Thoughts on Coming Apart and the Coming Great Reset
Turning and turning in the widening gyre
The falcon cannot hear the falconer
Kit Webster
Reviewing the Bidding
Thoughts and Theses
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No changes this week
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In the early 1990s, I predicted a severe crisis in the US in the early 2000s - see My Journey for details of how those thoughts were developed, and a description of my predictions, essentially all of which have held up well. That crisis would result in a resetting of the country's financial system and financial institutions and therefore would profoundly affect all parts of the culture and all institutions, including government and military.
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The crisis would be precipitated by debt, deficits, entitlements and demographics.
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The purpose of this web site is to Contemplate Out Loud about ways in which current events are reinforcing or contradicting my predictions. And to create a continual update of thoughts for the future.
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The Fed, Congress and the Executive Branch have now made that crisis inevitable and of a much higher order of magnitude than I anticipated.
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The crisis should be played out over the remainder of this decade. There will be a new world with a new financial system and a new culture under construction at the end of the crisis.
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The Fed has three alternative paths: inflation, austerity and default. For now, they have chosen inflation.
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We are deep into a multi-year end game and to the point at which things will generally become worse, faster, although nothing will move in a straight line.
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The Fed will likely continue on its current path until something breaks.
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When the Fed signals the end of raising interest rates, we will likely enter a new era of currency devaluation and yield curve control.
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Biden is significantly contributing to underinvestment in fossil fuels that will result in a multi-year, perhaps multi-decade, energy crisis. He is attempting to cross the green energy chasm in two steps. We will get to the point where even leftists will treasure every drop of oil and every lump of coal. I discuss this critically important issue, perhaps the most important issue we face today, in The Energy Crisis.
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Biden made a major strategic error by confiscating Russian currency reserves.
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The last stimulus payment, and arguably the one before that, were major errors, contributing significantly to inflation, shortages, extraordinary speculation and the increase in asset prices.
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Inflation is peaking - for now (January 2023) - and it will remain at a high level. In the long run, because of debt levels, there is no practical alternative to continued, elevated inflations - which will probably rise and fall in waves. Stagflation is my bet for the foreseeable future.
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There will be deflationary / disinflationary crosscurrents including demographics (retirement of Boomers, declining birth rates), and debt rationalizing and blowing up of debt, worldwide. Temporarily, we will have the interesting phenomenon of too much retail inventory as a result of overordering during supply chain issues and a slowing economy. Inflation is necessary; deflation /disinflation is the wild card.
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The economy is weakening - recession is probable, and there is definite slowing down at a fairly rapid pace. Actually, there is a good possibility that a recession has already begun. However, recessionary pressures may recede for a quarter or so. The third and fourth quarters of 2022 are two of those quarters where the pressures are temporarily receding.
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Housing is weakening.
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Ukraine should lose the war. A combination of Russian incompetence and advanced weapons from the West, primarily the US, is resulting in at least short term advantage to Ukraine. It is not clear what Russia's next moves are. See Ukraine.
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Russia may be winning the financial / energy war. Energy is so fundamentally important, and Russia has so much of it, while the US is burdened by extraordinary levels of debt, that Russia holds the better hand. The West's counter to that better hand is sanctions. Having said that, sanctions, particularly those leading to an inability for Russia to maintain their oil fields, will begin to create problems over time. These problems will be for Russia and for the whole world, because the world needs Russian oil. Very high stakes poker. See Ukraine.
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Europe will have serious energy challenges this winter. Now that the Nordstream pipelines have been damaged, they do not have the alternative to reach accommodations with Russia. Nature has smiled on Europe for half a winter with mild weather. The bullet was dodged until next year.
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Food disruptions over at least the next year, and probably for several years, primarily as a result of the Ukraine war, will be significant.
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I outline my thoughts about how the next few years will unfold here.
Beth tells me, enough with the analysis, already. People want to know how you feel. I am not so sure about that, but if you are interested, I emote here.
Thoughts From
the Archives
More Coming
May 3, 2024
Metaphors
A Bit of a Mess
My apologies, but my web editor, Wix, burped and created some background in the lower part of this post that I have not been able to get rid of. You can still read the post, but it is messy. I hope to have it cleared up by next week.
Markets
> No change
> Better late than never, or too late? US TREASURY SECRETARY YELLEN: I AM CONCERNED ABOUT WHERE WE'RE GOING WITH THE US DEFICIT.
> Must listen - Lyn Alden on Thoughtful Money podcast discussing fiscal dominance.
