For some time, former Rolling Stone journalist James Kunstler has been my reliable (and enjoyable) source of commentary from the negative end of the spectrum of opinion about the state of the economy, energy policy and economics, and broad social themes in the country. I try to seek and consider all points of view, in the hope that I might synthesize a realistic perspective that I can use to guide my own efforts to fit into the world and prudently deploy what resources I have to work with.
The more positive side of that spectrum has included for the most part various government, industry, and mainstream media types. For a long time, I was inclined to weight their opinions and pronouncements more credibly. But as I have observed things unfold, I am reluctantly beginning to see those on Mr. Kunstler's end of the scale gaining more credibility based on the actual evolution of events. The point is not so much that Kunstler and other gloom-n-doom types are especially authoritative or credible, but the offialdom that we should be able to rely upon is decidedly not.
Today, Kunstler's regular Monday commentary was headlined, "Not Your Grandma's Depression". It provides an interesting contrast to some of what I have heard coming from financial media pundits, the U.S. Treaury or Federal Reserve in recent months. A few excerpts follow;
"...We're a very different country than we were in 1932. In that earlier crisis of capital, few people had any money but our society still possessed fantastic resources. We had plenty of everything that our land could provide: a treasure trove of mineral ores and the equipment to refine it all, a wealth of oil and gas still in the ground, and all the rigs needed to get at it, manpower galore (and of a highly disciplined, regimented kind), with fine-tuned factories waiting for orders. We had a railroad system that was the envy of the world and millions of family farms (even despite the dust bowl) owned by people who retained age-old skills not yet degraded by agribusiness. We had fully-functional cities with operating waterfronts and ten thousand small towns with local economies, local newspapers, and local culture..."
"...Our debt problems today are of a magnitude so extreme that astronomers would be hard pressed to calculate them. By any rational measure our society is comprehensively bankrupt..."
"...the upshot will be something at least twice as bad as theGreat Depression of the 1930s: people with no money in a land with no resources (with manpower that has no discipline), hardly any family farms left, cities that are basket-cases of bottomless need, comatose small towns stripped of their assets and social capital, an aviation industry on the verge of death, and a railroad system that is the laughingstock of the world. Not to mention the mind-boggling liabilities of suburbia and the motoring infrastructure that services it."
Remember, the depression was a process, not an event.
Those of us looking for insight into the true state of the economy and markets hear and read soothing commentary about temporary liquidity problems in the financial industry, but I see increasing references to a more ominous realization that what we may really be seeing is approaching (or recognition of) onset of areas of insolvency. As Mr. Kunstler points out, liquidity is cash-on-hand, but insolvency is "...no cash either on hand or in the vault and nothing else to sell to raise cash except worthless "creative" securities that nobody would ever buy."
In the reader comments section that follows the column, one individual responded to an inquiry about capital preservation with the suggestion "Move to a warm climate with a good garden plot."
Pat and I have already discussed this very idea more than once.
Or Mexico. Remember how this blog began, in November of 2003?
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