change. The
generations were just acting out their part in a grand never ending
cycle. Lewis explains what he thought would happen:

“I stumbled into a job at Salomon Brothers in 1985 and stumbled
out much richer three years later, and even though I wrote a book about
the experience, the whole thing still strikes me as preposterous—which
is one of the reasons the money was so easy to walk away from. I
figured the situation was unsustainable. Sooner rather than later,
someone was going to identify me, along with a lot of people more or
less like me, as a fraud. Sooner rather than later, there would come a
Great Reckoning when Wall Street would wake up and hundreds if not
thousands of young people like me, who had no business making huge bets
with other people’s money, would be expelled from finance.”

Michael Lewis was a 24 year old Generation X Ivy League graduate who
ended up on Wall Street at the outset of the Unraveling. He was
flabbergasted by how clueless youngsters could pretend to know what
they were doing while taking home phenomenal amounts of money. He was
sure it would end in short order. But he was wrong. It built to a
decadent crescendo two decades later. It took longer than he expected,
but the rebellion is beginning now:  

“I thought I was writing a period piece about the 1980s in
America. Not for a moment did I suspect that the financial 1980s would
last two full decades longer or that the difference in degree between
Wall Street and ordinary life would swell into a difference in kind. In
the two decades since then, I had been waiting for the end of Wall
Street. The outrageous bonuses, the slender returns to shareholders,
the never-ending scandals, the bursting of the internet bubble, the
crisis following the collapse of Long-Term Capital Management: Over and
over again, the big Wall Street investment banks would be, in some
narrow way, discredited. Yet they just kept on growing, along with the
sums of money that they doled out to 26-year-olds to perform tasks of
no obvious social utility. The rebellion by American youth against the
money culture never happened. Why bother to overturn your parents’
world when you can buy it, slice it up into tranches, and sell off the
pieces? At some point, I gave up waiting for the end. There was no
scandal or reversal, I assumed, that could sink the system.”

The period from 1984 until 2005 was classified by Strauss & Howe
as the Third Turning Culture Wars. They describe this period in the
following terms:

“The Unraveling opened with triumphant “Morning in America”
individualism, and slowly drifted toward pessimism.  Personal
confidence remained high, and few national problems demanded immediate
action.  But the public reflected darkly on growing violence and
incivility, widening inequality, pervasive distrust of institutions and
leaders, and a debased popular culture.  National consensus split into
competing “values” camps.”

Deregulation Decade

“The crew of the space shuttle Challenger honored us by the
manner in which they lived their lives. We will never forget them, nor
the last time we saw them, this morning, as they prepared for their
journey and waved goodbye and slipped the surly bonds of earth to touch
the face of God.” –
Ronald Reagan

   

The Unraveling began during the 2nd Reagan term with the
“Morning in America” feel good landslide re-election campaign. The Dow
Jones Average on January 1,1984 was 1,259. The National Debt was $1.6
trillion. The oldest Baby Boomer turned forty-one in 1984, with the
youngest just twenty-four years old. This generation of 76 million
over-indulged spoiled social activists is the proverbial pig in a
python. Whatever path this generation chooses to take transforms the
country for better or worse. The term Yuppie was coined in the early
1980’s as the egocentric Boomers poured onto Wall Street beginning
their upwardly mobile perfectionist careers. The country was exhausted
from the 1960s turmoil and the depressing 1970s. Failed presidencies,
oil shortages, raging inflation, and American hostages had left an
America that was looking for a renaissance. Ronald Reagan’s first term
required extreme measures by Federal Reserve Chairman Paul Volcker to
break the back of inflation. By raising interest rates to 18%, Volcker
set the stage for a 20 year bull market in stocks and bonds. Reagan
survived an assassination attempt, the U.S. military conducted a
successful operation in Grenada, Reagan fired 11,000 air traffic
controllers, and an unprecedented peace time military buildup was
initiated. This created an atmosphere for economic revival, led by the
Boomers.

A new laissez faire era heralded by Ronald Reagan was based on his
belief that government was the problem, not the solution. His goal was
to cut the size of government while slashing taxes and unleashing the
animal spirits of the free market. Reagan was a rhetorical genius. It
is a shame that his soaring rhetoric did not match what actually
ensued. The basis of Reaganomics was:

  1. Reduce government spending,
  2. Reduce income and capital gains marginal tax rates,
  3. Reduce government regulation of the economy,
  4. Control the money supply to reduce inflation.

Reagan undoubtedly succeeded in radically cutting the top rates on
individuals from 70% to 28%. Of course, the only people affected by the
top marginal rates are the rich. These tax cuts did not benefit the
middle and lower classes. The benefits were supposed to trickle down to
these people.

 

http://www.americanthinker.com/blog/Tax%20Rates%20and%20Revenue.jpg

Corporate tax rates were decreased from 50% to 38% by the end of
Reagan’s term. Corporate America was delighted. The tax savings
permitted profits to soar. This additional capital could have been used
to invest in the business. The Harvard trained CEOs decided it was more
beneficial to pay them outrageously high compensation and to buy back
their own stock in order to inflate EPS.

 

http://dontmesswithtaxes.typepad.com/photos/uncategorized/2008/08/22/oecd_vs_us_tax_rates_2.jpg

The tone for the next twenty years had been set. Reagan’s policies
did reignite the animal spirits of America. Reagan’s defense buildup
increased annual spending from $303 billion in 1980 to $426 billion in
1988, a 40% surge. This most certainly contributed to the collapse of
the Soviet Union. They were a hollowed out oak tree and Reagan’s
defense buildup was the gust of wind that blew the rotting tree over.
His achievements were great, but his failure to reduce government
spending will haunt the country for decades and planted the seeds of
economic disaster. The Federal Government spent $590 billion in 1980.
In 1988, Federal Spending had grown to $1.064 trillion. Rhetoric did
not translate into action. Politicians have always been good at
following through on promises that buy them votes. The tough stuff can
be pushed off to the next guy.  

 File:CBO Revenues Outlays Percentage GDP.svg

 http://en.wikipedia.org/wiki/File:CBO_Revenues_Outlays_Percentage_GDP.svg

The reality is that government debt as a % of GDP was on a downward
trajectory for 30 years, bottoming in the late 1970s at 45%. Reagan cut
taxes and doubled spending during his eight year reign. This initiated
the launch procedure for a US government debt rocket. It sent a message
to the world and to its citizens that debt was not a bad thing.
Interest rates were in the midst of a quarter century long decline, so
the debt became more serviceable as time progressed. There was no
reason to save and invest when government and consumers could borrow
and buy what they wanted today. This was the attitude that began to
emanate during the early 1980s. Total government debt as a % of GDP
skyrocketed from 45% to 80% during Reagan’s eight year presidency. The
National Debt grew from $908 billion to $2.6 trillion, a 286% increase.
The massive increase in debt without apparent negative consequences
gave politicians and Baby Boomers the green light to live it up today
and not worry about tomorrow.

 

http://3.bp.blogspot.com/_H2DePAZe2gA/TAmkc5LEaAI/AAAAAAAANHQ/DZ5GKV-oRX0/s1600/govtdebtGDP052810.png

The 1980’s proved to be a confidence building decade after two
decades of tumult. With the most egocentric self centered generation in
the history of the world entering the prime of their careers, a double
shot of renewed confidence and debt accumulation began a cycle of greed
and hubris like none ever seen on earth.