> If I were to point to only one indicator of how strange and perverse our times are, it would be that the stock market roared up when it was announced today that unemployment went up. This is not about earnings or valuations, our financial system is now mostly about interest rates.
Until it isn't.
> Metaphors
When I was a senior in high school, I rejected the idea that a stormy day in Shakespeare meant anything other than a stormy day.
Two years of brain development later and a wonderful English teacher in college and all of a sudden, there were symbolism and metaphors everywhere.
(Warning, I am not going to worry about the line between metaphor and analogy in this piece.)
Alice in Wonderland -is my go-to metaphor for our times, but Joe Biden and Donald Trump are walking metaphors for the state of our culture.
In a democracy, you get the government you deserve.
Let's start with Trump.
Ironically, while wokeness is, as part of its essence, the triumph of feelings over facts, Trump is the embodiment of the raw emotional id of our nation. We Jungian-ly project our anger, frustration and despair onto this deeply flawed human, hoping to rescue ourselves and our country from their slides into oblivion.
I grew up in the 50s. Hopalong Cassidy, the Lone Ranger, Roy Rogers, the original Superman - heroes of sterling character who would save the day. Truth! Justice! The American Way!
Our hero is now Donald Trump, a man of poor character and no philosophy. A coarse philanderer. (I remember, decades ago, when Spy magazine, which I miss intensely, referred to Trump as a "short-fingered vulgarian.") This is what we have become. This is a metaphor for our times.
Biden was never anything above ordinary - he graduated 76th out of 85 in his law school - but now he is by default the adult in the room - and his mind and body appear to be deteriorating rapidly.
To focus on his ordinariness, Barak Obama once said of Biden, "Don't underestimate Joe's ability to fuck things up."
He is a classic old-school pol, who basically played the classic political game. Yes, he lies a lot. Yes, he has changed what have become awkward positions.
But those are not the points I want to make.
The metaphor is old and deteriorating and quite ordinary.
We are actively promoting an at-best ordinary and deteriorating man for president. And Obama, who understands this better than almost anyone, is leading the way. We are all actively avoiding reality together in a lemming race over the cliff.
We are both morally and financially bankrupt - decay creeps into every cranny of a culture over time.
Reagan's metaphor was "a shining city on a hill." JFK saw a greatness in America.
Today's metaphors are a deteriorating ordinariness and a naked id.
Beth often discusses the lack of great art today. The Wall Street Journal recently ran a Peggy Noonan article, "The Uglification of Everything."
Times have changed.
We are reflecting ourselves and our culture in many ways, including in our choices of presidential candidates.
The way to bet is either revolution or collapse.
However, there have been several spiritual awakenings over the history of our country within which people wanted to return to many classic values and choose a white knight instead of a dark one. Maybe history will rhyme, yet again.
Milei was, after all, elected in Argentina, even though, while so-far-so-good, the jury is still out on that one. Guiliani did pull New York out of its death spiral. There is hope. It can happen.
Both fingers crossed and not holding my breath.
"All the leaves are brown, and the sky is grey" (not Shakespeare).
Short Takes
> There is a profound change coming, which I have discussed over the years, and that will be the time when whites actually become an identity group beyond some far-right Proud Boys. Completely overstating, whites have approached the issues of immigration and diversity and white supremacy with a combination of enlightened self-satisfaction and bemusement. We are now at an inflection point in the United States at which whites are being actively discriminated against and sanctioned segregation is increasing. Incompatible cultures, primary Islam, will begin to compete for control of society at the legal and cultural levels, beginning with local communities.
Whites are probably destined to become minorities most places. As that time comes and as whites are actively marginalized and discriminated against, they will begin to cohere into identity groups.
Racial and cultural issues will become increasingly dangerous.
It will be ironic that immigration and diversity have unintended consequences.
This process is much more advanced in some parts of Europe, which will provide us with both cautionary tales and roadmaps.
The process has begun, but it will likely take years. Only enlightened minorities can change the outcome, and that is not the way to bet.
"History repeats itself, first as tragedy; second as farce, - Marx
Pro-Israel protesters have begun adopting a banana as a symbol of counter-protest after organizers of the Gaza extremist encampment banned bananas (they claim one of their comrades is allergic).
Vivek - "When we face our founding fathers in the afterlife and they ask us what sacrifice did you make for your country we better have a damn good answer for them.". Vivek is a Hindu. No afterlife for him. He goes through life after life until he becomes nothing - or everything.
