How much can a nation not get it? Would $100 oil ignite a new orgy of “consumer” spending and another round of investment in commercial real estate? Welcome to the Futility Economy. This is the economy where Nature and its material companion, Reality, punish us for our stupidity and fecklessness. This is the economy that will tear the United States apart, after it bankrupts us at every level, and mercilessly drives the population down by one-third through starvation, homelessness, violence, disease, and sheer political cruelty.

Whatever you thought our economy was the past thirty years — whatever model of it you have in your head — that is definitely not what we are going back to. Like one of Dickens’s Yuletide ghosts, Reality is leading us by the hand into new circumstances. We resist like crazy. We throw our hands over our eyes. We don’t want to look. We want to return to the comfort of our dreary routines — living in places that aren’t worth caring about, weaving endlessly in freeway traffic, drawing a paycheck at the air-conditioned cubicle, inhaling Buffalo wings by the platterful, with periodic side-trips to the state-chartered casino where there’s always a chance of scoring a lifetime’s income on one lucky bet. And at the end of the day, you can retire with a simulated prostitute on your laptop screen! And not even have to fork over a dime — except perhaps for the Internet connection fee.

Reality is taking us out of that familiar, if sordid, realm, whether we like it or not. Our destination is an everyday economy where you rarely travel far from the place you live, where you have to make provision for you own health, your own old age, your own income, your own diet, your own security, and your own education. If you’re really fortunate, some or all of these necessities can be obtained in conjunction with your neighbors in the place where you live — but don’t expect an increasingly mythical federal government to supply any of it. Expect a new and different way of organizing households based on extended families and kinship groups. Be prepared for agriculture to return to the foreground of everyday life, where farming is back at the center of the economy. Think about how you will cultivate your best role in a social network so the things you do will be truly valued by the other people who know you. Learn how to make your own music and write your own scripts. Try to study history. Resist cults. Keep your mind clear and your senses sharp.

Even if you have a dim sense that this is where we’re headed, most of you probably want to stay where you are. The investments we’ve made in the current mode of existence are so monumental that we can’t imagine letting go of them. This will be the theme of American life for the next couple of years as we struggle mightily to escape the confining armor of the Futility Economy and move closer to ways of life that have more of a future. Right now, all the power and authority in our culture has dedicated itself to remaining inside that old armor.

The Master Wish around the country, including among people who ought to know better, is that we can “solve” our economic problem by finding some other way to run all the cars. Even hardcore environmentalists yammer incessantly about hybrid and “plug-in” cars as the “solution” to our blues. One of Barack Obama’s first acts as president was to “save” the giant car companies. This is exactly the kind of signature behavior of a Futility Economy. It’s based on the idea that we have to continue driving cars all the time and for everything, at all costs.

The religion of the Futility Economy is Techno-Triumphalism, which is the belief that an endless sequence of magic tricks performed by shaman scientists can defeat the Second Law of Thermodynamics, which rules the universe — which true scientists ought to know cannot be defeated. Their colleagues, the shaman economists believe in parallel magic tricks, such as the idea that increased borrowing can “solve” a problem of runaway over-indebtedness. These are the actions that currently engage the people in charge of things in our society.

Given this current state of things, and the current course we’re on, my guess is that when the falsity of these ideas and actions are exposed, they will become evident not gradually but very rapidly and shockingly. The people in charge of things will lose their vested legitimacy in a flash, and the institutions they command will become irrelevant overnight. The process would be traumatic for all of us as routines we counted on for a thousand particulars of everyday life vanish or collapse. A Great Indignation will rise across the land over the perceived swindles involved. A lot of effort will go into avenging the swindles instead of rebuilding an economy out of the ashes of futility.

Regards,
James Howard Kunstler

January 5, 2010

Oil Prices Will End the Futility Economy was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

I was in Los Angeles for a few days last week, as chance had it, marveling at the odd disposition of things there.  I’ve been there many times over the years, but you forget how overwhelmingly weird it is. Altogether the LA metro area has the ambience of a garage the size of Rhode Island where someone happened to leave the engine running.  To say that LA is all about cars is kind of like saying the Pacific Ocean is all about water.  But one forgets the supernatural scale of the freeways, the tsunamis of vehicles, the cosmic despair of the traffic jams.  The vistas of present-day LA make the Blade Runner vision of things look quaint in comparison.

You motor out of the LAX airport – personally, I love the name “LAX” because it so beautifully describes the collective ethos of the place – and you discover quickly that the taxi cab’s windows are not that dirty, it’s the air itself colored brown like miso soup.  Going north on the 405 freeway, you see the looming Moloch of the downtown skyline through the brown miso soup. And you begin to understand why the products of the film industry are so fixated on the theme of machine apocalypse.  Downtown LA looks like just such a gigantic machine as the FX crews would dream up, as if a day will come when those gleaming mirrored office towers will pull themselves out of the ground from their roots and begin lumbering, crunch crunch crunch, north toward the Hollywood Hills seeking to exterminate the vile humanity responsible for making the place what it is.

