James Howard Kunstler
The cynicism among the informed classes has never been so deep. Even the pompom boys in the cheerleading clubs like CNBC and The Wall Street Journal express wonderment at the levitation of stock indexes and bond values. They chatter about a “correction” of 20 percent being a healthful tonic that would clear away some dross and quickly usher in a new episode of “growth” — or growthiness, which, like truthiness, became an acceptable approximation of the real thing. The truth, as opposed to truthiness, is they no longer believe their own bullshit about growthiness.
The suppression of interest rates and pervasive accounting fraud has thundered through the financial system, and the deformities caused by it have emerged in currency war, currency instability, trade collapse, and political crisis. Years of central bank intervention have stolen the capital of the future to construct a Potemkin economy meant to conceal the sickening gyre of diminishing returns strangling business as usual.
Until it collapses by a great deal more than the wished-for mere 20 percent, more perversities will be piled onto the already existing burden. Is it not a wonder that professionalized interest groups like AARP have not screamed bloody murder over the suppression of interest rates which deprives its members of bank account and bond interest on savings? Instead AARP, like virtually every enterprise in America, has turned to racketeering. Don’t worry, they’ll be gone from the scene soon enough.
The next shoe to drop will be various forms of bail-ins and attempts to prevent bank account and money market holders from getting access to their cash. A withdrawal above $2,000 already can trigger a report to the IRS. The next step will be to put a simple ceiling on withdrawals. Will that trigger public ire? Who knows? Nothing yet has in the USA. The meme currently circulating is the fear that government would like to abolish cash altogether and put in a regime of all-electronic money. Being allergic to conspiracy ideas, I’m skeptical about this idea, but I really can’t dismiss it.
A cashless society would conceptually allow government much more leak-proof control of all citizen money transactions. Mainly it could funnel tax revenue into the treasury much more efficiently. It raises some obvious practical concerns, such as: would such a program lead to an enhanced colossal skim of credit card company off-creaming? And what about the percentage of poorer Americans who don’t have credit cards or bank accounts now, either because they don’t understand how it all works, or they’re forced to function in the “gray” economy for one reason or another (e.g. a drug felony rap). And what kind of as-yet-unknown perverse work-arounds would this new system provoke?
I put the question to a table of college-educated people last night and their response was surprising: utter complacency. They’re already used to paying for most things with plastic, they said, and their employer already withholds a big part of their regular paycheck for taxes, so what does it matter? They couldn’t grok the possibility that a cashless money system might easily deprive them of access to whatever reserves they have. Or perhaps, more specifically, they couldn’t imagine an economic or political emergency that might provoke such a situation.
They might find out sooner than they realize. As I suggest in the lede, apprehension is growing that some kind of “corrective” event is at hand on the financial scene. Even the supposedly salubrious 20 percent S & P drop could set off a chorus of margin calls that would make the trumpets of Jericho sound like a kazoo concert. What will Americans do if they can’t get their money out of the banks? The last time this happened, 1933, we were a hard-up but polite and highly-regimented society, and the automatic rifle was a novelty restricted to a relatively tiny army and Al Capone’s crew. Behind the financial jitters of the informed minority is the greater fear of social unrest.