Welcome to the American hall of mirrors… and
mind the broken glass all over the floor. That’s Nature’s way of saying the
country has run out room to punk itself. 2018 was the consolidation of bad
faith in everything we do: politics, the news media, economics & finance,
show biz, regular biz, jurisprudence, medicine, education, and relations
between men and women — the year of peak dishonesty and self-deception. Of
course, the trouble with dishonesty is that it doesn’t comport with Reality,
and Reality being Mother Nature’s husband, bats in the cleanup position.
Entering 2019, the bases are loaded with delusions, misdirections, and
turpitudes. I shall get right to it without further throat-clearing.
Trumpology
The
nation’s focus remains clamped to the mercurial character in the White House.
If you subscribe to Strauss and Howe’s theories about The Fourth
Turning, then you might see president Donald J.
Trump playing the archetypal role they call “The Gray Champion,” an elder
figure of the “transcendental” Boomer generation sent by fate to rescue a
floundering society at a grave moment in the seasons of history. Yes, I know:
we might have been better off calling Ghostbusters. A cardinal precept at this
blog is that fate is a trickster. You order a Gray Champion and room service
sends up a Golden Golem of Greatness.
To
put it mildly, Mr. Trump has failed to charm at least half the country. They
are embarrassed at his physical presence: his lumbering gait, like unto a
behemoth land mammal of the Oligocene; that swaying bay window stomach
half-concealed by the flaps of his suit-jacket and bisected by the oddly
elongated necktie; the pained smile he puts on for the photo-ops; his man-spreading when seated
with the world’s poohbahs, and that strange confection of sculpted hair, like
the spun sugar on a Croquembouche, or the pouf on some horrifying plastic
dashboard figurine. His manner of speech, the weird, palindromic repetitions,
the childish artlessness of his casual utterances, the absence of Beltway
focus-group cant, and of course the reviled Tweets — drive his opponents up a
tree. The gilt-plastic trappings he surrounds himself with also offend them.
For all I know, they hate his cologne, too.
His
adversaries say he is “undermining institutions.” By this perhaps they mean the
beloved DC gravy-train of regular institutionalized grift divvied up between
elected officials, Wall Street, the War-and-Intel matrix, and the unholy infestation
of lawyer-lobbyists slithering around the Swamp. Just look what happened when
Mr. Trump threatened to end US military operations in Syria: apoplexy among the
Neocons and Progs-for War — though none of them could coherently state what our
strategy is there (is it to overthrow Assad so we can have another failed state
in the Middle East?). Whatever Trump proposes in the way of policy is
inadmissible because, according to the Resistance, Mr. Trump should not be
allowed to propose policy, or order it, or direct it. Because he is… Trump….
Whatever
you think of his agenda, Mr. Trump made the fateful mistake of bragging on the
bubble economy that is now collapsing, and it will probably un-do him more
effectively than all of the attempts to pin some actual crime on him by Robert
Mueller. The Special Prosecutor has spent two years and has come up with little
more than a handful of rinky-dink “process crimes” — mainly lying under oath,
engineered by Mr. Mueller’s legal team and old friends in the FBI and DOJ after-the-fact.
The Mueller investigation started with a false predicate — collusion with
Russia — and entailed loads of prosecutorial mischief. We approach the climax
of all that in early 2019. Mr. Mueller will issue his report before March.
Maybe it will contain surprises, but the investigatory process involves so many
people that it’s hard to believe no hints of any “bombshells” have leaked to
the papers and cable news outfits. Rather, Mr. Mueller will depict a whole lot
of nothing in the darkest possible light for the convenience of a house
impeachment process, the holy grail of the Resistance, though the exercise is
likely to fail if it gets to a senate trial.
But
before that, there is the question of Mr. Mueller himself. My view is that Mr.
Mueller has run a colossal cover-your-ass operation for the many documented
misdeeds among the FBI and DOJ in cooking up this mess starting in the spring
of 2016. His appointment in the first place was a gross error, considering his
mentor relationship with James Comey and prior association with his putative
supervisor, Deputy Attorney General Rod Rosenstein. RR remains in that position
despite being a witness in matters pending before Mr. Mueller (and other
regulators such as federal prosecutor John Huber and DOJ Inspector General
Michael Horowitz), including the FISA warrant scandal, the Uranium One deal,
and the tortured doings of the Hillary Clinton and her foundation.