I happened to be camping out briefly in West Hollywood, in a scene-ster hotel where tiny bubbles of show biz mega-success wafted around amidst a background odor of failure, and an impossibly thin line was drawn between being pampered and being asked to go die in the gutter, please.  The place is not without a certain decorum. I couldn’t help but imagine how lovely Hollywood must have been in, say, 1923, when 92 percent of all the hopeless crapola now on the ground there had not yet been built, when there were no freeways, and fewer cars than currently found in Lincoln, Nebraska, you could go out to the Pacific Ocean on a “Big Red” streetcar, and on a clear day you could see from La Cienga out to Mount Wilson, and the movie “industry” was like a college theater department. What a fabulous giggle it must have all been – apart from poor Fatty Arbuckle – in that romantic desert at the edge of the world.

The whole “Dream Factory” myth has become such an awful cliché, but what remains interesting now is how it utterly infected every other organ, byway, and lost corner of American life, to the degree that the life of this nation became little more than a “narrative,” a story-board, a montage of wishes superimposed over the harsher mandates of reality.  Hollywood now is a mere cartoon of what Wall Street and Washington have turned into.  We’re a civilization of fluff now, riding on a river of toxic sludge.

I found Hollywood utterly exhausting.  On morning walks down in the buzzard flats below Sunset Boulevard you almost never saw a human being outside the protective carapace of a car.  I think I was the only person who ever walked down Melrose Avenue this calendar year.  There were a lot of fresh store vacancies in the endless one-story strips, as if the retailers had just packed up and left Dodge under the cover of night.  There were obvious, if lame, attempts to pedestrianize the major surface boulevards with fancy crossing pavements, but traffic flowed on them at sixty off the rush hours, and you felt like a marmot in a buffalo stampede out there.  For solace, I listened to Bruce Molsky sing “I Ride an Old Paint” on the iPod.  The fiddle part is lovely.

The city of Los Angeles, indeed the whole state of California, seems exhausted too. Apocalypse is probably such a rich theme out there precisely because everything about that particular way of life seems to be nearing its end – whether it’s the fiscal fiasco or the water supply, or the aerospace economy, or the music industry, or the once-great university system, or the Happy Motoring fantasy of cruising for burgers in what Tom Waits called the dark, warm narcotic American night.  I went to the movies there one hot afternoon – Tarantino’s latest, Inglourius Basterds, a completely crazy but enjoyable revenge romp against Hitler & Co. – and before the feature, they showed a “trailer” for Roland Emmerich’s forthcoming apocalyptathon. 2012, in which virtually every global landmark from the Vatican to the White House is destroyed, and mankind’s last hope is John Cusack riding a spaceship to worlds unknown….  If that isn’t shooting your wad as a movie-maker, I’m not sure what is.  Maybe next time out, Roland will step back and make a movie about a puppy.

I had my fill of apocalypse by the time I left the place, only to find myself back in a real nation really dissolving into a puddle of goo.  In the strange new ether of the Web, a consensus grows that we’re in for a rocky autumn, as if the signal event will be something like a hurricane of shoes dropping – bank failures galore, repudiation of US debt instruments by America’s former patrons, foreclosures to the farthest horizon, jobs and incomes terminated, and all the good intentions of the folks in charge coming to naught in the face of historic forces.  We’re off to that kind of a start as I write this, with the Dow dropping eighty points and the news that Disney Inc has just paid four billion for the rights to the Marvel Comics posse – Spiderman and his homeys.  As if America needs more childish fantasy.

Regards,
James Howard Kunstler

September 9, 2009

Cars, Wishes and the Apocalypse was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

What our Keystone Kops Kongress (The KKK of the 21st Century.) has done is to forget history and simple economics.

Historically, Americans have a preference for large cars.  Granted, you can always find a group of people who drive nothing but small cars, like Ferrari, Maseratti and Volkswagen, though they have always been in the minority, like those who wear Birkenstocks.  But most of us prefer big and bigger.  Keep in mind that it’s not just because they’re bigger.  There’s far more to it than that.  Consider.  Big cars ride smoother on rough roads and over railroad crossings.  Engines are more powerful and the trunks are generally large enough to hold two weeks worth of luggage or a couple of dead bodies.  And in case you think I’m exaggerating, why do you think gangsters like big cars?

Taking a road trip?  Nothing like a big car for comfort while traveling in luxury for 600 – 800 miles.  Then there’s safety.  Big cars from the good old days, and even the current poor imitations of big cars, are simply safer.  Hit another vehicle…or have one hit you…and you stand a very real chance of walking out of the mess with nothing more than a few strained muscles. I should know.  I’ve both seen it and done it. Try the same stunt in a small car and you have a better than even chance of residing in the nearest hospital for a few weeks and then scheduling your life around physical therapy for the next six months or better.  That’s if you’re lucky.  If you’re unlucky?  Your surviving loved ones will become intimately acquainted with funeral home procedures.  Simple cremation can still run some $3,500, while a very modest traditional funeral will range from four to over ten grand, and that doesn’t include a monument or gravesite.

Our brilliant Kongress has also managed to either forget or totally ignore economics, which is apparently what they do professionally.  It doesn’t take a genius to figure out that you’re not saving money by buying a new car to replace your old one in order to save money on gas.  Don’t believe me?  Then let’s run a few figures based on automotive ads, along with an actual experience that I had.

All the automotive ads tell you that by trading in your old comfortable, roomy gas-guzzler that gets a paltry 15mpg in town for a nice, shiny econobox that gets a spectacular 32mpg on the highway and a very reasonable 20mpg in town, you will save thousands of dollars every year.

Sure you will.

