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http://jameshowardkunstler.typepad.com/clusterfuck_nation/2008/12/legitimacy-dwindles.html#comments

A Brand New DIS-Belief System Is Born

The U.S. is, in the best case scenario, entering an economic depression that will be far worse than both the Great Depression of the 1930s and the Panic of 1873. At worst, the USA will collapse altogether. Here's Why:

Belief in any system---and in this case we are discussing the concept of belief in the US economic system---is like oil to a combustion engine. Without belief in the credibility of the system, the economy seizes up and dies. It’s that simple. If a system lacks credibility, if people don’t believe in it, than they will not participate in that system (Unless of course they are compelled to at gunpoint, but we’re not there quite yet) Now in some cases, if things haven’t gone too far, trust can be reestablished and with that trust a belief in the system might grow---and the engine can be saved. But once trust has eroded beyond the point of repair, there is no chance of resuscitation. Either the system has to be thrown out and a new system has to take its place, or the citizens of the system have to be compelled by force and repression to accept the old way of doing things. This is where we stand today. Belief in the credibility of our economy has been summarily destroyed.

We hear a lot these days from the likes of Ben Bernanke and Henry Paulson and Barney Frank and Chris Dodd and George Bush. Each says essentially the same thing: Once the credit markets unfreeze, and once banks start lending again and people start borrowing again, once confidence in the system is restored then we’ll be on the road to recovery. Each of these men, and millions who echo their sentiments, predict that this “recession” will ease soon because the FED is taking aggressive action to stimulate lending and to thaw the still-frozen credit markets and to lower mortgage rates and to stimulate employment and production, etc.. They are wrong. The credit markets will never thaw and banks will never start lending again because belief in the system has died. And because of this, the old regime and era of Fractional Reserve Banking and "money as debt" is also dying, albeit a violent and protracted death. And at the very heart of the crisis exists the foundational dynamic created by the decade-long DERIVATIVES experiment:

Virtually every bank, every financial institution, every nation, has a secret vault in which it is hiding its bad assets. And no one really knows who holds what. And some of these bad assets are part of bundles of securitized instruments that are so complex and so difficult to detangle, that it would take decades just to unravel them all and actually discover what all of the assets are really worth---if anything. And we're talking upward of 500 TRILLION dollars worth of these hidden, secretive, worthless assets. And the depth of mistrust that exists has become so powerful that it has, in a most extraordinary moment in history, actually given birth to an entirely new belief system! And what makes this new belief system so cataclysmic is this new belief system bases its spiritual and intellectual foundations upon the idea of disbelief! The leaders of the world---both political and financial---have, through their decades of theft and duplicity and lies, given birth to a new paradigm: the paradigm of disbelief. And it is this new paradigm, this new DIS-belief system if you will, that makes trust in the old way of doing things totally impossible.

Now, many of our self-proclaimed leaders continue to argue that this crisis will abate once “confidence” in the economy has been restored. These folks would argue that disbelief and confidence are, for all intent and purpose, synonymous. They are wrong. And underestimation of the power of disbelief keeps them from acknowledging the magnitude of our plight.

Let’s take a brief look at a few examples of how disbelief in the system---rather than simply a lack of confidence in the system---will lead ultimately to the TOTAL collapse of the United States’ economy.

1. Banks won’t lend to other banks---regardless of the declining LIBOR, falling interest rates, etc.---because every bank assumes that all of the other banks are insolvent.

2. Banks won’t lend to individuals because banks currently assume that these loans will not be repaid.

3. Individuals refuse to take out loans from banks because banks have proven themselves to be dishonest, usurious institutions. In addition, people are coming to the realization that suffocating under a regime of debt servitude to banks is not the way they want to live out their days.

4. People have lost all faith in our federal government. Congress, the President, the folks who have promoted their economic Friedmanite agenda for decades---all of these institutions lack any sort of credibility. Hatred for and a lack of belief in our politicians and financial leaders is omni-partisan.