January
will kick off with the congressional extravaganza I’ll call Investi-Gate, as committees
headed by Democratic chairs Gerald Nadler (Judiciary), Elijah Cummings
(Oversight), and Adam Schiff (Intelligence) swarm the President and his
associates like army ants on a drove of peccaries. They’ll haul in everybody
and his uncle to keep the show going for their pals in the media. The star
attraction will be Trump ex-lawyer Michael Cohen, though he will appear as a
convicted liar. He may even defy the committee by not answering their subpoena
before he has to report to federal prison in March. After all, Rod Rosenstein
successfully defied more than one summons to congress for months on end. What
will the House committee chairs do to Cohen? — threaten him with jail?
The
house committee Investi-Gate circus
is a sure thing, though, don’t forget, minority members can also call
witnesses, and there is room for blowback on the venture. Republicans still
chair the senate committees, and there may be a mud-fight between the two
houses. Otherwise, expect a whole lot of grandstanding at the expense of paying
attention to any of the nation’s serious business. Mr. Huber and Mr. Horowitz
will also release reports in early 2019. Much of the recent criminal
misbehavior in FBI / DOJ / Mueller orbit lies within their commissions.
Abundant evidence has already been published concerning the conspiracy to
defeat Mr. Trump by subterfuge in the 2016 election, and further illegal
attempts to injure him in the years following. Some of the characters in this
horror show have already testified to grand juries.
Gen.
Flynn was sent to the doghouse by Judge Emmet Sullivan at his December
sentencing hearing for the purpose of rethinking his guilty plea. The idea is
to persuade him to go to trial and force Mr. Mueller to go through a discovery
process (of evidence) that could easily derail Mr. Mueller’s case and reflect
poorly on the Special Counsel, perhaps even lead to legal problems for him in
the way of malicious prosecution. Gen Flynn’s case also resolves one way or
another in March.
Finally,
Mr. Trump will be free to declassify a trove of documents in all these matters
after Mr. Mueller reports. Doing so prior to that might set up the president on
an obstruction of justice charge. If there’s anything germane in those docs,
they could change the whole dramatic arc of the story that took over two years
to develop. There’s plenty of chatter across the web about Mr. Trump invoking
martial law or declaring some kinds of national emergency, plus loose talk
about military tribunals and “thousands of sealed indictments,” but I’m not
persuaded that there’s any reality to that.
Politics That Maybe Matter
This
country faces a lot of practical problems that are not likely to be addressed
if congress is preoccupied with Investi-Gate,
and depending on how ferocious the action gets in bear markets, currencies, and
banking, which could alter the entire picture (more below).
The
crisis in medicine is obvious. Whatever else you can say about ObamaCare, it
just didn’t do enough and is now crippled by court decisions. Health Care is
simply unaffordable for a growing demographic of the sinking middle class. Much
of that is due to plain old racketeering, and I propose that it could be
mitigated to some degree if a simple law were passed that required doctors,
surgeons, hospitals, labs, and other players to publicly post prices for their
services — to eliminate this ridiculous business of providers “negotiating” the
price of every transaction in secret, according to deliberately
incomprehensible guidelines. It may be too late to “solve” the health care
problem in the way that much of the Left wishes: a single-payer system run by
the government. True, other advanced nations ran single-payer systems with
apparent success for decades, and still do, but they started these programs in
an era of reliable economic growth based on industrial production and that era
is over for reasons mostly having to do with dwindling cheap energy. The
National Health Service in Britain is a shambles. France’s system still
functions, but the high taxation needed to keep funding it is, ironically, a
main beef of the Yellow Vest protesters. The deflating financial bubble will
underscore a new order of austerity in the USA, and may usher in graver
problems with the value of the dollar. One way or the other, congress will be
stymied over health care reform in 2019.
The
eventual result will be the disintegration of the current health care system
and its eventual reorganization into local, clinic-based medicine at a much
lower level of complexity and treatment. It was a tremendous blunder to consolidate
hospitals and medical practices into gigantically-scaled conglomerates. The
hallmark of The Long Emergency is
that everything organized at the gigantic scale will fail one way or another.
Get your mind right for that outcome and take care of yourself in the meantime.
The
Left especially has no inclination to address immigration reform. As long as
they mendaciously refuse to even make a distinction between legal and illegal
immigration, nothing can be done. The Right is also dishonest and cowardly about
it, fearing to alienate the ballooning Hispanic voter bloc. Still there is a
better chance that some immigration reform may be possible because it doesn’t
require the sort of titanic fiscal outlays that Health Care does — Mr. Trump’s
wall aside. More likely, though, the current immigration impasse will continue
and may provoke vigilante action along the border in 2019 that could be part of
greater civil violence prompted by increasing economic disparities.