First of all, that sipmobile is going to run you $19,995.00 with nothing down and a very affordable 5-year note.  Then you will need to pay $3,457.00 to cover tax, title and license.  But there is still no down payment.  Of course, that means the little critter’s price has just escalated to $23,452.00.  Even after making the down payment that isn’t a down payment, you’re still on the hook for $333.25 per month for the next 60 months…and that’s at 0% interest.  At today’s (June 19, 2009) price of $2.59 a gallon for regular, that’ll pay for 128 gallons.  Per month. At 20mpg, you’d be able to travel 2,560 miles for the price of that monthly payment.  Your gas-guzzler that gives you 15mpg?  You’d only be able to go 1,920 miles on the same amount of money.  However, throw in the monthly payment and your fuel efficient economy car is costing you $666.50 a month, making your effective fuel cost $5.18 a gallon to travel those same 2,560 miles per month or 26 cents a mile.  Since you have no monthly payment on the gas guzzler, you’re still spending $333.25 to travel 1,920 miles or 17 cents a mile.

“But I can drive a lot farther for the money,” you say, “so I’m still saving money.”  Well, it’s true that you’re driving 33.3% farther on the same amount of gas…or using 25% less gas if you prefer to think of it that way… but your cost per mile tells a different story.  Project the cost of fuel for that gas-guzzler by 33.3% and the resulting price of fuel is $444.22.  Still 1/3 less than the combined monthly payment/fuel cost of your sipmobile to travel the same number of miles.  Now what’s the fuel cost per gallon for the gas guzzler?  $3.45.  And the fuel cost per mile to drive 2,560 miles at 15mpg?  The same 17 cents per mile that it cost to drive 1,920 miles.  As long as you’re making a monthly payment, the cost per mile for your econobox will always be at least 9 cents more than the gas-guzzler.  Why do I say ‘at least’?  Because if you pay any interest at all, your monthly payment will, obviously, go up.  As will your fuel cost per mile.

Odds are that your old gas-guzzler has been paid off for some time, so your only expense is maintenance, insurance and the cost of gas.  Unless you drive 5,000 miles a month AND rebuild the entire car from the front bumper to the rear bumper with new parts, there’s no way you will spend as much money on your gas-guzzler in the next five years as you will that nice, shiny sipmobile.  Additionally, Our beloved old beasts are built to last as well as to survive crashes. Incidentally, insurance on your environmentally friendly economy car will be substantially more than your gas-guzzler.

To give you an idea of how little knowledge exists on this level, you might find an experience I had in the 1970s to be instructive.  One day, a man knocked on my door.  He was looking for scrap cars that he could buy and then sell them to the junkyard to make a few bucks.  He saw my old car in the driveway and wanted to know if I wanted to sell it.  Of course I didn’t.  But in the course of the conversation, he mentioned that a few days earlier he had gotten a car from an elderly couple.  It was a virtually new Buick station wagon, less than a year old.  Garaged at all times and with less than a 100 miles or so on the odometer each month.  According to him, it still had the new car smell.

Believe it or not, the old couple had told him to come and get it…they GAVE it to him…because it used too much gas and they were going to buy an economy car to save money!  If that wasn’t bad enough, he spent the next several days trying to sell that car for $100…and no one was interested.  In the end he sold it, the day before he visited my house, to a scrapyard for $75, whereupon the scrapyard crushed it for scrap metal. I could’ve cried!

What’s the moral of all this?  Just because that nice, new economy car gets 30mpg on the highway, that doesn’t necessarily make it an economy car.  As you’ve read, there are many more factors involved.

Me? I’d rather have a big, old, comfortable, safe car (such as my ’93 Buick Roadmaster Estate Wagon) than one made from tin foil that they’ll have to cut me out of with a pair of scissors if I have a minor accident.

What about you?

Regards,
Richard Marmo

June 24, 2009

Buy an Economy Car and Save Money on Gas? Not Hardly. was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

If there is one thing Americans will fight to the last ditch over it is our beloved automobiles.  Most of us won’t use mass transit, we won’t carpool, we won’t walk, and we won’t ride bicycles.

The new ukase that DC throw away our debilitating tax dollars to attempt to bribe people via vouchers to buy hybrids they can’t afford and will hate in return for allowing their trade-ins to be scrunched into scrap has me close to foaming at the mouth.  Where in the Constitution does it say such loony legislation is legal?   Where does it say the Washington can dictate our choices, gas mileage, and harming our possessions to suit their ideologies?

This is an offshoot of a dictatorial California (where else?) scheme forbidding registration of older cars.  By outlawing perfectly good vehicles, which the drivers pay the penalty of lower gas mileage for, the Greens are destroying wealth and continuing to back us into corners we aren’t going to like a bit–all for their crazy junk science.

Other ideas that have been floated are import duties similar to those in the Netherlands and elsewhere: a 100% import duty on foreign automobiles, a suggestion sure to find favor with Japan, India, Korea, and the EU who would like to keep selling their products to us.  We’re already having grim rumblings about “protectionistic” legislation.  In Egypt a foreign car runs about three times new car value, whatever its age.  “Class” in Holland is an old black Ford sedan!  California already offers a bounty in some instances and has banned other cars from the road.  Still another proposal is demanding that cars past a certain age be destroyed–did those people ever hear of the “takings” clause?  If I cannot drive a vehicle on public roads and/or if I cannot register it and/or if the government demands said car be destroyed, I will be impoverished without compensation.