Fragmenting Culture

“I am not a destroyer of companies. I am a liberator of them!
The point is, ladies and gentleman, that greed, for lack of a better
word, is good. Greed is right, greed works. Greed clarifies, cuts
through, and captures the essence of the evolutionary spirit. Greed, in
all of its forms; greed for life, for money, for love, knowledge has
marked the upward surge of mankind. And greed, you mark my words, will
not only save Teldar Paper, but that other malfunctioning corporation
called the USA” – Michael Douglas as Gordon Gekko

   

 

The self-absorbed yuppies’ goal of wealth, power, and material possessions was captured accurately in the 1987 movie Wall Street and Thomas Wolfe’s fantastic 1987 novel Bonfire of the Vanities. It
seems that 1987 marked the high point of the Unraveling period. The Dow
Jones Industrial Average had grown from 824 at the beginning of the
decade to 2,700 by September 1987. The Boomer heroes of unbridled greed
were Michael Milken, Ivan Boesky, Carl Icahn and Boone Pickens.
Leveraged buyouts, where corporate raiders used huge amounts of debt to
takeover companies, taking them private, firing thousands of workers,
spinning it off as an IPO, and reaping enormous profits, were hailed as
the savior of free markets by Wall Street. These deals generated
gigantic fees for the firms advising on the LBOs. This Boomer led
societal mood of wealth accumulation at the cost of gutting
corporations and screwing the working class became ingrained in the
fabric of America.

More Wall Street “inventions” like program trading, portfolio
insurance, and arbitrage combined with hype and hubris to cause a 508
point crash on October 19, 1987. This 22.6% one day drop was the
largest percentage decline in history. This once in a lifetime event
scared the average investor out of the market for years. This event
also unleashed a 20 year reign of banking terror, as the Greenspan Put
was born. Alan Greenspan became Federal Reserve Chairman in August
1987. His 1st major act was to pour billions of liquidity into the market after the Crash. This was the 1st of many risk enhancing acts by Greenspan over the next two decades. 

 File:Black Monday Dow Jones.svg 

http://en.wikipedia.org/wiki/File:Black_Monday_Dow_Jones.svg

Oliver Stone completed his film Wall Street before
the crash. He captured the battle between Boomer gluttony and the work
ethic of the average American worker. It was essentially a morality
play between the slick oily Gordon Gekko and the old union leader
looking out for the best interests of his fellow workers. They battle
for the soul of Charlie Sheen’s Bud Fox character. The film goes in
depth into the immoral culture of Wall Street. Inside trading on
non-public information is business as usual. Companies aren’t seen as a
productive part of society, but as pawns in a giant game of chess
played by the “Big Swinging Dicks” on Wall Street. The workers are seen
as liabilities that can be shed in order to boost short-term profits.
Maximizing returns as soon as possible was all that mattered to Gekko
and real life sharks on Wall Street. The movie’s message was clear.
Unrestrained free-market capitalism with no principles is destructive
for society. The movie isn’t anti-capitalism. It distinguishes between
the cynical, quick buck culture of the Boomers and the moral hard
working culture which had built America. Both Oliver Stone and Michael
Lewis thought that their works of art would deter young people from
vapid careers on Wall Street. Instead, young MBA students saw these
stories of greed as an exciting beckoning to riches, morality be damned.

Thomas Wolfe’s novel Bonfire of the Vanities  addresses
the lack of control anyone has over their lives regardless of their
wealth, wisdom or success. He captured the yuppie Boomer excesses of
New York City and Wall Street in his brilliant novel.  Beneath Wall
Street’s veneer of achievement, the New York City was a hot-bed of
racial and cultural tension. Homelessness and crime in the city were
soaring. Several high-profile racial incidents polarized the city,
particularly two black men who were murdered in white neighborhoods. 
Bernie Goetz became a folk-hero in the city for shooting a group of
black punks who tried to rob him in the subway. The chasm between the
haves and have-nots had grown immense.  In Wolfe’s New York, venal
self-interest motivates everyone but the suckers, while ethnic and
racial bigotry is extreme.  Men use women for little other than sexual
gratification, and women use men almost entirely for monetary or social
gain. 

Those in power fail to represent the disinterested abstractions
(justice, civil rights, truth) that they ostensibly represent.  The
manipulation of truth and justice by the news media, show Wolfe’s
cynical view of these flawed apparatuses of human society. Tom Wolfe
ruthlessly exposes the superficiality of 1980s culture. Wolfe directs
his most serious criticism to the very rich, with their extravagant
dinner parties, 6-block hired-car rides which cost $250, and
thousand-dollar flower arrangements. Hypocrisy is rife in this novel,
and most evident in the two leaders depicted on opposing sides,
Reverend Bacon and the Mayor of New York. Neither of these men is truly
concerned with the people of New York, but rather with their own
advancement and profit. Each, in his way, is racist, but decries racism
at every turn. Each purports to be “of the people” but uses his
position of power for monetary gain. Wolfe captured the worst traits of
America during the early years of the Unraveling.

The 1980’s proceeded as expected with strengthening individualism
and weakening institutions. The GI Generation Heroes began to depart
from the scene. This steady, cautious, risk adverse generation that
built American industry and finance were being pushed into retirement
by the Baby Boomer Generation. The old civic order was cast aside and
the cultural revolutionaries stormed the gates. Baby Boomers seized
control of Wall Street, having never experienced a bear market, never
faced adversity, and never having to care about anyone but themselves.
A brooding sense of pessimism began to creep into the mood of the
country. Fiduciary responsibility towards your clients and proper risk
management was considered old school. Maximizing profits, generating
fees, and getting rich was the mantra of the new Wall Street
generation. As the Boomers grew rich and cynical on the street of
dreams, moralistic charlatan frauds like Jesse Jackson and Al Sharpton
exacted their share of profits for themselves and their constituents.
The working middle class sunk deeper into despair as their wages
continued a two decade long stagnation. Real hourly earnings were the
same in 2005 as they were in 1984, and 10% below the level of 1972.

 

 http://images.creditwritedowns.com/blogger/SKyAUUr-whI/AAAAAAAABLw/vzeVSMcAtFk/s1600/Real%20Hourly%20Earnings.png 

The trickle down crowd, mostly Republicans, contended that a rising
tide lifts all boats. In theory that sounds great. In practice, it has
proven to be a lie. During the 1980s and 1990s, all boundaries
regarding compensation were obliterated by the “Me Generation”.
Executive pay packages began to skyrocket as they were viewed as rock
stars and masters of the universe. The ratio of CEO’s pay to the
average worker’s pay leaped from 30 to 1 in 1980 to 250 to 1 by 2005.
If CEOs had performed phenomenally over this time period, a case could
be made for this leap. But, corporate America and certainly Wall Street
had brought the US economy to the brink of disaster by 2005. This
outrageous pay disparity contributed to the deepening anger in the
country simmering below the surface.

 

http://www.cbpp.org/images/cms/4-17-09inc-f1.jpg

Strauss & Howe aptly described the mood:

 “Personal confidence remains high, and few national
problems demand immediate action.  But the public reflects darkly on
growing violence and incivility, widening inequality, pervasive
distrust of institutions and leaders, and a debased popular culture. 
People fear that the national consensus is splitting into competing
“values” camps.”

