Authored by James Howard Kunstler via Kunstler.com,

Welcome to the American hall of mirrors... and mind the broken glass all over the floor. That’s Nature’s way of saying the country has run out room to punk itself. 2018 was the consolidation of bad faith in everything we do: politics, the news media, economics & finance, show biz, regular biz, jurisprudence, medicine, education, and relations between men and women — the year of peak dishonesty and self-deception. Of course, the trouble with dishonesty is that it doesn’t comport with Reality, and Reality being Mother Nature’s husband, bats in the cleanup position. Entering 2019, the bases are loaded with delusions, misdirections, and turpitudes. I shall get right to it without further throat-clearing.

Trumpology

The nation’s focus remains clamped to mercurial character in the White House. If you subscribe to Strauss and Howe’s theories about The Fourth Turning, then you might see president Donald J. Trump playing the archetypal role they call “The Gray Champion,” an elder figure of the “transcendental” Boomer generation sent by fate to rescue a floundering society at a grave moment in the seasons of history. Yes, I know: we might have been better off calling Ghostbusters. A cardinal precept at this blog is that fate is a trickster. You order a Gray Champion and room service sends up a Golden Golem of Greatness.

To put it mildly, Mr. Trump has failed to charm at least half the country. They are embarrassed at his physical presence: his lumbering gait, like unto a behemoth land mammal of the Oligocene; that swaying bay window stomach half-concealed by the flaps of his suit-jacket and bisected by the oddly elongated necktie; the pained smile he puts on for the photo-ops; his man-spreading when seated with the world’s poohbahs, and that strange confection of sculpted hair, like the spun sugar on a Croquembouche, or the pouf on some horrifying plastic dashboard figurine. His manner of speech, the weird, palindromic repetitions, the childish artlessness of his casual utterances, the absence of Beltway focus-group cant, and of course the reviled Tweets — drive his opponents up a tree. The gilt-plastic trappings he surrounds himself with also offend them. For all I know, they hate his cologne, too.

His adversaries say he is “undermining institutions.” By this perhaps they mean the beloved DC gravy-train of regular institutionalized grift divvied up between elected officials, Wall Street, the War-and-Intel matrix, and the unholy infestation of lawyer-lobbyists slithering around the Swamp. Just look what happened when Mr. Trump threatened to end US military operations in Syria: apoplexy among the Neocons and Progs-for War — though none of them could coherently state what our strategy is there (is it to overthrow Assad so we can have another failed state in the Middle East?). Whatever Trump proposes in the way of policy is inadmissible because, according to the Resistance, Mr. Trump should not be allowed to propose policy, or order it, or direct it. Because he is… Trump….

Whatever you think of his agenda, Mr. Trump made the fateful mistake of bragging on the bubble economy that is now collapsing, and it will probably un-do him more effectively than all of the attempts to pin some actual crime on him by Robert Mueller. The Special Prosecutor has spent two years and has come up with little more than a handful of rinky-dink “process crimes” — mainly lying under oath, engineered by Mr. Mueller’s legal team and old friends in the FBI and DOJ after-the-fact. The Mueller investigation started with a false predicate — collusion with Russia — and entailed loads of prosecutorial mischief. We approach the climax of all that in early 2019. Mr. Mueller will issue his report before March. Maybe it will contain surprises, but the investigatory process involves so many people that it’s hard to believe no hints of any “bombshells” have leaked to the papers and cable news outfits. Rather, Mr. Mueller will depict a whole lot of nothing in the darkest possible light for the convenience of a house impeachment process, the holy grail of the Resistance, though the exercise is likely to fail if it gets to a senate trial.

But before that, there is the question of Mr. Mueller himself. My view is that Mr. Mueller has run a colossal cover-your-ass operation for the many documented misdeeds among the FBI and DOJ in cooking up this mess starting in the spring of 2016. His appointment in the first place was a gross error, considering his mentor relationship with James Comey and prior association with his putative supervisor, Deputy Attorney General Rod Rosenstein. RR remains in that position despite being a witness in matters pending before Mr. Mueller (and other regulators such as federal prosecutor John Huber and DOJ Inspector General Michael Horowitz), including the FISA warrant scandal, the Uranium One deal, and the tortured doings of the Hillary Clinton and her foundation.

January will kick off with the congressional extravaganza I’ll call Investi-Gate, as committees headed by Democratic chairs Gerald Nadler (Judiciary), Elijah Cummings (Oversight), and Adam Schiff (Intelligence) swarm the President and his associates like army ants on a drove of peccaries. They’ll haul in everybody and his uncle to keep the show going for their pals in the media. The star attraction will be Trump ex-lawyer Michael Cohen, though he will appear as a convicted liar. He may even defy the committee by not answering their subpoena before he has to report to federal prison in March. After all, Rod Rosenstein successfully defied more than one summons to congress for months on end. What will the House committee chairs do to Cohen? — threaten him with jail?