Yes, we need to heed warnings that the USA has to cut back consumption and wasteful habits–but urging people to buy new cars is not a good way to go about it, nor is destroying perfectly usable machinery.

“Use it up, wear it out, make it do, or do without,” the old Yankee doggerel goes, and we really should pay attention to it, so long as we leave our neighbors alone and do not become joyless Scrooges.  That does NOT mean that we have to do without what we really want, merely that we need to be creative and check our priorities and goals more carefully.

The three biggest purchases most people make in their lifetimes are houses, college educations, and automobiles.  Gary has my article on how to solve the college problem and it will appear in time.

The revolution starts right here, dear bar patrons, because I am going to tell you how to have what we want legally and economically.  My contribution to the war effort where our treasured transportation is concerned will be showing you how you can all drive exactly what you want affordably and a pox on anyone who doesn’t like it.  My family has been doing it for over sixty years and I guarantee that it works.

Life is about using our intelligence, our assets, and our character to get what we want, and no one I know wants to ride around in a motorized dog crate that has to be plugged in every night while the electric meter whirls as though powered by a demented squirrel.  Imagine going to visit friends fifty miles away and having to ask if you can plug your car in during the evening so that you can make it back home!

Think of the danger of frail car substitutes.  A fellow car-lover said that every time he takes his Miata convertible out he gets very nervous finding himself eyeball to hubcap with eighteen-wheelers.  He is the second-best driver I know and his gaudy little roller skate has plenty of power to get him out of trouble.  The same can scarcely be said for ultra-lightweight plastic baby bathtubs with bitty three-banger motors.  Or worse.

This bears directly on the idiotic idea that we crush useful vehicles and send them to China as scrap–well, what did you think the government was going to do with the ones turned in?  Give ‘em to Mr. Goodwrench to put on the lot at GovMot?!  Destruction of wealth, the lordly “WE know better than you do,” and totalitarianism is what  the left wing does professionally.  Scrap value is bound to be part of phoney bologna “pay as you go.”  Our steel industry is in trouble, too, so better we don’t sell metal of any sort we need to foreigners, even if we don’t get it back as tanks or 105 shells as happened during WWII.  The casings of large caliber shells–such as a 105–are certainly made of brass, but the payload is steel, with a rotating brass ring that engages with the rifling and a secondary explosive burst that turns that steel into multitudinous shards named after Colonel Shrapnel.  Give me any nonsense and I’ll tell you about anti-tank rounds with sabots on them and kinetic energy.

It is insanity to sacrifice perfectly good parts and cars with a great deal of useful life left in them on the sacred altar of Liberal theology.

One of our great problems as a nation is the “use it once and throw it away” mentality which has turned into machinery which cannot even be repaired for less than a new computer, for example, would cost.  Ask to have a VCR repaired and the man will laugh.  If I needed a new washer I would never think of buying precisely that; I would go find a sturdy older machine that was made out of genuine metal instead of plastic.  Parts are still available, and for far less cost I would have a machine that would work another fifteen years, instead of Sears wanting me to buy an extended warranty for years two through four.  I expect the things I purchase to be good for many years.  I don’t buy junk, and I don’t buy fads.

Part of the answer on “What should the car of the future be?” (coming in the next segment) has to do with how long you expect it to last and how little you anticipate having to put into repairs.  The rest is comfort, safety, sensible but not ludicrous gas mileage, affordability, and vehicles you expect to drive long term.

Having argued the case for diesel fuel and motors, based on lower price, higher mileage, greater availability in times of rationing/long lines/higher prices (diesel is more likely to be available than gas since the trucks must roll or most of us will starve), and the ability to store it for future need, unlike gasoline which is now useless as a means of running motors after six months, let’s go on to the more interesting part of how to choose perfect vehicles.

The first question is how many vehicles do you need?  Almost certainly at least one more than you have!  The classic Cavalry rule is 1.3 mounts per man, rounding up always since one cannot ride a third of a horse or drive a fraction of a car.  Two people need three cars (since one always seems to be in the shop, or having the oil changed, or is the wrong size for the job.)  Three people need four cars.  And good driving records/grades, with the current price of insurance.  Not to worry, since part of the solution is being certain that the guidelines I am going to promulgate ensure that we can both afford and enjoy our vehicles.

What sort and how many cars would it take to make your family blissfully happy?  What would you love to drive and own?  How about a luxurious sedan as a road car and for evenings out, a station wagon or pick up, a car for your teenaged daughter, and something that will get pretty good mileage if you insist?  That’s a nice collection even if it is difficult to park in suburbia.

Could you get all of those and afford to run them?  Of course you can!  The solution is the very cars that the government proposes to destroy.  You know what new cars cost even with desperate dealers offering all sorts of incentives, but with sensible shopping you could have all four for less than the cost of a Hyundai.  Think about how much gas you could buy if you didn’t spend the money on a Honda Accord!   Remember how much better things were constructed twenty or more years ago.

The newest car I own is a ’95 and I’ll match my collection against an oil sheik’s.  Other than being diamond-studded.  I wouldn’t take a 2009 car (well, less than a Ferrari) if you gave it to me on the condition that I had to drive it.

Next time I will make specific recommendations on how to reduce car purchases to a proposition as simple as orthodontia:  when you need it, you need it.  Once you’ve had it, you don’t expect to need it again.  Once you have sorted out the perfect fleet and freed yourself from five-year car notes and safety and repair concerns, you can finish accumulating the 30% of your portfolio which should be in metal and get on to sorting out the various interesting propositions our friends at Agora sends us.

