Down and Dirty-a pervasive trend for contraction(Jim Kunstler)

	Member Profile	Date Posted
FORECAST FOR 2008 - by Jim Kunstler	ray_heritage	NEW 12/31/2007 2:49:54 PM
2008 Forecast "Theworld has never really been in a situation like this before and it isimpossible to say what it might lead to. But there is no doubt that theAmerican public has enjoyed an artificially high standard of living inrelation to the value of what we actually produce -- fried chicken,hair extensions, and the Flaver Flav Show -- so the conclusion ispretty self-evident." (snippets) Down and Dirty: What's coming down the pike starting tomorrow, January 1, 2008? Ishudder to imagine how things will play out now as we turn the cornerinto 2008... but my little walnut brain can't imagine any scenario inwhich the US economy doesn't end up on a gurney in history's emergencyroom. The housing market is in a death spiral. Eventually, themedian price of a house will have to fall back to the median income,and it has a very long way to go, perhaps 50 percent. Until thathappens, houses will be generally unsellable. ...an anxiousfinance sector will be offering fewer mortgages and on much morerigorous terms, so there will be far fewer qualified buyers even fordistress sales. And the median income itself may soon not be what ithas been. The whole equation has changed. Most of theseunfortunates would be better off just mailing in the keys and walkingaway. But in so far as these awful liabilities are peoples' homes, fullof all their stuff and their childrens' stuff, not to mention being therepository of all their previously-imagined wealth, as well as theirhopes and dreams, walking away is psychologically more easily said thandone. One thing the public doesn't get about the housing debacleis that it is not just the low point in a regular cycle -- it is theend of the suburban phase of US history. We won't be building anymoreof it, and those employed in its development will have to findsomething else to do. Now, unfortunately the whole point of the housingbubble was not really to put X-million people in so many vinyl andchipboard boxes, but rather to ramp up a suburban sprawl-buildingindustry as a replacement for America's dwindling manufacturingeconomy. This stratagem ran into the implacable force of PeakOil, which not only puts the schnitz on America's whole Happy Motoring/ suburban nexus, but implies a pervasive trend for contraction ineverything from the daily distances we can travel to the the very coreidea of regular economic growth per se -- at least in the way we haveunderstood it through the age of industrial capital. ...somethinglike 40 percent of all new jobs after the year 2000 were created in thefinal burst of suburban expansion -- everything from the excavators tothe framers to the sheet-rockers, and then the providers of granitecountertops, the sellers of appliances and furnishings, and cars toservice the far-out new subdivisions, and so on. This is the end,therefore, not only of the production "home-builders," but perhapseverything from Crate and Barrel to WalMart, too, eventually. ...thecommercial side of the business has also begun a nauseating slide intonon-performance and equity destruction. In other words, we built waytoo many strip malls, power centers, and office parks. God knows whatwill happen to the owners of these white elephants, or the mortgage andlien holders of these things...     What happens out there onthe housing market scene will certainly redound in banking and financeand whatever still constitutes the US economy generally. The fears anduncertainties surrounding all credit-backed tradable securities ...will multiply as defaults commence in commercial real estate, anddesperate individuals next enter a wave of credit card default, all ofit, too, securitized and sprinkled all over the world. None of thisstuff has yet been priced into the public disclosures of the manytroubled banks and bank-like companies holding it. Nor doesanyone really know how this is affecting the hedge funds, and theirstaggering leveraged positions in things that are looking more and morelike quicksand. I can't imagine that quite a few major bankswill not collapse in the first half of 2008. It is hard to escape theconclusion that many hedge funds will also blow up, given theunsoundness of their counter-parties' positions, not to mention thefrailty of the bond reinsurers. But the death of more than a few hedgefunds could easily unwind the entire global finance system -- meaning aperiod of destructive chaos followed by a set of severely differentinstitutional arrangements, with untold loss of imagined capital wealthalong the way and big changes in everyday life.      ...whoeverends up in the oval office will preside over one king-hell of aclusterfuck. In the immortal words of TV's erstwhile "Mr. T," I pity dafool who gets elected into this mess. There will be a whole continentfull of bankrupt, re-poed, and idle former WalMart shoppers, many ofthem with half of their skin tattooed and many of that bunch all revvedup to "roll heavy and gun up" against the folks who screwed them. ...Whichleads me to my penultimate observation of the moment: 2008 will be theyear that celebrity wealth goes into hiding. A land full of peoplecrying into their foreclosure notices will take a dim view ofthe...luxuriating out there and may come looking for scalps... Ihave learned my lesson about making numerical predictions for the stockmarkets. So let's just say there is no fucking way that the DOW, theNASDAQ, and the S & P will not end the year 2008 absolutely ontheir asses. The charade of permanent prosperity based ongetting something for nothing is over. That sound you hear out there isreality knocking on the door. It has been standing out in the cold fora long time and it is not happy with us.