Cynical Alienation

“Now, I have to go back to work on my State of the Union speech.
And I worked on it until pretty late last night. But I want to say one
thing to the American people. I want you to listen to me. I’m going to
say this again: I did not have sexual relations with that woman,
Miss Lewinsky. I never told anybody to lie, not a single time; never.
These allegations are false. And I need to go back to work for the
American people.” –
President Bill Clinton, January 26, 1998

“The great story here for anybody willing to find it, write about it and explain it is this vast right-wing conspiracy that has been conspiring against my husband since the day he announced for president.” – First Lady Hillary Clinton, January 27, 1998

  

The appearance of progress on some issues overshadowed the
underlying deterioration of societal institutions and practices. Social
Security was “saved” by Alan Greenspan and his commission. Essentially
he manipulated the CPI calculation downward, screwing future
generations of seniors out of their rightful payouts. Politically
difficult decisions regarding Medicare and Medicaid were deferred to
sometime in the distant future. With oil prices averaging $20 per
barrel through the 1980s and 1990s, a coherent long-term energy
strategy seemed unnecessary to the next election cycle politicians who
control this country. The deregulation of the Savings & Loan
Industry gave them many of the capabilities of banks, without the same
regulations as banks. Imprudent real estate lending, fraud and insider
transactions by S&L executives, protected by high powered
Washington politicians, led to the first financial crisis. The failure
of 747 thrifts and losses of $160 billion to the taxpayer can be
attributed to lax oversight and fraud.  

The Berlin Wall fell as communism collapsed under the weight of
central planning, corruption, and fraud. Academics like Francis
Fukuyama foolishly declared “The End of History”. According to
Fukuyama, Democracy had won over all other forms of government:

 “What we may be witnessing is not just the end of the
Cold War, or the passing of a particular period of post-war history,
but the end of history as such: that is, the end point of mankind’s
ideological evolution and the universalization of Western liberal
democracy as the final form of human government.”

Only a Harvard academic could spout such claptrap. By 1991, the U.S. was again at war. The 1st
Gulf War was considered a moral war as the U.S. came to the rescue of
Kuwait and Saudi Arabia. Using traditional military maneuvers, General
Schwarzkopf obliterated Sadaam Hussein’s Republican Guard. But, there
was no consensus to follow through and eliminate Hussein. Unwittingly,
we planted the seeds for the bleak later stages of the Unraveling by
leaving military bases in Saudi Arabia. There were not many more feel
good national experiences after the 1st Gulf War. A
recession in 1991 (remember George Bush Sr. buying 4 pairs of socks at
JC Penney to exhort Americans to shop America out of recession) caused
by the S&L Crisis allowed an obscure Arkansas Governor to win the
Presidency. The election of Bill Clinton ushered in the culture wars of
the 1990s. The conservative religious right fought scorched earth
battles with the liberal left wing elite who control the media. Pat
Buchanan captured the animosity of this conflict:

“There is a religious war going on in our country for the soul
of America. It is a cultural war, as critical to the kind of nation we
will one day be as was the Cold War itself. Who is in your face here?
Who started this? Who is on the offensive? Who is pushing the envelope?
The answer is obvious. A radical Left aided by a cultural elite that
detests Christianity and finds Christian moral tenets reactionary and
repressive is hell-bent on pushing its amoral values and imposing its
ideology on our nation. The un-wisdom of what the Hollywood and the
Left are about should be transparent to all.”

As ideologues fought wars over morality, religion, and abortion,
unbridled corporate fascism and individual greed ran rampant. The
unholy alliance between mega banks, mega-corporations, the Federal
Reserve and Washington DC led to a widening chasm between the haves and
have-nots. The 1990s were rooted in three poisons: anger, greed, and
delusion. The Presidency of Bill Clinton was marked by a strong
economy, political gridlock, declining moral values and relatively
minor military skirmishes. Society glorified individuals, their wealth,
power and lifestyles. The TV show Lifestyles of the Rich and Famous, hosted
by Robin Leach, ran from 1984 until 1995. The show featured the
extravagant lifestyles of wealthy entertainers, athletes and business
moguls. Glorification of the rich and their profligate lifestyles,
spurred the superficial self-centered Boomer generation to idolize and
emulate this lifestyle. There was one big problem with emulating this
lifestyle. The Boomers didn’t have the money to live this lifestyle.
Wall Street stepped in to supply the fuel for the two decades of
decadence. Household debt grew from $2 trillion in 1984 to $14 trillion
in the mid 2000s.

 

http://www.swifteconomics.com/wp-content/uploads/2009/06/Debt.png

The United States has experienced a three decade long “expenditure
cascade”.  An expenditure cascade occurs when the rapid income growth
of top earners fuels additional spending by the lower earners. The
cascade begins among top earners, which encourages the middle class to
spend more which, in turn, encourages the lower class to spend more.
Ultimately, these expenditure cascades reduce the amount that each
family saves, as there is less money available to save due to extra
spending. Expenditure cascades are triggered by consumption. The
consumption of the wealthy triggers increased spending in the class
directly below them and the chain continues down to the bottom. This is
a dangerous reaction for those at the bottom who have little disposable
income originally and even less after they attempt to keep up with
others spending habits. The personal savings rate was 12% in the early
1980s and declined to negative 1% by 2005. The expenditure cascade
couldn’t have occurred without easy access to debt. The question that
must be asked is, who benefits from debt and who pays?

 

http://wallstreetpit.com/wp-content/uploads/2010/01/image016.png

The delusion of the American populace cannot be underestimated.
Their worshipping at the altar of materialism and adoration of
Hollywood created pop culture was crucial to the societal delusion.
Without the corporate consumerism marketing machine, an unlimited
amount of credit provided by bankers, and ultra-low interest rates
supplied by the Federal Reserve, the delusions of grandeur could not
have been realized. Credit cards didn’t even exist until 1968. Until
the 1990s mortgage lenders followed the 28/36 rule. Your mortgage
payment, including taxes and insurance, couldn’t exceed 28% of your
monthly gross income. All of your debt payments couldn’t exceed 36% of
your monthly gross income. Homebuyers rarely put down less than 10% of
the home’s value. Home equity loans were virtually non-existent. The
subprime loan market for homes and automobiles was miniscule. In the
early 1980s auto loans averaged 45 months and buyers put 12% down on
the purchase. By the mid 2000s auto loans averaged 64 months with only
5% down on the purchase. By 1999, 40% of all cars on the highway were
leased. The proliferation of easy credit allowed average people to live
a life of excessive opulence, occupying 7,000 sq ft  McMansions,
driving BMWs, and wearing Rolex watches. Americans bought so much stuff
on credit they couldn’t fit it all in their oversized abodes. So they
needed to rent outside storage for their stuff. In 1984 there were
6,601 facilities with 290 million square feet of rentable self storage
in the U.S.  In 2009, there were 46,000 self storage facilities with
2.21 billion square feet, a 762% increase.