Markets and Money
The
jig is really up. The big bad bear market is already underway, even if it
rallies in January. The debt bubble engineered by the Federal Reserve is
blowing up and thundering through the system. The epic market instability of
December 2018 on the heels of persistent Fed rate hikes points to major credit
problems and especially an inability to roll over old debt into new loans at
higher interest rates — in particular loans to zombie enterprises that need to
borrow to keep paying interest on previous loans (a lot of that among the shale
oil companies). The US government can’t take higher interest rates either. It’s
already paying about as much in annual interest on US debt as we pay for our
war machine. There are only two ways out, both of them nasty. Either suck up
debt defaults, which will induce an impoverishing disappearance of money; or
provoke high inflation, by injecting more Central Bank QE “money” into the
system, which can destroy the value of money. Inflation is typically the choice
of governments because it reduces the face value of debts while it allows
government to pretend that it is taking action. In the end, you may have plenty
of worthless money, which is no different from having not enough money that
retains value. The latter was the main feature of the Great Depression.
So,
inflation is the usual choice, but it also typically leads to incendiary
resentment among the citizenry when they realize they’ve been played and it
takes a wheelbarrow full of cash to buy a loaf of bread and a jar of peanut
butter. I suppose that Fed chief Jerome Powell knows all too well he’s popped
the Mother-of-All-Bubbles. He can blame it on Mr. Trump. Everybody else will,
of course. Sometime in the second quarter of 2019, the Fed will resume the
money-for-nothing gambit of “quantitative easing” in the hope of arresting the
damage, but this time the dollar will lose value uncontrollably and
catastrophically. Many people will be ruined, especially retirees at the mercy
of insolvent pension funds.
Before
2019 is out, the US could find itself in a situation worse than the Great
Depression. Supply lines are much longer now than they were then. If suppliers
can’t get paid because trust has collapsed in the short-term corporate paper
system, they won’t deliver supplies, which means you may not eat, or fill your
gas tank, or heat your house, or get whatever else you need. Also, the USA in
1931 had not yet transformed itself into the fiasco-waiting-to-happen called
suburban sprawl. How is Dallas going to work for people who spend a substantial
chunk of their income on mandatory motoring (if there’s little or no income)?
Stock
market activity may appear to stabilize in January, but it will go south again
later on in the first quarter and the Bear will growl louder for the rest of
the year.
Civil Disorder
Be
prepared for it in 2019. There are going to be a lot of pissed-off people
around the country. They are liable to attack Federal property and their fellow
citizens (and their property). The hungrier they are, the worse it will be.
They will not understand the forces that are destroying the money system. There
are a gazillion small arms out there and the government will not be able to
control them or confiscate them. Any attempt to do that will only inflame the
situation. A major principle of The
Long Emergency is that government becomes increasingly
impotent and ineffectual as it rolls out. We’re already seeing that in
Washington, and it is not at all just because Mr. Trump has inspired such an
impasse between the branches. The states, too, will be hard-pressed to do
anything useful. Many of them, like Illinois, New Jersey, Connecticut, and
California, are already technically insolvent. The federal government may have
to pretend to rescue them financially, which will only make the national
predicament worse.
Oil
The
shale oil “miracle” was an impressive stunt. For a while, it goosed US
production way above the former all-time production peak of 1970, and it
achieved that with astounding speed — about a decade. But this is oil that is
very expensive and complex to produce. It was made possible by massive
borrowing at artificial low interest rates, which are now rising. Something
like three-quarters of the shale operators never made a red cent in net profit,
and many of these companies will find it hard or impossible to roll over their
existing debt, especially with oil under $50-a-barrel. But the price is a
deceptive metric. If it zoomed up to $100-a-barrel tomorrow, the effect would
only be to crush economic activity, because industry requires cheaper oil to
pencil out its operations and citizens can barely afford to drive when gasoline
hits $4-a-gallon at the pump. At the lower $45-a-barrel, the price crushes the
oil producers. Take your pick. There’s no “Goldilocks” price.
The
other problems with shale oil have to do with the nature of the shale plays.
The Permian Basin in Texas is very large, but the best plays are developed in
the so-called “sweet spots” and there’s a limited amount of them. They are the
places that the producers developed first, and when they are played out, the
next round of plays will be in spots not-so-sweet (or productive) — possibly
not worth drilling. The character of the shale oil wells is also way different
from the old conventional classic oil wells. The old wells cost about $400,000
(in current dollars). It involved just sinking a pipe into the permeable source
rock. The oil came out under its own pressure at the rate of thousands of
barrels a day. Eventually, you put a simple pump-jack on the well (the
“nodding donkey”) and it produced for decades, like running a cash register.