5. Shipping of commodities has come to a virtual standstill because commercial paper (short term promissory notes) are no longer trustworthy instruments of commerce.

6. Credit card companies are viewed with such contempt that the old regime of living with credit is slowly collapsing. Those in debt are defaulting by choice, refusing to pay the usurious issuers of these instruments of indenture.

7. Scandals like the Madoff affair are cementing for citizens the fact that the entire system, from the Hedge Fund managers to the accountants to the SEC overseers, is rotten to the core.

8. The scandalous decision to allow institutions to valuate their own assets in what can only be called a mark-to-bullshit model of valuation is not lost on the ever-growing number of people who believe that they are being royally screwed by the US kleptocracy.

9. Eight years of a Bush regime that demonstrated total disregard for the idea of law---including the apparent duplicity regarding the reasons for going to war in Iraq and the Katrina scandal---have further solidified citizens’ disbelief in the current paradigm.

10. The lies of Paulson and Kashkari regarding the use of the TARP funds, and the apparent decision of these men and their Congressional allies to save the rich whilst sacrificing the poor has further decimated systemic credibility.

11. The U.S. decision to ignore the world’s call for action on Climate Change vis-à-vis the Kyoto Accords, and the Bush Administrations decision to repeal emissions standards for industry, has eroded any belief that citizens of the country might have when their leaders speak of concern for the environment. Saying one thing and doing another creates disbelief. The same is true of the “Big 3” automakers, who claim a belief in stewardship of the environment while simultaneously suing states over toughening emissions standards for cars and trucks.

12. The story that won’t go away---that of the impending 500 Trillion dollar Credit Default Swap ponzi sceheme, which made CEOs of companies like Lehman and AIG multi-millionaires---continues to defy attempts by the government and financial leadership to sweep the story under the rug. When the defaults begin and the dominoes fall, disbelief in the system will reach new heights.

13. The Housing foreclosure disaster has left citizens without any trust for a system that created the subprime debacle. And despite all of the foreclosures and the implosion of the housing market, lenders continue to try and swindle people and trick people into refinancing or modifying their existing loans. Disbelief in this system is exploding at an exponential rate.

14. The creation of MBS, Mortgage Backed Securities, has further exacerbated the plummeting trust in the banking and lending sector. Now when a home-owner tries to contact his or her bank in a desperate attempt to save their home, the bank simply says that it no longer holds the loan. It sold the loan as part of a package of similar loans to someone else, who then re-packaged it and sold it to someone else, and so on---and no one knows where to find the loan anymore. Belief in the people who brokered these deals has disappeared.

15. Everyone’s getting laid off and people are having trouble making ends meet, and anger is mounting, and meanwhile, everyday on TV and on the Internet, people are bombarded with images of the manors and estates and wealth of the very men whose actions have destroyed their lives.

16. What was once touted as GDP growth is now being exposed as nothing more than DEBT growth, if you will. The lie of the schemers is coming into full view, and people are finding it harder and harder to believe that wealth was, in fact, created, when they are suffering under mountains of debt and lost income.

17. The power of the Internet as a source for disseminating information regarding the destruction of the US by the keptocrats is reaching tens of millions of angry people.

18. Outbreaks of E-Coli from spinach and cattle raised on city-sized mega-farms is sickening thousands: belief in the credibility of our system of food production and distribution is faltering.

I could go on. I have barely scraped the surface. But my point should be clear: We have moved beyond the point where swings in confidence in a system implicitly recognize that system as credible. We have moved to a regime of disbelief in the system, and this disbelief is growing by the hour, and there is nothing that can be done to stop its momentum. On some level we have reached a moment of crisis in our identity as a nation not entirely unlike that which we faced in the mid-19th century. We have reached a point where disbelief in the credibility of the current system will become a force that will tear us apart. How we will survive is a matter for the seers. But make no mistake about it: this is no Recession, and there will be no Recovery.

Posted by: DanW | December 22, 2008 at 10:53 AM