Rebelliously yours,
Linda Brady Traynham

June 18, 2009

Leave Our Cars Alone was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

By the time you finish wading thru all the contradictory comments, jawboning and visits to Fantasy Island, your head has a very good chance of suffering mental whiplash, if not actual severe hernia of the mind. Let’s see if there’s any way to make sense of the mess.

June 1, 2009, General Motors finally drank the hemlock and filed for bankruptcy at the behest, encouragement, dictation or coercion (pick one; your choice) of President Obama and the U.S. Government.  GM’s bankruptcy filing is one of only two things that has been consistently reported or agreed upon.  The second?  Insistence that bankruptcy court will allow GM to emerge within a short period of time as “a leaner, meaner and smaller company that will be able to respond quickly to market forces, producing cars that Americans want and that are also environmentally responsible.”  What “environmentally responsible” means I don’t know, other than you will likely see a parade of petite cars you pull on like a pair of jeans.

From this point on, you pays your money and takes your chances.  Some things are obvious, such as President Obama saying there will be additional pain, more dealerships will close and some parts suppliers will go out of business.  That’s a masterpiece of understatement, particularly when you consider another statement appearing on MSNBC.  David Cole—who just happens to be the Chairman of the Center For Automotive Research in Ann Arbor, Michigan—essentially said that critical suppliers were on the edge of failure.  If they go down, they could trigger a cascading failure, causing the collapse of the entire automotive industry, then moving on to affect the rest of the economy.

Even the number of plants to be closed is a moving target.  According to the bankruptcy filing, nine plants will be closed and three idled.  Other reports have indicated sixteen, still others claiming either more or fewer.  You feel like you’re in the middle of a shell game, trying to figure out which shell has the correct number of plant closings under it.  Regardless, 21,000 will be fired, but 1200 “new jobs” will be “created.”

From the perspective of the loyal, dedicated worker who suddenly finds himself (or herself) out in the cold, it doesn’t matter if a plant is closed or idled.  They still don’t have a job all of a sudden, which means they have to go find one…assuming they even know how to go about the process.  Keep in mind that many of them have never worked anywhere except for GM and they don’t have a clue how to start a job search or create a resume.

When an idled plant is finally restarted, if it ever is, a new problem rears its head.  Where do you find the skilled workers to get the assembly lines rolling again?  The ones who knew how are no longer around.  Either they’ve found new jobs in the area, moved to another state or taken forced retirement.

In spite of his “cascading failure” comment, David Cole does a 180-degree pirouette with his statement that a more focused product offering from GM could generate a profit of around $10 Billion dollars.  Taking it a step farther, he claims that the auto industry is on the threshold of a dramatic increase in profitability.  Of course, that does assume a rebounding economy and the creation of one million new households per year, resulting in growing demand.

The demand may be growing, particularly as cars wear out and a family or individual either replaces them or does without, instead falling back on public transportation and shank’s mare, but there is the little problem of being able to qualify for a loan.  Granted, money is available for those with good credit, but the number of Americans with good credit is definitely going down.  Beyond that, how many of us want to be saddled with a five to seven year car loan when many don’t know if they’ll even have a job five to seven months from now?

Cascading failure or rebounding economy: does anyone know for sure which it will be?  Even those of us who are charter members of the Doom & Gloom Society don’t know for sure which direction it will finally go or how bad it will truly be if things do go south. Especially way south.  Still, there seems to be no dearth of analysts, positive thinkers or Pollyannas who insist that we’re just having a difficult period at the moment, but things will soon return to business as usual.

Another positive thinker, as reported on the June 1 MSNBC, is George Magliano.  Mr. Magliano is Director of automotive industry research for the Americas at the consulting firm IHS Global Insight.  He is projecting sales of 9.5 – 11 million vehicles annually for the next couple of years, gradually returning to 15 million per year after that.  He also said that we’re beginning to feel pretty good about the economy, but the recovery will be anemic.  If that ain’t an oxymoron, what is?  Correct me if I’m wrong, but an anemic recovery darn sure doesn’t qualify as a recovery from where I’m sitting.  Nor would it make me feel pretty good about the economy.  But this is what you get when you make a habit of wearing either rose-colored glasses or blinders.

Another comment that has been made…sorry, I can’t remember where.  The reports, comments, contradictions and information floating around is coming so fast and furious that it doesn’t take long to begin suffering from sensory or informational overload.

Some experts suggest that GM will become a publicly traded company again by the middle of next year, at which time the Government will begin to slowly sell its stake in the company.  Depending on your perspective, reaction to that statement will range all the way from stunned silence to hysterical laughter.  Few people believe it will happen and a local conservative talk show host stated that when the government gets into something, they never get out of it.  The chances of Government Motors ever becoming General Motors again are somewhere between slim and none…and slim just left town.

Let’s take a quick look at the kinds of cars you won’t have versus the ones they (meaning the government) think you want.  All I can say is read it and weep.

So-called muscle and emotional cars, meaning the Corvette, Camaro, anything with a large V-8, comfortable and sufficiently large enough to provide decent protection in a crash, are either going to vanish or become few and far between.  Makes you wonder what’s going to happen to large SUVs and full-size pick’emup trucks, doesn’t it?

What will take their place?  Trot on over to Chevrolet’s Future Vehicles page and take a look.