Shale oil wells cost between $6- 12 million. They require technically demanding
horizontal drilling and fracking, with additional costs in highly technical
labor, water for fracking, sand to hold open the fracks, chemicals to aid the
process, and a gazillion truck trips to deliver all the water and sand (and
take the oil away). Shale wells produce maybe a few hundred barrels a day for
one year, after which they typically deplete by over 60 percent. After four years,
they’re done. The oil is also different. Shale oil is typically ultra-light. It
contains little-to-none of the heavier diesel, kerosene, jet fuel, and heating
oil distillates, making it less valuable.
Trouble
in the credit markets could shut down shale production for a period of time and
create dire problems for the American economy. That could happen in 2019 as
poorer-performing companies fail to get new financing. As mighty as it seems to
be, the industry is fraught with fragility. Meanwhile, discovery of new,
producible oil has fallen to the lowest level since the 1940s, after three
recent previous record low years. Current low oil prices at around $45-a-barrel
may give Americans a false sense of security. Low prices are mostly indicative
of the collapse of the demand for oil at the global margins and among the large
US demographic that cannot afford it anymore — that is, the impoverished former
middle class. As the damage becomes more obvious, we could hear calls to
nationalize the oil industry. The attempt to do that would collide with the
aforementioned trend for government to become more strapped for revenue,
more impotent, and more incompetent.
Geopolitical
The
Golden Golem has gone an extra mile to antagonize Russia the past two years. Is
it to demonstrate how not Putin’s
puppet he is? If so, it’s pathetic. For instance, heaping ever more sanctions
on Russia, tossing Russian diplomatic staff out of the country because of the
laughable Novichok poisoning of the Skripal father-and-daughter in Britain.
Nobody believed that set up — who recovers from the world’s supposedly most
potent, high-tech military toxin? The larger Russia hysteria, ginned up by the
US “Intel Community” to cover the embarrassment of Hillary Clinton’s election
loss, has destroyed the brains of thousands of Washington insiders and infected
whole sectors of the educated coastal elites who really ought to know better.
Meddling in elections? Is that something the US has never entertained? Recall
that 1996 Time Magazine cover
with the headline that bragged, “Yanks to the Rescue: the Secret Story of How
American Advisors Helped Yeltsin Win.” And now we’re wetting our pants over a
baker’s dozen Russian Internet trolls on Facebook? Yes, this is what the brightest people in the room have
been doing for two years. The net result is a new cold war, pushing Russia into
the arms of China, giving both of those countries an incentive to construct a
new framework for global relations that excludes the toxic US as much as
possible.
That
new framework, by the way, will not be the same as the late, unwinding
Globalism Release 2.0 (Release 1.0 was 1870 – 1914) that allowed America to
exchange IOUs for flatscreen TVs lo these many years. Let’s call that Tom
Friedman Globalism, after the pundit who said it would last forever. The world
will become a wider place again as the Great Powers are increasingly bound to
their own regions for trade relations in a world growing short of energy and
capital resources. The exception to that is in weaponry, now that Russia has
demonstrated its ability to launch hypersonic rockets that can reach the US in
little more than a few Noo Yawk minutes. Do we have anything like that? I
suppose we wish we did. The media is not even talking about it, the
implications are so dreadful.
Has
Mr. Trump actually accomplished anything with his deal-seeking in China while
beating it on the snout with his tariff stick? Well, he got a lot of US
companies loading up on inventory of goods they feared will carry costly duties
a year hence, so they’re all stocked up just in time for a vicious bear market
and the recession / depression that it entails. A lot of that stuff may end up
being distributed by the bankruptcy judges.
How
does our antagonism against China work with the campaign to “normalize” the
behavior of North Korea. I doubt it helps. In 2019, North Korea will be the
whoopie cushion that China places under America’s seat at the negotiating
table. Mr. Trump defied the conventional State Department wisdom by meeting
face-to-face with Kim. It got the two Koreas actually speaking with each other
for the first time in 60 years, with some concrete steps toward ending the de
facto state-of-war. Will Li’l Kim play the role China assigns to him? I think
so. They can squash him like bug. And, of course, everything that the US
congress and Mr. Mueller do to injure and weaken Mr. Trump will make further
progress in Korea unlikely.