The house committee Investi-Gate circus is a sure thing, though, don’t forget, minority members can also call witnesses, and there is room for blowback on the venture. Republicans still chair the senate committees, and there may be a mud-fight between the two houses. Otherwise, expect a whole lot of grandstanding at the expense of paying attention to any of the nation’s serious business. Mr. Huber and Mr. Horowitz will also release reports in early 2019. Much of the recent criminal misbehavior in FBI / DOJ / Mueller orbit lies within their commissions. Abundant evidence has already been published concerning the conspiracy to defeat Mr. Trump by subterfuge in the 2016 election, and further illegal attempts to injure him in the years following. Some of the characters in this horror show have already testified to grand juries.

Gen. Flynn was sent to the doghouse by Judge Emmet Sullivan at his December sentencing hearing for the purpose of rethinking his guilty plea. The idea is to persuade him to go to trial and force Mr. Mueller to go through a discovery process (of evidence) that could easily derail Mr. Mueller’s case and reflect poorly on the Special Counsel, perhaps even lead to legal problems for him in the way of malicious prosecution. Gen Flynn’s case also resolves one way or another in March.

Finally, Mr. Trump will be free to declassify a trove of documents in all these matters after Mr. Mueller reports. Doing so prior to that might set up the president on an obstruction of justice charge. If there’s anything germane in those docs, they could change the whole dramatic arc of the story that took over two years to develop. There’s plenty of chatter across the web about Mr. Trump invoking martial law or declaring some kinds of national emergency, plus loose talk about military tribunals and “thousands of sealed indictments,” but I’m not persuaded that there’s any reality to that.

Politics That Maybe Matter

This country faces a lot of practical problems that are not likely to be addressed if congress is preoccupied with Investi-Gate, and depending on how ferocious the action gets in bear markets, currencies, and banking, which could alter the entire picture (more below).

The crisis in medicine is obvious. Whatever else you can say about ObamaCare, it just didn’t do enough and is now crippled by court decisions. Health Care is simply unaffordable for a growing demographic of the sinking middle class. Much of that is due to plain old racketeering, and I propose that it could be mitigated to some degree if a simple law were passed that required doctors, surgeons, hospitals, labs, and other players to publicly post prices for their services — to eliminate this ridiculous business of providers “negotiating” the price of every transaction in secret, according to deliberately incomprehensible guidelines. It may be too late to “solve” the health care problem in the way that much of the Left wishes: a single-payer system run by the government. True, other advanced nations ran single-payer systems with apparent success for decades, and still do, but they started these programs in an era of reliable economic growth based on industrial production and that era is over for reasons mostly having to do with dwindling cheap energy. The National Health Service in Britain is a shambles. France’s system still functions, but the high taxation needed to keep funding it is, ironically, a main beef of the Yellow Vest protesters. The deflating financial bubble will underscore a new order of austerity in the USA, and may usher in graver problems with the value of the dollar. One way or the other, congress will be stymied over health care reform in 2019.

The eventual result will be the disintegration of the current health care system and its eventual reorganization into local, clinic-based medicine at a much lower level of complexity and treatment. It was a tremendous blunder to consolidate hospitals and medical practices into gigantically-scaled conglomerates. The hallmark of The Long Emergency is that everything organized at the gigantic scale will fail one way or another. Get your mind right for that outcome and take care of yourself in the meantime.

The Left especially has no inclination to address immigration reform. As long as they mendaciously refuse to even make a distinction between legal and illegal immigration, nothing can be done. The Right is also dishonest and cowardly about it, fearing to alienate the ballooning Hispanic voter bloc. Still there is a better chance that some immigration reform may be possible because it doesn’t require the sort of titanic fiscal outlays that Health Care does — Mr. Trump’s wall aside. More likely, though, the current immigration impasse will continue and may provoke vigilante action along the border in 2019 that could be part of greater civil violence prompted by increasing economic disparities.