There are four vehicles listed and none of them are as large as the current Chevy Impala. The Cruze is the largest of the bunch, but you can’t get a sense of its size because it’s described as having comfortable seating for five, ample interior space and surprising cargo capacity.  Then there’s the Volt, a plug-in electric car with a 40-mile range without a drop of gas being used.  A perfect commute car, it says?  No way, I say.  Especially in Texas.  You can easily rack up more than 40 miles by the time you make a single combined run to the grocery store, office supply, Radio Shack and the mall before coming home.

But the real jewel is the Chevy Spark, which will be imported from…where else but… China.  It’s a true 4-4-4, meaning it has a 4-banger engine, 4 doors and 4 seats.  This thing is so small that it can be parked in the back of my ’93 Buick Roadmaster Station Wagon with room to spare!  Forty years ago, I saw a 1967 Ford Mustang Hardtop tooling down the road with a Great Dane in the back seat.  Poor dog had to stand on the seat with his head out one window and his tail out the other.

The Spark appears to be even smaller, which means that even if I could shoehorn myself behind the wheel …which I doubt since I have trouble squeezing into a Dodge Stratus, even though I’m only six-foot-one and weigh about 185 pounds… my dog, Magnum, would be emulating that Great Dane.  And Magnum is a Dudley Yellow Lab weighing a mere 65 pounds.

The bankruptcy of General Motors, its transformation into Government Motors and the myriad questions swirling around the entire episode, leaves one with the feeling that we are occupying a real live episode of Perils of Pauline, with no assurance that there will be a hero coming to her rescue.

Would I buy another General Motors car right now?  Maybe.  Would I buy a future minicar, electric car or any other car produced by Government Motors?  Not a chance.

If a substantial percentage of car buyers reach the same conclusion, the anemic economic recovery they’re obsessed with spending into existence may very well turn into a robust depression.

Regards,
Richard Marmo

June 10, 2009

Round and Round GM Goes was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Of course, many Nobel prize-winning economists would argue that it has only been a blessing for us, but that only shows how the newspapers are committing suicide-by-irrelevance. And if other societies, such as China’s late-entry industrial start-up, want to adopt a similar fantasy, they will only find themselves all the sooner in history’s garage with a tailpipe in their mouths.

Here in the USA, we will mount the most strenuous campaign to keep the motoring system going — in fact, we’re already doing it — but it will fail just as surely as two (so far) of the “big three” automakers have failed. It will fail because car-making is only one facet of a larger network of systems that is coming undone, namely a revolving debt cheap energy economy.

Americans will never again buy as many new cars as they were able to do before 2008 on the terms that were normal until then: installment loans.  Our credit system is completely broken.  It choked to death on securitized debt engineered by computer magic and business school hubris.  That complex of frauds and swindles coincided with the background force of peak oil, which meant, among other things, that economic growth based on ever-increasing energy resources was over, and along with it ever-increasing credit.  What it boils down to now is that we can’t service our debt at any level, personal, corporate, or government — and that translates into comprehensive societal bankruptcy.

The efforts of our federal government to work around this now, to cover up the “non-performing” debt and to generate the new lending necessary to keep the old system going, is a tragic exercise in futility.  I’m not saying this to be “pessimistic” grandstanding doomer pain-in-the-ass, but because I would like to see my country make more intelligent choices that would permit us to continue being civilized, to move into the next phase of our history without a horrible self-destructive convulsion.

Another consequence of the debt problem is that we won’t be able to maintain the network of gold-plated highways and lesser roads that was as necessary as the cars themselves to make the motoring system work.  The trouble is you have to keep gold-plating it, year after year. Traffic engineers refer to this as “level-of-service.”  They’ve learned that if the level-of-service is less than immaculate, the highways quickly enter a spiral of disintegration. In fact, the American Society of Civil Engineers reported several years ago that the condition of many highway bridges and tunnels was at the “D-minus” level, so we had already fallen far behind on a highway system that had simply grown too large to fix even when we thought we were wealthy enough to keep up. Right now, we’re pretending that the “stimulus” program will carry us over long enough to resume the old method of state-and-federal spending based largely on bonding (that is, debt).

The political dimension of the collapse of motoring is the least discussed part of problem: as fewer and fewer citizens find themselves able to buy and run cars, they will feel increasingly aggrieved at the system set up to make motoring virtually mandatory for all the chores of everyday life, and their resentments will rise against the elite that can still manage to enjoy it.  Because our car-dependency is so extreme, the reaction of the dis-entitled classes is liable to be extreme and probably delusional to an extreme, too.

You can already see it being baked in the cake. Happy Motoring is so entangled in our national identity that the loss of it is bound to cause a national identity crisis.  In places like the American south, the old Dixie states, motoring lifted more than half the population out of the dust, and became the basis of the New South economy.  The sons and grandsons of starving sharecroppers became Chevy dealers and developers of suburban housing tracts, malls, and strip malls.  They don’t have any nostalgia for the historical reality of hookworm and 14-hour-days of serf labor in hundred-degree heat. Theirs is a nostalgia for the present, for air-conditioned comfort and convenience and the groaning all-you-can-eat Shoney’s breakfast buffet off the freeway ramp.  When it is withdrawn from them by the mandate of events, they will be furious.