 

http://www.marketoracle.co.uk/images/2009/May/uk-housing-size.gif

The delusional middle and lower class Boomers believed they were
equal to the top 1% of ultra-wealthy, because they were living like
them. As Orwell noted, “all animals are created equal but some animals are more equal than others”. Those
that were “more equal” worked on Wall Street. The repeal of the
Glass-Steagall act in 1999 with overwhelming majorities in both Houses
of Congress and cheered on by Wall Street groomed Secretary of the
Treasury Robert Rubin, opened Pandora’s Box. Bank holding companies
started dealing in mortgage-backed securities, credit default swaps,
and structured investment vehicles. A blizzard of products solely
designed to generate fees while ignoring the banks’ fiduciary duty to
their clients was unleashed. Subprime mortgages surged from 5% of all
mortgages to 30% by 2008, as issuing the mortgage became detached from
the risk of the mortgage. The issuer of the loan had no risk, since the
mortgages were immediately bundled and sold off to investors (suckers).
No doc, Alt-A, and Option ARM mortgages proliferated as fraud ran
rampant on Wall Street and throughout the financial services industry.
The Federal Reserve, led by Alan Greenspan, aided and abetted the
delusional debt bubble through its non-existent regulation of the banks
and mortgage brokers, and unnecessarily keeping interest rates
extraordinarily low from 2001 through 2005.

 

http://www.alphaprofit.com/Illustrations/MoneyMatters/022510/Federal-Reserve-Discount-Rate-Investment-Decisions.gif

As the average American middle class worker fell further behind,
without realizing it, the financial sector grew ever more powerful and
malevolent. A country that had once produced its way to world
domination degenerated into a paper kingdom run by Harvard MBAs,
lawyers, tax accountants and central bankers. They “create” pieces of
paper with terms that no one understands, packages worthless pieces of
debt obligations and sell it to other clueless financial experts,
borrow 40 times their capital and gambles it based on models that told
them they couldn’t lose, and rewards themselves with obscene pay
packages and bonuses.  

Industry

1970

1980

1990

2000

2008

Manufacturing 22.7% 20.0% 16.3% 14.5% 11.5%
Construction 4.8% 4.7% 4.3% 4.4% 4.1%
Retail & Wholesale Trade 14.5% 14.0% 12.9% 12.7% 11.9%
Finance, Insurance, Real Estate 14.6% 15.9% 18.0% 19.7% 20.0%
Professional Services 5.4% 6.7% 9.8% 11.6% 12.7%
Educational Services 0.7% 0.6% 0.7% 0.8% 1.0%
Health Services 3.2% 4.4% 6.0% 6.1% 7.1%
Government 15.2% 13.8% 13.9% 12.3% 12.9%
Other 18.9% 19.9% 18.1% 17.9% 18.8%
TOTAL 100.0% 100.0% 100.0% 100.0% 100.0%
Source: BEA          

http://my.caseyresearch.com/displayTcr.php?id=21#cc1

The “creativity” of Wall Street was complimented by corporate
America instituting “free trade” and “globalization” policies (NAFTA)
supported by politicians in Washington DC. The terms free trade and
globalization were code for corporate CEOs shipping US manufacturing
jobs to China, India, and Vietnam, while expanding their corporate
earnings per share 3 cents above analyst expectations per quarter. As
reward for gutting American industry, the CEOs demanded their Board of
Director toadies give them stock options for 1 million shares and $10
million raises. Does it require a Harvard degree and ingenious
brilliance to fire 100,000 American workers making $20 per hour and
build a plant in China paying peasants $1 per hour and depending on
cheap oil to inexpensively ship the goods back to America? Only one
problem, people without jobs have trouble buying stuff. Without middle
class jobs, corporate CEOs turned to their Harvard buddies on Wall
Street to create $1.2 quadrillion of financial derivatives to convince
the middle class they really had wealth to spend on cheap Chinese
goods. This corporate/banking collusion was fully supported by their
paid for representatives in Washington DC. This unholy alliance between
big business and big government enriched the ruling elite, while
impoverishing the middle class.

 

Once In A Lifetime

“Indeed, recent research within the Federal Reserve suggests
that many homeowners might have saved tens of thousands of dollars had
they held adjustable-rate mortgages rather than fixed-rate mortgages
during the past decade, though this would not have been the case, of
course, had interest rates trended sharply upward.”
– Alan Greenspan, February 2004

“Even though some down payments are borrowed, it would take a
large, and historically most unusual, fall in home prices to wipe out a
significant part of home equity. Many of those who purchased their
residence more than a year ago have equity buffers in their homes
adequate to withstand any price decline other than a very deep one.”
– Alan Greenspan, October 2004

“Improvements in lending practices driven by information
technology have enabled lenders to reach out to households with
previously unrecognized borrowing capacities.”
– Alan Greenspan, October 2004

“The use of a growing array of derivatives and the related
application of more-sophisticated approaches to measuring and managing
risk are key factors underpinning the greater resilience of our largest
financial institutions …. Derivatives have permitted the unbundling of
financial risks.”
– Alan Greenspan, May 2005

  

You may find yourself living in a shotgun shack
You may find yourself in another part of the world
You may find yourself behind the wheel of a large automobile
You may find yourself in a beautiful house, with a beautiful wife
You may ask yourself: well… how did I get here?

Letting the days go by/let the water hold me down
Letting the days go by/water flowing underground
Into the blue again/after the money’s gone
Once in a lifetime/water flowing underground

You may ask yourself
How do I work this?
You may ask yourself
Where is that large automobile?
You may tell yourself
This is not my beautiful house!
You may tell yourself
This is not my beautiful wife!

You may ask yourself
What is that beautiful house?
You may ask yourself
Where does that highway lead to?
You may ask yourself
Am I right?… Am I wrong?
You may say to yourself
My God!… what have I done?

                       The Talking Heads – Once in a Lifetime

 

David Byrne’s lyrics are reflective of how Americans have operated
in a largely unconscious state for the last twenty years, operating on
debt-oriented auto-pilot, and waking up from their materialistic stupor
asking, “How did I get here?” We have taken the acquisition of material
belongings so seriously that it became what we worked for. Material
possessions defined who we are.  When we lose these possessions we no
longer have the identity that we have blindly created by collecting
“things”. My God, what have we done? Charles Mackay in his book Extraordinary Popular Delusions and the Madness of Crowds , written in 1841, captures the essence of what has happened in the US:

“Money, again, has often been a cause of the delusion of the
multitudes. Sober nations have all at once become desperate gamblers,
and risked almost their existence upon the turn of a piece of paper.”

The nation had an opportunity to come to our senses with the
election of George Bush in 2000. The gravity of the coming Saecular
Winter could have been moderated through prudent actions taken on the
fiscal, political, and defense fronts. The autumnal Unraveling is a
time of foreboding and a brooding pessimism. As a howling wind begins
to blow, leaves turn brown and wither, determined squirrels scurry
around collecting acorns in preparation for the bitter snowy Winter
ahead. The opportunity to judiciously prepare was wasted after the
September 11, 2001 terrorist attack on America. The colossal
overreaction to an attack by a terrorist organization consisting of a
few thousand members, ensured that the coming Winter will be harsh,
deadly, and more bitter than any ever experienced in U.S. history.
Prudence, caution, intelligence, and sound judgment were required.
Recklessness, haste, stupidity, and hubris were employed. The result
was that the Crisis that arrived in 2005-2008 will be more painful and
possibly fatal for the United States. The multiple wars of choice,
immense housing bubble, stunning government deficits and unaddressed
unfunded liabilities have created a nation weakened and unprepared for
the harsh reality ahead. The Empire of Debt has reached epic
proportions.

