John Michael Greer

Tom Whipple notes that oil prices are slipping into the very high $80s, and that the Kingdom of Saudi Arabia is OK with prices in the $90s perhaps even the $100s. As always, Saudi oil minister Prince Ali al-Naimi maintains that the Saudis can increase production whenever necessary, but a lot of people don't believe they really have the excess capacity anymore. I suspect they have a lot of heavy, sour crude - more costly to refine - and that they know there will be buyers for it someday. And even if they have plenty of light, sweet crude, the erosion of the dollar is as much to blame for increasing prices as scarcity of oil.

There's nothing new about Jim Kunstler predicting imminent doom. He's gotten so good at it. In this case he cites John Michael Greer, who presented at the ASPO conference, and often makes a lot of sense to me, and also cites the continuing effects of oversold mortgages. With everything costing more and more, but no return of jobs, I consider the current climate to be stagflation. A lot of economic gurus insist that our wealthy corporate masters will do anything to avoid hyperinflation because then their hard-won money becomes worthless, so I've expected either a long run of this stagflation, or perhaps deflation. Greer, however, thinks that the recent $600 Billion dollar debt we are taking on is a clear sign that hyperstagflation is imminent.

James Kunstler: Pre Post-Mortem

I like the formulation of John Michael Greer that we're about to see something called hyperstagflation, which would amount to sharply rising prices in an economy going nowhere fast. But if it's based on anything like the stagflation of the 1970s, that journey also ends in an inflationary fiasco, and logically some hyper version of it, which would kill the US government as we know it. Much as I loiter in the precincts of thought experiment, I don't really relish that outcome. But, sadly, we seem to be in one of those times when events outrun personalities and their meager abilities to react.

It's been my contention for weeks now that criminal mischief on the mortgage scene - all those lost, doctored, forged, robo-signed documents - will slow foreclosures (and even plain vanilla transactions) to the extent that the real estate market will choke on un-sellable property, leading to suffocation of the big banks and ultimately generalized thrombosis of the system.

John Michael Greer: The Preponderance of the Small

Many of my readers will have heard the calm and sanitized announcement this evening that the Federal Reserve Board will be buying $600 billion of US federal debt over the next seven months. I’m not sure how many of my readers have noted that this is the amount of debt the US government expects to issue over the next seven months. I’m even less sure how many of my readers have noticed that the Fed will be paying for these purchases by exercising its legal right to produce US dollars out of thin air. In other words, the United States is now printing money to pay its bills.

There may be an example somewhere in the long history of finance when a country has done this without facing catastrophic economic consequences in the fairly near term, but I don’t happen to know of one. Once a country starts covering its debts by way of the printing press, the collapse of its currency and its economy is pretty much a foregone conclusion. The exact way in which the consequences come due varies from case to case; the hyperinflation made famous by Weimar Germany and, more recently, Zimbabwe is only one of the options, and there are good reasons to think that this isn’t the most likely outcome just at the moment.

My own guess, for what it’s worth, is that we’re headed into a state of affairs that might as well be called hyperstagflation: the economy and money supply both contract, but the demand for dollars drops faster than the supply as holders of dollar-denominated assets scramble to cash in their dollars for anything that might preserve a fraction of their paper value. As in the stagflation of the Seventies, but much more drastically, prices go up while employment goes down until the economy shudders to a halt.

Now of course that’s far from the only possibility; we could see a straightforward deflationary collapse; we could also see increasingly reckless use of the printing press overwhelm the contraction of the money supply altogether and tip us into old-fashioned hyperinflation. What we won’t see for very much longer, though, is what currently passes for business as usual. I suspect a great many people in the financial community are aware of that – a supposition that gains some support from recent reports that corporate insiders in a range of industries are selling off their shares of their own companies’ stock at a record pace. I suspect the rest of us will become aware of it, too, as we approach the kind of economic, social, and (inevitably) political disruptions that people later describe in hushed tones to their grandchildren.