Given the history of the region and the predilections of its dominant ethnic group, one might imagine that they will want to take out their gall and grievance on the half-African politician who presides over the situation. Among the ever-expanding classes dis-entitled from the so-called American Dream, the crisis is only marginally different in other regions of the nation. Mr. Obama faces a range of awful dilemmas, and it is painful to see them go unrecognized and unacknowledged by his White House.  It’s hard to imagine that the president and his elite advisors are blind to these equations, but as the weeks tick by they seem stuck in a box of limited perception.

We’re in a strange hiatus for now.  “Hope” levitates the legitimacy of the dollar, the stock markets, and the authority of leadership. In the background, implosion continues, debt goes unpaid, banks ignore bad loans to keep them off their books, jobs and incomes vanish, cars and other things go unsold, and a tragic wishfulness strains to sustain the unsustainable. Our expectations are inconsistent with what is happening to us.

It will be very painful for us to walk away from the car-centered life.  Half the population faces the ugly obstacle of being hopelessly over-invested in a suburban house and all the life-ways associated with it. There will be no easy way out for them, whatever they chose to do politically, whatever noise they make, whomever they scapegoat, whatever fantasies they cultivate about what the world owes them, or who they think they are.

Mr. Obama should not waste another week pretending that we can keep this old system going.  The public needs to know that we will be making our livings differently, inhabiting the landscape differently, and spending our days and nights differently — even while we suffer our losses.  The public needs to hear this from more figures than Mr. Obama, too, from leaders in the state capitals, and the agencies, and business and education and what remains of the clergy.  But somebody has to set in motion the chain of recognition, or events will soon do it for us.

Regards,
James Howard Kunstler

June 8, 2009

Revolving Debt Cheap Energy Economy on Its Knees was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Word has it that the experienced entrepreneurial minds in Washington and the ever-solicitous-of-their-membership Union leaders have cut a deal whereby the government gets 55% of Government Motors stock and the UAW gets 45% (another report was 50-50, but it doesn’t matter which is correct for purposes of this discussion) in return for writing off a big hunk of cash that was supposed to go into union coffers for retirement benefits.

Upon this news, the price of GovMot popped up eleven per cent., from $1.45 to $1.61.  (This is very confusing to old dears who think stocks are priced in eighths…)   How I wish that you young ‘uns had been taught arithmetic the way we were back in the golden years of “I like Ike.”  We see immediately that 1.45 + 16 = 1.61, and that 16 is very near 14.5, or 10%, just by moving the decimal over.  If we want to be picky about that extra cent and a half, and we do, 1.5 is on the close order of one tenth of 14.5, and through a process known as addition, reach eleven per cent. total.  (And we write per cent. as I always do because it is Latin and an abbreviation for “per centum,” or “per hundred.”)   The error in my instant mental calculations is well within tolerances.

The question is…what on earth caused the rise in the price of GovMot?  

That stock is going to be valuable in traditional terms if and only if the government manages to run GM at a profit, a proposition so absurd that merry laughter resounds at least in the room I’m sitting in.  Let’s see…the new CEO has been shoved into his chair under orders to produce “green” cars that nobody wants, using technology that doesn’t exist, and Harry and Nancy have pushed things along briskly with new, far more stringent requirements for gas mileage and emissions controls, those issues being the very ones which have already devastated the auto industry, other than the cost of union labor.

It is only obvious to old dinosaurs like us that profits derive from manufacturing a product which people are willing to buy at a price which results in income greater than unit cost plus overhead plus advertising plus incentives plus profit for dealers, in this case.  Americans do not want, and will not buy, other than in California, miniscule underpowered tin cans that require being plugged into electrical sockets.  Has it dawned on anyone the electricity isn’t free?  Another spurt of laughter, imagining the office building of the future which has a parking lot which resembles a drive-in movie, the speakers replaced by docking stations so that employees can recharge their cars enough to make it back home.  THAT will clearly be an efficient, economical project, given the low cost of urban land and what power is going to cost under Cap & Trade.

I can report smugly that I am well ahead of the power curve because I stopped considering new cars as far back as catalytic converters, a terrific mileage-destroyer.  NO, Americans are not going to endanger their families in cramped death traps which won’t withstand collisions with shopping carts, particularly at what such inconvenient, inadequate, uncomfortable, unsafe vehicles are projected to cost.  Not in a world where a Jaguar weighing a ton and a half, surrounding us with very comforting steel barriers and incredible luxury, getting 25 mpg, can be had for a few thousand dollars.  I may be partial to collecting Jag-u-ars, but the same holds true of Mercedes, BMW, and whatever you fancy that you can find in good condition, with mileage of less than 125,000 miles, preferably, that is old enough to be exempt.  In time older cars will be mandated to be destroyed–California is already making efforts in that direction–but for now driving our ’83 Mercedes diesel is a good solution.

Here’s a tip from by-gone days:  pay cash for your first car.  Then put an imaginary “car payment” into a savings account every month until you have accumulated enough to buy your next car for cash.  At present you won’t make much in interest, but what you will save by not paying interest on a car loan will still be significant, and the discipline is good for you.  People tend to pay off a car (car notes were three years four decades ago) and go on spending sprees which make it very unpleasant to have to cut expenses again when they buy a new or newer car.