  

http://www.profitscore.com/articles/prof_TCMD-Mar10.jpg

The recklessness of our lack of preparation is reflected in the following facts:

  • Total US credit market debt increased from 275% of GDP in 2000 to 365% of GDP in 2009.
  • The National Debt increased from $5.7 trillion in 2000 to $13 trillion today. It is projected to reach $20 billion by 2015.
  • Consumer debt has increased from $1.5 trillion in 2000 to $2.4 trillion today.
  • The U.S. has spent $1 trillion since 2003 on wars of choice in Iraq and Afghanistan.
  • Annual defense spending has risen from $359 billion in 2000 to $896 billion in 2010.
  • Unfunded liabilities for Social Security, Medicare, and Medicaid total $106 trillion.
  • There are 7 million less Americans employed today than there were in 2007.
  • In 2008, Wall Street lost $42.6 billion and required middle class
    taxpayers to bail them out. Total compensation on Wall Street in 2009
    totaled $55 billion, three times the previous high.

Michael Lewis was befuddled that his tale of greed, hubris and
recklessness, written in 1987, did not deter college graduates from
heading to Wall Street. It took two more decades, but the Wall Street
money culture is in the process of being discredited. Americans are
slowly coming to the realization that unbridled greed is not the same
as capitalism. Excessively low interest rates punish savers and senior
citizens, while benefitting borrowers, risk takers and Wall Street.
Savings leads to investment, while borrowing leads to impoverishment.
The actions taken thus far by politicians, government bureaucrats, and
the Federal Reserve are the exact opposite of what was required. The
next leg down in this Greater Depression will thoroughly discredit
those who have promoted a money culture over those virtues that will
benefit society in the long run. The current Crisis will require
personal sacrifice, renewed community spirit, public consensus, and
truth. Failure could prove fatal for our nation. The best of human
nature must win out over greed, ignorance, and love of power. Our
future hangs in the balance.

“It has always seemed strange to me… the things we admire in
men, kindness and generosity, openness, honesty, understanding and
feeling, are the concomitants of failure in our system. And those
traits we detest, sharpness, greed, acquisitiveness, meanness, egotism
and self-interest, are the traits of success. And while men admire the
quality of the first they love the produce of the second.” –
John Steinbeck

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FourWude's picture

All things must come to pass my child. Yearn not for that which you will detest.

WaterWings's picture
Elected bastards don't even understand the basic laws that protect us. Congressman Assaults Student on Washington Sidewalk:

http://www.youtube.com/watch?v=v60oNUoHBYM

Blindweb's picture

No one said anything about an apocalypse.  Your narrow method of thinking translated the article into single digit binary.  0 or 1.  Apocayplse or Utopia.  In reality, many will die, but most will live in ever declining conditions.  A 10% loss in average life expectancy could wipe out 50 years of gains. 

 

Then again: peak oil->mass povert->malnutrition->plauge, and maybe we'll get the apocalypse you're looking for. 

Gully Foyle's picture

 Blindweb

Really dude? Where the fuck you been? Half the goddamned posters here claim Apocalypse. You know the fucking Gold and Guns crowd.

My "narrow method of thinking" was a tease at that specific group, and by extension everyone else who has read what they say.

Your narrow perspective has caused you to misinterpret.

Do try to fix that.

Hondo's picture

Economic events don't work nicely on your time table....."Survive the worst and prosper afterwards"????  Well, the markets are no better than they were 11 years ago trying prospering on that.  Every generation may or may not take their turn in the barrel.  Wars, depressions, etc.......the generation that is within 10 years of "proposed" retirement is going to hit the wall and when that happens it's going to reverberate all the way down the food chain.

Be patient...your turn in the barrell will come soon enough.

 

.

mtomato2's picture

You're right. It's "All Goooooood."  Always has been, always will be.

 

Nothing bad ever happens.  It's great to be human.

YourAverageDebtSlave's picture

Wow another gloom and doom article to usher in a new week.  Thanks a million ZH.

I've been on the world is ending camp for a while, and have been changing my view.  I'm a bit tired of reading all the ideological circle jerks that seem to take place online.  I wonder how many of these authors are doing anything to come up with or implement solutions. Pessimism breeds more pessimism and encourages so called intellectuals to talk about the poor state of the nation while sitting there with their dick in their hands doing jack shit.  Great Captain Obvious the USA is going down the drain and you've given an excellent historical overview why that's the case.  What the fuck does your rant do to help future generations? 

It takes real intellect and courage to come up with solutions and implement them.  These type of articles are a dime a dozen and have no value to the masses.  It's like my doctor telling me I have cancer, then telling me how my lifestyle has contributed to me contracting cancer and then saying that's all. 

I'll be pleasantly surprised the day I come on Zerohedge and they have an article titled "10 Things We Can Do Today to Change the Path of Our Nation for Our Children's Benefit."

falcomadol's picture

I don't know if there are ten things that can be done to that end.

Not in the context of "the United States as we know it must survive."

I've also been in the doom camp for a good decade plus, working in audit and finance that entire time.  I've never been on the "easy money" side of it.  It's hard to be a doomer when there are so many people with little to no capacity to do jack shit who are making so much money.  There are guys fresh out of college who should be working lines at a linen mill manning phones at Fidelity as glorified secretaries (no one ever calls to talk to them, they call to talk to their bosses) making more than I've ever made in my life.

Did I make a wrong turn?  Was my calculation incorrect?  Is my soul and identity worth the financial sacrifices I've made?  As the collapse continues to be postponed these quesitons become more and more poignant.

cougar_w's picture

As the collapse continues to be postponed these quesitons become more and more poignant.

Why? Because now you wish you had joined those empty suits on the phones creating nothing to serve nobody for no purpose in a universe that regularly eats the unnecessary?

The collapse (whatever that means) has nothing to do with it. There is a right side and a wrong side to this that has nothing to do with acquiring the most toys before the wheels fall off the toy wagon.

We're trying to save a species here. We're not doing a very good job of it. That worries me, just a bit. If you know what I mean.

Thoreau's picture

Agreed. It's all too easy to become overwhelmed with the trials of the world; thus paralyzing the motivation to make changes within our own spheres of influence.

Yet most folks enjoy a good drama or horror flic. Human nature.

Inspector Asset's picture

Point well taken.

When are we going to talk solutions instead of just pissing on the fire.,,

I will come up with the essay, Things We Can Do Today to Change the Path of Our Nation for Our Children's Benefit.

 

Give me until Friday, since I have alot on my plate this week.

 

In the mean time get a good laugh about Goldman at http://wallstonion.blogspot.com/

something about an Investment Yacht

cougar_w's picture

I will go out on a limb here and predict that none of your recommendations will involve living with 95% less of virtually everything except food and water.

Well actually you could cut the whole thing down to that one item and stop right there.

See, and it didn't take me to Friday.

Not being critical or cynical really (oh well maybe a little) but I detect a lot of hand-waving whenever the subject of "what to do" comes up, and I suspect that most of that is because nobody wants to change anything. Certainly nobody wants to go back to a time before all this inhumane nonsense was launched.