> Pippa Malmgren makes a point you have seen me make several times - they are doing to us what we did to the USSR (I have actually referred only to Russia, but by supporting Russia and messing around in the South China Sea, China is getting into the game).
China and Russia know they cannot defeat the US using traditional military means. Their strategy is simple. Force the US to deploy military assets, which will bleed America dry of cash at a time when the US budget deficit is already overwhelmingly too large and perhaps unfixable. Create inflation by any means because the US is very politically sensitive to inflation, especially in the run-up to an important election. Open multiple geopolitical fronts because the US can’t handle a multi-front conflict very well.
> Pippa continues (behind a paywall, so I am trying to tread carefully here) - endorse strongly -
Why do we care? We care because this 4th Estate brouhaha reveals that there is a serious gap between what is happening in reality and what is being discussed in the media. That gap exists in almost every important issue I see in the world economy. The problem here is that the media has squirreled itself into a cozy burrow of like-minded thinkers. That means the public does not have any idea of what is really going on in the world, especially in the realm of geopolitics. This is a serious problem given the perilous state of geopolitics and the various elections being held this year. The issue is the absence of diversity of thinking, a subject I’ve written two books about. These days, people think diversity means ticking boxes: gender, color, capacities, sexual orientation, etc. But, you can have a room full of very diverse people who all think the same thing, like “Donald Trump will never win” or “We can beat China/Russia hands down.” Then you have no diversity of thinking. Berliner referred to it as an “absence of viewpoint diversity.”
> In first change to the guidance in 25 years, federal agency says repeatedly misgendering employees or denying them access to a bathroom consistent with their gender identity amounts to workplace harassment
> From National Review
After five days of anti-Israel demonstrators occupying Deering Meadow on Northwestern University’s campus, Northwestern president Michael Schill and the rest of the university’s leadership decided to accede to several of the protesters’ demands.
While not committing to divesting its endowment from companies that do business in Israel and ending partnerships with Israeli institutions, the university released a list of concessions in a celebratory statement Monday afternoon in exchange for the removal of the encampment on the lawn.
Most notable among those concessions is a promise to offer full-ride scholarships to Palestinian students and guaranteed faculty jobs for Palestinian academics.
“The University will support visiting Palestinian faculty and students at risk (funding two faculty per year for two years; and providing full cost of attendance for five Palestinian undergraduates to attend Northwestern for the duration of their undergraduate careers),” the document reads. “The University commits to fundraise to sustain this program beyond this current commitment.”
As National Review reported in March, over 70 percent of Palestinians support Hamas’s October 7 attack against Israel and 75 percent support Hamas as the governing body of the Gaza Strip.
Northwestern will also provide a “house for MENA/Muslim students” and will “advise employers not to rescind job offers for students engaging in speech protected by the First Amendment.”
Other concessions in the deal Schill and the rest of Northwestern’s leadership struck with the encampment occupants — one of whom assaulted a student journalist attempting to take video — include student oversight of the university’s partnerships with suppliers and the investment of its endowment.
“The University will include students in a process dedicated to implementing broad input on University dining services, including residential and retail vendors on campus,” Northwestern’s leadership wrote, as well as forming a committee on “investment responsibility” with “representation from students, faculty, and staff.”
SHIRAZ UNIVERSITY IN IRAN IS OFFERING SCHOLARSHIPS TO AMERICAN AND EUROPEAN UNIVERSITY STUDENTS WHO'VE BEEN EXPELLED FOR THEIR FREE SPEECH
> From The Morning Dispatch
“Donald Trump thinks he’s identified a crucial mistake of his first term: He was too nice,” Time Magazine’s Eric Cortellessa wrote of his recent interview with the former president, in which Trump reveals what he wants a second term to look like. “Trump has sought to recast an insurrectionist riot as an act of patriotism,” Cortellessa wrote. “‘I call them the J-6 patriots,’ he says. When I ask whether he would consider pardoning every one of them, he says, ‘Yes, absolutely.’ Trump has also vowed to appoint a ‘real special prosecutor’ to go after Biden. ‘I wouldn’t want to hurt Biden,’ he tells me. ‘I have too much respect for the office.’ Seconds later, though, he suggests Biden’s fate may be tied to an upcoming Supreme Court ruling on whether Presidents can face criminal prosecution for acts committed in office. ‘If they said that a President doesn’t get immunity,’ says Trump, ‘then Biden, I am sure, will be prosecuted for all of his crimes.’” Perhaps most concerningly, Cortellessa writes: “Trump does not dismiss the possibility of political violence around the election. ‘If we don’t win, you know, it depends,’ he tells TIME.”