We haven’t even gotten into the true costs of adulterating gasoline with ethanol, which costs more per gallon, destroys your engine, and drives the cost of food products derived from corn up.  Here’s another little tip if you get a new car:  while you are breaking it in, either have your oil changes done at the dealership, which has specially-formulated goo, or run diesel oil in it!  Well, you don’t have to, not unless you want to guard against dissolving the cams or damaging gaskets…What has been done to gasoline and engine oil deserves a whole article and will get it, but we need to return to who is going to profit and how from the shenanigans with GM ownership.

Given that we do not expect Government Motors to be run at a profit which will eventually trickle down to shareholders, where’s the real money in this deal going?  Cui bono?  It could be, mind, that the Auto Workers and Washington are arrogant enough to believe they can do what the old management could not achieve, under new and greater handicaps.  Right, Tinkerbell, “I believe!  I believe!”

The obvious answer is that eventually there will be a bailout which involves buying back the stock the UAW just acquired, at, oh, six or eight dollars a share, d’you think?  Plan big, it’s only tax dollars and counterfeit, so why not make it sixteen a share?  That’s not the question!  WHO is going to profit?  Those with sweet, pure, innocent minds will reply, “The retired auto workers, of course.”  Wrong.  The UNION.  The chances that all of the proceeds of the sale of stock will actually benefit the rank and file is not a proposition that I would rely on, curmudgeonly cynic that I am.

Here’s another cute little provision:  The bosses are going to forego their Christmas and Performance bonuses this year and next!  Wow, justice is done, fairness is achieved, and heartless profiteering on the part of the few has been smacked firmly on the nose.  

Wrong again.  Surprise, boys and girls on the assembly lines, you are losing your Christmas and performance bonuses, too.  I can imagine the outrage; “sharing the wealth” wasn’t supposed to apply to loyal Democratic voters in unions, surely.

By the time the stock price has been filtered through government and the top Union management and GM is shut down completely–can you see any other end?–a very good surmise is that the retirement trust will be doing well to get the four billion traded for the stock.  I don’t know anything at all about the current leadership of the UAW, far less those who will be in command a few years hence, if there is any difference, and they may be as honest as a summer day is long, but I’ve had six decades to see what happens when large amounts of money are at the command of a few people who are not held very accountable.  We know all about purchasing big resorts where union leadership can go to recuperate from the arduous task of crippling business with ludicrous demands for higher wages and better “benefits,” frequently for less labor.

Here’s another way to look at this:  how ridiculous is it that Union demands led to a situation where the part of GM that is on the hook for retirement benefits is held to be half of the value of the company?!  I have never been in favor of unions; I resent bitterly that employers are denied their clear right to fire strikers (who have a perfect right to seek other employment if they don’t like their pay or working conditions) and have watched American institutions destroyed by them.  In the real world forklift operators do not make $86 K.  The employee at my local feed store makes $8/hour doing it.  That’s right at $17 K before taxes.

The real greed we’re hampered by has been political parties greedy for votes paying for those votes with laws and regulations which favored big contributors and loyal voters, and greedy men and women who pushed past the point the traffic would bear.

It is not possible to mandate “a living wage,” because the costs must always be passed on, which results in the recalculation of all prices.  Congress could mandate a minimum wage off $25/hour tomorrow, and within weeks the additional job losses would be incredible and the cost of all goods and services would have increased exponentially.  Life is very simple:  a garbage collector is not worth what a plumber is.  One reason we need “honest money” is that it makes it easier to set the relative value of goods and services and hold them stable.  The current system of fiat money leads to anomalies and lags.  Twenty gallons of gasoline “should” still be equal to the cost of a good pair of shoes, but it isn’t.  Relatively nice apartments “should” rent for half of what they do now, to maintain the comparative cost/value ratios of fifty years ago.

It will be interesting to see how this plays out.  If you  have stock in GM, I’d chart at least the Friday close and get out well before it is clear to all that the behemoth is going belly up.  The government will almost certainly buy Union-held stock eventually, but individual investors aren’t going to get the same cosseting.  You aren’t likely to recoup what you have in such stock unless you bought it fairly recently, but if you hold on too long you aren’t going to get anything.  Will a foreign manufacturer want GM plants after they have been retooled–at vast expense–to make little tinfoil People Pods?  When the final breakdown occurs, my estimate is that GM will be sold off for little more than the value of the buildings…and commercial real estate is on a downward plunge.

Regards,
Linda Brady Traynham   

Update: According to the Washington Post, long revered as a source for truth and total lack of bias, says that  ”The Obama administration is preparing to send General Motors into bankruptcy as early as the end of [this] week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink.” Gee…what a way to bail ‘em out, huh?  Why not just let them go quietly into bankruptcy in the first place? 

Reuters pitches in that the bankruptcy plan “involves a quick sale of the company’s healthy assets to a new company initially owned by the U.S. government.”  Funniest thing about that, and where does “The government’s plans include giving stakes in the new company to GM’s union and bondholders,” which I reported on earlier, fit into all of this?  Probably right where I thought it does.  I’m just a simple Donna Reed housewife and goat owner, so who has an explanation for why Obama would forgive some fifteen billion dollars GM has already received, far less extend further credit, other than to leave a better pay-off to the Union? 

Seems like Mr. Obama said not to long ago that he didn’t enjoy, you know, meddling in the private sector.  A simple solution is to stop doing it.  GM is planning to close eleven hundred dealerships, which means at least another twenty thousand jobs blown away…but those are non-union jobs.   Some pigs are created more equal than others.

To The Union Bosses The Government-Mandated Profits was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.