Meaning, 300 years ago.

95% less, courtesy of Dame Physics. She's waiting for you out there, biding her time, she's just gonna love the look on your face when you turn some corner and she head-slaps you into the dirt and says "the dust under you is your 5% and good luck."

Thermodynamics is a bitch, isn't she?

StychoKiller's picture

Someone will come along and propose to be our "Savior" (i.e., a totalitarian dictator)

and cut the Gordian Knot, when what is really needed is someone with Intelligence and patience to unravel the knot WITHOUT using cutting implements!

greyghost's picture

well said youraveragedebtslave, oohhh for one thin dime for every one of these rants, with nary a solution amongst them...united states notes....

greyghost

docmgmt's picture

I don't know if it'll get posted over here, but one person writing about what can be done to fix some of the fundamental structural problems in society is Charles Hugh Smith, on his blog at oftwominds.com

Slash's picture

myopic view is myopic. The fix is the collapse. The whiping clean of bad debts, creditors who made stupid loans going bust, over extended and over leveraged companies going bust, with only the strongest surviving. Seizure of credit markets was the 1st step in the market trying to correct itself.

 

There is no painless "fix" to our problems as detailed in the article. Just as with cancer, there is no magic painless pill that makes it go away. You have to take the pain of chemo and possibly worse.

 

Most people who write articles like this assume the reader has basic economic knowledge to know the fact that the collapse is the fix.

jomama's picture

i'd love to hear about the steps we can take to remove the oligarchy, the corrupt politicians and the bankers that pull their strings.  if you've got any ideas, i'm all ears.

JFK was the last president 'of the people' who tried to right these wrongs. and they blew his head off. 

YourAverageDebtSlave's picture

Introduce complimentary currencies within your local community that promote local sustainability.  Timebanking, Hubspace's Ven, the Cyclos are just a few alternative currencies that exist in small communities across the globe.  Without the dollar as a currency their power starts to decrease quickly.  The implementation of an alternative currency depends on local community solidarity, so it is quite a task.  But the alternative is to bend over and continued getting gangbanged up the ass by D.C. and Wall Street.

SteveNYC's picture

I'll be pleasantly surprised the day I come on Zerohedge and they have an article titled "10 Things We Can Do Today to Change the Path of Our Nation for Our Children's Benefit."

 

#1 (courtesy of ZH and its contributors) - Awareness

#2 (courtesy of SteveNYC) - Personal responsibility

 

Now, let's see if you can build on it.....

JohnG's picture

Take your children and leave?

SteveNYC's picture

LOL!! For some, sure.....

theprofromdover's picture

No.1 Small is beautiful.

No.2 Do unto others as you would have done to you.

No.3 Your first personal duty is to safeguard the future of your children.

No.4 No man is an island (merely a peninsula)

No.5 Money can't buy you love.

thefatasswilly's picture

Instead of complaining about it and becoming the very whiny bitch you're bitching and whining about, why don't you begin? Give some solutions, man. You're obviously qualified to do so, seeing as how you complain so effectively.

YourAverageDebtSlave's picture

Fatass, thank you for the challenge.  Chances are you won't actually read this or put it to use, but nevertheless here' some solutions from another forum I belong to (the whole site is full of solutions):

Community Building:  http://www.chrismartenson.com/forum/community-building/15712

Food Storage (Execution):  http://www.chrismartenson.com/forum/successful-food-storage-day-9-familes-4-tons-5-hours-lessons-learned-recommendations/27519

Food Storage (Preparation - lots of great links from many posters in this thread):  http://www.chrismartenson.com/forum/emergency-preparation-and-food-storage-info-lowesville-seminar/18845

Freeze Dried Food:  http://www.chrismartenson.com/forum/freeze-dried-food/23945

Canning:  http://www.chrismartenson.com/forum/canning-101-help-me-please/15851

Recipes:  http://www.chrismartenson.com/forum/recipes-food-and-drink/20155

Square Foot Gardening:  http://www.chrismartenson.com/forum/square-foot-gardening/18771

Agriculture/Permaculture:   http://www.chrismartenson.com/forum/definitive-agriculturepermaculture-thread/15715

Seeds:  http://www.chrismartenson.com/forum/seed-thread/20370

Lowesville Seminar:  http://www.chrismartenson.com/forum/definitive-lowesville-seminar-thread/17632

and http://www.chrismartenson.com/forum/life-after-lowesville/18306

Coping With 3E Issues:  http://www.chrismartenson.com/forum/coping-triple-e-interpersonal-problems/12564 

Family and Friends:  http://www.chrismartenson.com/forum/getting-your-friends-and-family-pay-attention/26150

Firearms:  http://www.chrismartenson.com/forum/definitive-firearms-thread/12654

Home Gardening:  http://www.chrismartenson.com/forum/home-gardening-beginners/21875

Chickens:  http://www.chrismartenson.com/forum/definitive-chicken-thread/16424

Emergency Supplies:  http://www.chrismartenson.com/forum/emergency-supplies-we-might-need/15458

Emergency Food:  http://www.chrismartenson.com/forum/quick-emergency-food-question/21964

Off Grid Refrigeration:  http://www.chrismartenson.com/forum/grid-refrigeration/19539

Baking/Cooking Without Power:  http://www.chrismartenson.com/forum/baknig-and-cooking-without-power-or-gas/13687

Beekeeping:  http://www.chrismartenson.com/forum/beekeeping-anyone/18759

Becoming a Farmer:  http://www.chrismartenson.com/forum/becoming-farmer/16150

Renewable Energy/Off Grid:  http://www.chrismartenson.com/forum/re-without-batteries-or-grid/18828

Trading/Investing (Be careful with this one, it's not advice, lots of good discussion from different perspectives.  Bottom line, do your own work to learn and apply):  http://www.chrismartenson.com/forum/traders-thread/14692

...and my personal favorite http://www.chrismartenson.com/forum/monetary-missing-puzzle-peice/35436

ColonelCooper's picture

The problem is, "O' Angry One", that none of your links solve anything.  They are simply ways for people to become more self sufficient and live through collapse.  Most of the Gold -n- Guns crowd disparaged upon in this line of thinking are already doing that anyway.

None of what you're suggesting means Jack Shit if it doesn't incorporate some sense of community and awareness building. 

To simply be able to say, "I have a garden and you don't.  You're fucked and I'm not." is no solution, anymore than if I say, "I have gold and you don't."

Back to the drawing board.

marc_hanes's picture

I agree with the rebuttal. But only in part. Really no one has substantive "solutions" to the mess so complaining about the lack thereof such does not advance things. We live in age of emotional venting. Everything we post, our respective IP addresses, etc. are logged. The door can be kicked down at any time. To me, it's more a situation of diminishing risk over a medium term horizon. A friend has a 150 acres in Virginia. I am welcome should that be necessary? Are any of these acres developed? No. I am still young and strong to help develop this property should it be necessary. More to the point, I have no idea what kind of inchoate "community" could arise out of 20-30 people trying to figure shit out on these 150 acres (which would then only be recognized by illegitimate Forces). You seem to want a drawing board where none can exist. Breathe until you don't.

