Jim Kunstler (paraphrased): Financial Crisis + Peak Oil = SHTF

[JohnyCanuck]

The Ponzi-Plus Plan

SNIP

What we're seeing in this fiasco, among other things, is a lesson in the diminishing returns of technology. This is a train wreck of investment vehicles so complex that they could only be created with the aid of computers. The result is that hardly anyone -- perhaps even nobody in or out of Wall Street -- really understands what they represent. In fact, this alphabet soup of engineered securities -- CDOs, CDSs, MBSs, SIVs, etc -- was cooked up from a recipe of Ponzi algorithms. They were designed to be mathematically indecipherable, except by computers, in an alternative universe of model-making that bore only a superficial relation to the real world. That was their dirty secret. And the dirty secret of the Great Bail-out is that, in the real world, we will never be able to discover the actual trading value of these things at any number above zero. This is why they are called "toxic."

The big effort of Mr. Paulson and his working group has been to ram through legislation that at all costs avoids any attempt to place a reality-based value on this bad debt. He managed it by holding a gun to Congress's collective head, telling them in plain English that a genuine "work-out" of these "toxic" investments would set in motion a fatal cascade of credit default swaps which would leave the entire banking landscape a smoldering wasteland -- with the result that virtually every retirement account and pension fund would go up in a vapor, the Federal Reserve and the FDIC would melt away to twin piles of goo, scores of millions of lives would be ruined, and the USA would be left a basket case among nations, making us envy even the fate of Haiti and Zimbabwe. Talk like that might prompt a congress-person to do any fool thing.

SNIP

What the mainstream is truly missing here en masse is that another tsunami is building right behind the finance fiasco, and that it will render moot the whole reeking cargo of schemes and wishes that comprises the Great Bail-out. I am speaking of the global oil problem. In fact, the problems in banking and money currently roaring in the center ring of the world circus, can be described categorically as a product of the oil problem -- since oil is the primary resource of industrial economies and therefore the motive force behind our ability to generate "wealth." Without reliable and ever-growing supplies of oil, there is no industrial growth, and without industrial growth things like capital investment instruments lose their legitimacy. That is why the Frankenstein family of Ponzi securities was invented in the first place -- to compensate for the demise of industrial growth by creating wealth out of... nothing!

The looming oil problem entails a swirl of factors that will aggravate and accelerate our social, economic, and political struggles. These factors will mutually reinforce the instabilities that they set into motion. For instance, the new oil nationalism is undermining the traditional operation of oil markets as we've known them since the mid-20th century. In turn, oil nationalism will aggravate the oil export crisis, which will starve the oil importers -- the USA being the chief victim. Finally, there is the remorseless base-line condition of Peak Oil itself, meaning that we are at point where world oil demand permanently outstrips world oil supply no matter if the USA falls on its ass economically or not. What remains beyond this is a desperate contest among the oil importers -- America, Europe, China, Japan, India -- for control of the world's remaining oil resources.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2008/09/the-pnzi-plus-plan.html

[yella_dawg]

1. The key factor, the one most often overlooked...

is the term "ever growing" not just the economy, but the US dollar absolutely requires a constantly increasing rate of production and consumption. SUV's were as much a factor in the current economic disaster as funky mortgages.