How
about the second greatest economy in the world? That would be the European
Union. The EU’s financial system is way more dysfunctional than even ours, with
no mechanism or provision for regulating each country’s spending vis-à-vis the
debt generation of the Union as a whole. There’s no way it can continue and no
prospect for debugging the set-up. What’s more, decades-long shenanigans of the
European Central Bank have created imbalances that will never be corrected.
Even the attempt to normalize operations — as the ECB ceases its debt
monetization routines staring in the first quarter of 2019 — is guaranteed to
crack up the EU economy, which is a horror show of zombie companies and zombie
banks. They will suffer particularly in the recession / depression to come. The
next domino to fall, theoretically Italy, will take the EU down, whatever
happens with the dithering over Brexit. Without the ECB vacuuming up unwanted
EU paper, nothing really pencils out over there. In 2019, expect a substantial
fall in the value of the Euro, and possibly its demise as a currency.
In
fact, expect wholesale disintegration of many structural arrangements all over
Europe beginning in 2019, along with more political violence that exceeds the
simple street actions of the Yellow Vests in France. NATO has been staging war
games on Russia’s border for two years, apparently with no awareness that the
NATO members are deeply dependent on Russian oil and natural gas to remain
advanced nations with comforts and conveniences, like heating their homes.
Perhaps that recognition will hit in 2019. But there will be plenty of noise
for that signal to cut through.
Climate Change
Something’s
going on ‘out there’ though the picture is deeply non-linear and is being
confused for the moment by an extraordinary low level of cyclical sunspot
activity. Not being a scientist, I have only two salient points worth
considering about the issue:
The
first is, we’re not going to do anything about it — because nothing can be done
about it. Whatever’s happening, we’re going to have to roll with it. I’m also
not persuaded that many of the proposed mitigations — carbon taxes, seeding the
upper atmosphere with reflective particles — will accomplish anything.
The
second thought is this: the civilized world has experienced many many instances
of climate change over the past several thousand years. Civilizations rise and
fall with these changes, but the human project as a more general matter
continues, with periods of history that appear to be restful time-outs. The
Roman Optimum (warming period) segued into the Dark Age Cooling, and then the
Medieval Warming (viniculture in England!), and eventually the Little Ice Age
comes along with Isaac Newton and skaters on the Dutch canals. The
difference this time is that our civilization is so deeply complex that
successful adaptation to new conditions is a low percentage outcome, at least
in the form of salvaging many of our current arrangements. In other climate
disruptions, people adapted, sometimes with very severe changes in customs,
practices, political arrangements, and life-styles.
It
will be especially stark this time, and the broad pop culture of Collapse suggests that we
intuit this — everything from Game
of Thrones to The
Road, to my own World
Made By Hand novels. It begins with the wobbling of the most
abstract and fragile of our systemic arrangements, finance, which is mostly
based on ephemeral trust (that the other fellow will pay you). From there, the
trouble proceeds to politics and culture. A few concluding words on the latter:
Culture
2018
was a low point for American culture, such as it is. The idiotic drivel
emanating from the university campuses has infected the entire nation like a
toxic shock disease. Most damaging, of course is the umbrella ideology of
“multiculture” in a society that formerly thrived precisely because of the
opposite of that: a
common culture composed of ethics, customs, norms, and
standards of decent behavior that people not insane could subscribe to. Remove
the common culture of a nation and you will not have a nation — it’s that
simple. Hence Americans are divided foolishly into battling identity groups who
do not believe in a common culture and are doing everything possible to defeat
it. They have no idea what E
Pluribus Unum used to mean and they have no desire or
intention to rediscover it. I return to the cardinal theme of The Long Emergency: that we can’t
construct a coherent consensus about what is happening to us, and therefore we
can’t make any coherent plans about what to do.
The
financial hardships of 2019 provide an opportunity for some overdue
mind-cleaning on these matters. There may even be a significant number of survivors among the
brain-damaged former thinking classes who refuse to go along with the
emperors-new-clothes ideas of recent years any longer. The main thing to
understand about the so-called Progressive Left behind this toxic shock is that
the whole crusade has been less about ideas of justice or fairness than the
sheer joy of coercing others, of pushing people around and punishing them
because its fun! The ideologies around that behavior are just window dressing.
The
response to it so far has been surprisingly mild. If the financial unwind
shapes up as harshly as it looks from here, the response will get more severe.
The universities themselves will suffer hugely as their budgets crash through
the floor and all, of a sudden, they have to issue pink slips to a half dozen
Diversity deans on six-figure salaries. Many colleges will begin the process of
shutting down in 2019 as their student loan racket disintegrates.
Well,
you’ve suffered long enough for today, and I’ll leave it at that.
Happy
2019 everybody!