ColonelCooper's picture

I'm looking for no drawing board.  The writing is already there, and I think you just posted an accurate brief summary.

I raise food, garden, butcher, can, pickle, smoke, hunt, on and on and on.  I haven't solved anything whatsoever.  I just maybe have a slightly better chance of seeing the end of the decade than someone who doesn't.

I was simply responding that his links weren't solutions to any societal problem, other than perhaps for his own narrow ass to slide by another few years.  I just found it somewhat humorous that he was getting so pissed off about nobody offering answers to the ills of society, then posts links about how to survive by yourself.

YourAverageDebtSlave's picture

Personal responsibility is about the only answer to the ills of present society. If 75% of the population worried about how their narrow ass could slide by  or doing the things you are doing instead of watching Lost or American Idol our society would be much more self sufficient and I'd be willing to bet the government wouldn't be pulling the shit they are right now.  The masses would be to smart and wouldn't hesitate to take things into their own hands because it would already be a way of living .  Right now people are too dependent on the nanny state.  Lastly Cooper, your response shows you didn't go through all the links or read what was in them.  As a result your response is lacking in credibility.

Currently Smoking Cannabis's picture

The lesson from 'The Boy Who Cried Wolf' was never intended to be that there are no wolves.

Oh regional Indian's picture

Wow Gully, pretty knee jerk response from a normally sanguine man.

I for one think this is brilliant, both Strauss and Howwe adn Quinn's threading a clear narrative, verifiable facts, clear cause and effect.

I can see the same thing happening here in India, slightly different scale, but the parallels are staggering.

Same for Japan, another country I've seen/dealt with closely.

In the vortex of super cycles and especially in the context of the super colliding super cycles we are in the midst of today, it is not the END that is imminent, it is an end.

The end of an era. The end of an age. The end of an experiment in a way of life that was clearly not sustainable, not for the US, not for the world.

We on the other hand might end, but I don't think the life we are currently living are really worth protecting.

The next turn will look nothing like this one. Heck, even astrologically speaking we are entering a new age.

We can just be ready to transition bravely with eyes and minds fully open, detached from possession of all but our equanimity.

ORI

http://aadivaahan.wordpress.com

StychoKiller's picture

Kali is NOT going to go away without a fight, and blood -- lots and lots of blood!

DavidPierre's picture

 Jim Quinn has been circle-jerking this  moronic 'Fourth Turning' theme with his syphlitic homeys on his blog...

www.thestinkingpile.com.

for the past year and a half.

Oh! ... he's good with the charts and graphs and all that other common and easily available official BS ... likes to pretend he isn't a McMansion dealing, bureaucrat Neo-Con Psychopath...but

Ask him to explore the scientific facts about 9/11 ...

He completely toes the government line. He swallows all of the 'official lies' and deletes and censors every thing unless you agree with him.

His former Webmaster booted him off and shut down his previous blog a few months ago for his overt Racism and Foul Mouthed abuse of any one who might challenge his narrow, Nazi/Fascistic views.

+10 Gully...

just more blah blah...blah... from a clueless jerk.

 

 

 

DavidPierre's picture

A typical post that Quinn lets stand...

I strongly suspect that 'NeoCon' is actually Quinn...

"neocon says:

Goldopussy—-Why even bother to contaminate this blog with your socialist ranting? Europeans are all little pussy cowards, including you. Especially you. I used to read your delusional comments on TBP #1, and they were all the same. That’s what comes from wimpy European trash like you. You want so desperately to be American but nature played a cruel trick on you, didn’t it ? Instead of being born of good stock from the finest nation, you were born with genetically inferior bloodlines on the miserable shitty continent of Europe. The source of your terminal misery is that you know, as do all Europeans, that you are worthless half-humans. Worthless fucking halfwit, half-humans. By contrast, I was born of impeccable breeding, of the finest, superior bloodstock, in the greatest nation on earth. And you understandably resent that, being the inferior chickenshit pussy that you must be, since all Europeans are. Tough shit, Goldopussy."

This is mild compared to some of the more porngraphic/obscene material he encourages on his blog.

Roger O. Thornhill's picture

I think the apocalyptic scenerios are a bit much - outside of nuclear war or an asteroid hitting us.

Markets tend to go on, supply chains are reconfigured. I always look at Somalia as an example - a complete disaster, yet the market stalls are all there - buying and selling goes on.

What I see is that we are weighed down by some very (exceptionally) heavy debt and this will eat into our standard of living to the point where we will become something of a beaten down economy. People will have less and less and we will begin to resemble the third world. Very, very rich, and very very poor. Politically this is wonderful for TPTB because it is easy to manipulate a third world population. Just keep giving some form of bread and circuses to keep the plebes fooled and happy, look at the Peronistas of Argentina as the example. 

Anyway, we won't get to bullets outside of a civil war or nuclear war. That is fantasy thinking.

And just quickly I will expand on this. Credit freezes - immediately the govt will step in and backstop the whole thing with unlimited cash - no one is going to throw up their hand and say we can't fix it. Think any scenario you want, they will backstop with money, with food, with gold or silver - they aren't going to give in - that is where fantasy ideas fall apart. They will back this up with the army, air force, and the national guard. They will distribute food by airlift, by commandeered trucks and trains. Again, if you look for a road warrior scenario (outside of a full on war of some kind) you will be wrong.

We would probably be better off if we had some form of a full stop and settled the whole mess at once - I only hope for this, as this will unsaddle us from the debt nightmare quickly, before the entire population is dependent on government largesse. Otherwise our slow descent will get us the petty tyrants (we deserve) running the show. All under the banner of fairness, reform, equality, etc. Tyrants love enforcing fairness - tyrants always derive their power from "righting" some perceived wrong. Unless we discover some amazing "new thing" (hint: it's not an iPad) or we find a way to cancel these debts quickly we will just have a much more reigned in lifestyle - probably with riots and breadlines.

And we will just slowly sink - until our new savior (dictator) arises.

WaterWings's picture

I always look at Somalia as an example - a complete disaster, yet the market stalls are all there - buying and selling goes on.

Yes, you are absolutely right about your example 17th World country where people grow their own food and take their own goats out to pasture. The sun still shines. The gangs still rape and pillage. I wonder how that would work in America?

Anyway, we won't get to bullets outside of a civil war or nuclear war. That is fantasy thinking.

Right again! We will never see organized masses beyond state level ever again because of Predator drones and observation blimps that can track 10,000+ movements at the same time. Ha! Civil war is fantasy. There is no country to take back. By the time people start to organize "We want our country back or else!" they will find their supermarkets empty and realize that human flesh isn't as bad as the movies make it out to be. And nukes. Seriously, what world leader is crazy enough to actually attempt to use one. That'll never, ever, EVAR happen.

And just quickly I will expand on this. Credit freezes - immediately the govt will step in and backstop the whole thing with unlimited cash - no one is going to throw up their hand and say we can't fix it. Think any scenario you want, they will backstop with money, with food, with gold or silver - they aren't going to give in - that is where fantasy ideas fall apart. They will back this up with the army, air force, and the national guard. They will distribute food by airlift, by commandeered trucks and trains. Again, if you look for a road warrior scenario (outside of a full on war of some kind) you will be wrong.