From The Telegraph
Sex is a biological fact, according to Britain’s National Health Service, which is reversing guidance from 2021 that allowed trans patients to be placed in single-sex wards according to their gender. It’s only the latest sign that peak trans has passed—at least in Britain.
One of the “community guidelines” at George Washington University’s encampment is “no sexual relationships.”
> The Free Press on Biden's student debt forgiveness
That’s why a new study by the Committee for a Responsible Federal Budget, which added up the total cost to taxpayers of these write-offs, is so useful. They estimate the total cost will be somewhere between $870 billion and $1.4 trillion, which is “more than all federal spending on higher education over the nation’s entire history.” (Our emphasis.) As CRFB notes, it’s also more than all educational appropriations for the next decade ($935 billion), more than the cost of providing universal pre-K and universal affordable childcare ($750 billion), and more than the cost of tripling the Pell Grant program ($675 billion). The cherry on top is how poorly targeted this scheme is—with the benefits mostly going to the richer half of the country. Another recent analysis found that at least 750,000 of the households having their student debt cleared by the rest of us are “making over $312,000 in average household income.”
> The movement to forgive trade school debt is impressive (sarcasm)
> A new Pew survey shows 42% of Americans consider China an “enemy,” up from 25% two years ago. The mounting mistrust is largely driven by Republicans, among whom 59% describe China as an enemy, compared to only 28% of Democrats.
> Arnold Kling, an economist, published a book a decade ago that offered a way to think about the core difference between progressives and conservatives. Progressives, Kling wrote, see the world as a struggle between the oppressor and the oppressed, and they try to help the oppressed. Conservatives see the world as a struggle between civilization and barbarism — between order and chaos — and they try to protect civilization.
> Not on my Bingo card - 42% of Democrats?
>>> The US fertility rate fell to 1.62 in 2023; replacement rate is 2.1.
It Ain't Easy Being Green
> From the Wall Street Journal
HUD last Thursday announced that it will require new homes financed or insured by its subsidy programs to follow the 2021 International Energy Conservation Code standard. The nonprofit International Code Council sets what are supposed to be model energy building standards every few years, which states and municipalities can adopt.
Many governments have declined to adopt the 2021 standards because of their higher costs. The National Association of Home Builders says the energy rules can add as much as $31,000 to the price of a new home. It can take up to 90 years for a buyer to realize a payback on the higher up-front costs through lower energy bills.
Not to worry, HUD says taxpayers will help cover the cost. It “is anticipated that many builders will take advantage” of numerous tax incentives in the Inflation Reduction Act “as well as rebates that will become available in 2025 or earlier for electric heat pumps and other building electrification measures,” the rule says.
These incentives include a $5,000 per unit tax credit for “zero energy” multifamily construction that meets prevailing-wage requirements that also raise building costs. HUD adds that builders may also “take advantage of certain EPA Greenhouse Gas Reduction Fund programs, especially the Solar for All initiative” and an investment tax credit that can offset 50% of a solar project’s cost.
Notwithstanding these taxpayer handouts, HUD estimates that the new standards will raise the cost of a single-family home by $7,229 and the average annual mortgage payment by $439, assuming a 5.3% mortgage interest rate
> The G7 group of wealthy democracies has given itself 11 years to all but stop using coal in their energy systems. A carveout will still exist where emissions are captured. The G7 — which includes Canada, France, Germany, Japan, the UK, and the US — accounts for about a fifth of global emissions, but it does not include China and India, the world’s top two coal polluters.
>From The Guardian
New climate rules imposed by Joe Biden’s administration requiring huge cuts in carbon pollution from coal-fired power plants will accelerate the decline of an industry that until recently provided most of America’s power, experts say, potentially even dealing a death blow to coal in the US.
Coal, once the backbone of the US economy and feted by Donald Trump as he rose to the presidency, is being driven out of the power sector by cheaper renewables and gas and now faces an Environmental Protection Agency (EPA) regulation, finalized last week, that demands all coal plants not retiring by 2039 to slash their carbon emissions 90% within the coming decade.
The situation is now “probably terminal” for most of the several hundred US coal plants not already earmarked for closure, according to Seth Feaster, a coal industry analyst at the Institute for Energy Economics & Financial Analysis, who said “just a handful of plants” will likely survive beyond the end of the 2030s.
> More capacity; less wind
Miscellany
Eh - maybe a gentlemen's C