Jeez, this one is a helluva rubik's cube. Anyone thinking that Mad Max can't happen hasn't seen it recently. The first movie. Wifey goes to the beach, thinks she's safe, roving gang decides they want to pester her, she gets run over, Mad Max goes on vengeance rampage, THEN the world collapses into Road Warrior. Mad Max is highly plausible. Oh, but this part was funny though. True, true, but hilarious:

They will back this up with the army, air force, and the national guard.

LOL! Yes, they will shoot guns around and bark orders but they will not save the day. They will want to go home to be with families once hyperinflation that will never occur actually occurs. Or will shooting and barking orders stop hyperinflation? Oh you forgot the Coast Guard. Oh, well, there not really part of the military that protects American interests anymore. They are following BP orders. That's okay, we didn't need them anyway. What were they going to do? Float out in boats and tell us there is oil in the water out there? We can already see that. Go guard some Bottlenose dolphins in Perdido Bay, Admiral Thad. And don't ever come back you Domestic Enemy.

We would probably be better off if we had some form of a full stop and settled the whole mess at once - I only hope for this, as this will unsaddle us from the debt nightmare quickly, before the entire population is dependent on government largesse.

LOLOLOLOLOL - okay, the jokes on me. Hardy-har-har. I thought you were serious at first.

probably with riots and breadlines.

We already have breadlines: food stamps. If there are ever real breadlines I would not be standing in it because that makes you a periiiiiiime target. Why stand in line when you can rob the old lady walking home? It will be funny to see people standing in line because they won't realize it until it is too late that they should have gotten out of the city and turned into farmers. Yeah, I don't think we'll see many breadlines that last for too long once the JIT inventory supermarkets empty and poor people start burning stuff. And no, the poor people won't use nukes because they don't have nukes. Maybe .38 Specials or even AK-47s that were pulled out of someones Cold. Dead. Hand. or maybe a drug deal gone bad "I got a glock pointed at you sideways which means I'm really serious!"

superman07's picture

Historically armies disband and protect communities / family when threatened internally, or command and control disintergrates. values present before they joined will still be prevelent. Those that wish to do harm, will.

Zina's picture

Not if californian soldiers are put to kill ohian citizens, and ohian soldiers put to kill californian citizens.

And electronically controled drones don't disband.

 

 

AnAnonymous's picture

Where in history did you go to fetch that conclusion on armies protecting families and stuff?

Mr Lennon Hendrix's picture

"FIAT bitches!  I always look at Somalia as an example."  Move there, I dare you.

And what happens when the dollar is religated to the currentsea of a third world?  They can backstop it with currentsea all they want, throw paper in a fire, see what happens; you get a minute of warmth, good for you.  Backstop with food, what, corn?  Food is in a limited supply.  And PMs?  From where Fort Knox?  Surely you meant Tungsten, we will mitigate the problem with Tungsten....

And with oil production peaking in '05, 5 years ago, how will we cheaply service the military vehicles?  Tell me Unicorns piss light sweet crude, I'll believe you.

You see, you are giving the tyrants way too much credit.  They can not just pull this scenario out of a hat.  Their time is up.  It is your time to shine.  And I do not mean like that Tina McBride song.  On that note, why are people still listening to pop music?  I thought by now America would have woken up and stopped drinking the kool aide.  It has mercury, didn't you know?!

Check it out, she looks like a singing zombie.....

Sunny D Commercial-Martina McBride-Shine on:

http://www.youtube.com/watch?v=6bWm2swwjfk

Study Finds High-Fructose Corn Syrup Contains Mercury:

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/26/AR200901...

You know man, we are already in th Road Warrior scenario, but it is the beginning, and that is why you can not figure it out.  It is still outside your paradigm.  Your dictator is here, and has been for about a hundred years.  Say hello to the Fed.  You see, to make my point, what they have to mitigate the problem, is FIAT.  This FIAT is pretend.  You are pretending to fall into obscurity, and you will be saved by your pretending.  This is the same as a created reality that lives in hell but does not know.  Have some Sunny D, and shine on!

AnAnonymous's picture

And with oil production peaking in '05, 5 years ago, how will we cheaply service the military vehicles?  Tell me Unicorns piss light sweet crude, I'll believe you.

 

Okay, a big digression to answer this one.

Where will people get fish if the oil spill is what they claim to be? From the mouths of frugal people, that is where they are going to take it.

People with a high rate of consumption will beat people with a slow rate of consumption.

The consequences of decrease of oil extraction capability will impact the US army with a delay. And in all cases, it will affect selectively people. It wont be a homogenous decline in terms of consumption. Some entities will keep consuming a lot while others are going to be pushed out of the consumption circle.

The US army is a huge consumer of oil with a high rate of consumption.

Where will the gas come from? From the tanks of people who consume much less. So mostly from cars practice  from the western world (some other people's oil consumption is so low the US army cannot predate on it, too marginal gains)

In a context of decline of oil extraction, the US army will keep a superior consumption level to anyone (does not mean that the US army will not lose projection capabilities in the future but it means that when the US will no longer be able to project over a certain distance, no other army in the world will be able) and will definitively tap in the oil reserve composed with US, Japanese and European car drivers.

The US army will eliminate them as competitors in the race to oil consumption and will keep a relatively high level of consumption.

 

Mr Lennon Hendrix's picture

With what?  The DOLLAR?!  They will use the dollar?!?!?!  My point is the dollar, and all FIAT, will not serve this memorandum.  The dollar and all FIAT are illusions of mercury into gold.  The DOLLAR will not be traded for oil, so what will the US trade for oil?  Do not say force, I believe humanity has exhausted its capability for war regimes.  If you can not service the ideology it goes away.  Bye bye dollar, bye bye regime.

Roger O. Thornhill's picture

I'm trying to be pragmatic - and don't think that I don't have gold & bullets just in case. We should all realize that none of us will predict this thing with 100% accuracy. That this could descend into hell is certainly possible but I'm thinking that there is not a lock that it goes that way at full tilt. There are many ways this situation can devolve. I hedge accordingly based on what odds I think each scenario has and I have things in place for the scenarios I believe are possible.

I just think it is dangerous to get locked into one scenario and have all your eggs in one basket. Be prepped for a few scenarios - this may play out in weirder ways than we think.

But as I said -  I know that structurally we have a serious problem - that problem will have to be faced, the extend and pretend will be harder to pull off. I just think the road warrior scenario will be take so many things going wrong at once as to be less likely - but I am prepped for that as well. My "gas island" will be quite sophisticated if it comes to that.

scipio_africanus's picture

Gully Foyle, thanks for the comment. Please invest in equities for us and don't purchase any tennable farm land, gold, ammunition, commodities or anything that us doom and gloomers are "wasting" our money on. You should fully place your faith in the powers that be (Obama, Democrats, RINOs, Ben Bernanke, Joe Biden, FedRev) and not in mathematics. We do however appreciate you enlightening all of us apocolyptic fools /sarcasm

walküre's picture

You've got about a year, maybe 2 left before things start to unravel badly. The Mayan thing has nothing to do with it and it's not a self fullfilling prophecy either.

The debt calendars of the world are what they are. Debt needs to be rolled over, refied or forgiven or defaulted. The pies can only be sliced so many ways.

There's going to be a reset of some sort.

Anyway, not to bore anyone. Just use the time that's left to prepare.