Markets and Money

The jig is really up. The big bad bear market is already underway, even if it rallies in January. The debt bubble engineered by the Federal Reserve is blowing up and thundering through the system. The epic market instability of December 2018 on the heels of persistent Fed rate hikes points to major credit problems and especially an inability to roll over old debt into new loans at higher interest rates — in particular loans to zombie enterprises that need to borrow to keep paying interest on previous loans (a lot of that among the shale oil companies). The US government can’t take higher interest rates either. It’s already paying about as much in annual interest on US debt as we pay for our war machine. There are only two ways out, both of them nasty. Either suck up debt defaults, which will induce an impoverishing disappearance of money; or provoke high inflation, by injecting more Central Bank QE “money” into the system, which can destroy the value of money. Inflation is typically the choice of governments because it reduces the face value of debts while it allows government to pretend that it is taking action. In the end, you may have plenty of worthless money, which is no different from having not enough money that retains value. The latter was the main feature of the Great Depression.

So, inflation is the usual choice, but it also typically leads to incendiary resentment among the citizenry when they realize they’ve been played and it takes a wheelbarrow full of cash to buy a loaf of bread and a jar of peanut butter. I suppose that Fed chief Jerome Powell knows all too well he’s popped the Mother-of-All-Bubbles. He can blame it on Mr. Trump. Everybody else will, of course. Sometime in the second quarter of 2019, the Fed will resume the money-for-nothing gambit of “quantitative easing” in the hope of arresting the damage, but this time the dollar will lose value uncontrollably and catastrophically. Many people will be ruined, especially retirees at the mercy of insolvent pension funds.

Before 2019 is out, the US could find itself in a situation worse than the Great Depression. Supply lines are much longer now than they were then. If suppliers can’t get paid because trust has collapsed in the short-term corporate paper system, they won’t deliver supplies, which means you may not eat, or fill your gas tank, or heat your house, or get whatever else you need. Also, the USA in 1931 had not yet transformed itself into the fiasco-waiting-to-happen called suburban sprawl. How is Dallas going to work for people who spend a substantial chunk of their income on mandatory motoring (if there’s little or no income)?

Stock market activity may appear to stabilize in January, but it will go south again later on in the first quarter and the Bear will growl louder for the rest of the year.

Civil Disorder

Be prepared for it in 2019. There are going to be a lot of pissed-off people around the country. They are liable to attack Federal property and their fellow citizens (and their property). The hungrier they are, the worse it will be. They will not understand the forces that are destroying the money system. There are a gazillion small arms out there and the government will not be able to control them or confiscate them. Any attempt to do that will only inflame the situation. A major principle of The Long Emergency is that government becomes increasingly impotent and ineffectual as it rolls out. We’re already seeing that in Washington, and it is not at all just because Mr. Trump has inspired such an impasse between the branches. The states, too, will be hard-pressed to do anything useful. Many of them, like Illinois, New Jersey, Connecticut, and California, are already technically insolvent. The federal government may have to pretend to rescue them financially, which will only make the national predicament worse.

Oil

The shale oil “miracle” was an impressive stunt. For a while, it goosed US production way above the former all-time production peak of 1970, and it achieved that with astounding speed — about a decade. But this is oil that is very expensive and complex to produce. It was made possible by massive borrowing at artificial low interest rates, which are now rising. Something like three-quarters of the shale operators never made a red cent in net profit, and many of these companies will find it hard or impossible to roll over their existing debt, especially with oil under $50-a-barrel. But the price is a deceptive metric. If it zoomed up to $100-a-barrel tomorrow, the effect would only be to crush economic activity, because industry requires cheaper oil to pencil out its operations and citizens can barely afford to drive when gasoline hits $4-a-gallon at the pump. At the lower $45-a-barrel, the price crushes the oil producers. Take your pick. There’s no “Goldilocks” price.

The other problems with shale oil have to do with the nature of the shale plays. The Permian Basin in Texas is very large, but the best plays are developed in the so-called “sweet spots” and there’s a limited amount of them. They are the places that the producers developed first, and when they are played out, the next round of plays will be in spots not-so-sweet (or productive) — possibly not worth drilling. The character of the shale oil wells is also way different from the old conventional classic oil wells. The old wells cost about $400,000 (in current dollars). It involved just sinking a pipe into the permeable source rock. The oil came out under its own pressure at the rate of thousands of barrels a day. Eventually, you put a simple pump-jack on the well (the “nodding donkey”) and it produced for decades, like running a cash register. Shale oil wells cost between $6- 12 million. They require technically demanding horizontal drilling and fracking, with additional costs in highly technical labor, water for fracking, sand to hold open the fracks, chemicals to aid the process, and a gazillion truck trips to deliver all the water and sand (and take the oil away). Shale wells produce maybe a few hundred barrels a day for one year, after which they typically deplete by over 60 percent. After four years, they’re done. The oil is also different. Shale oil is typically ultra-light. It contains little-to-none of the heavier diesel, kerosene, jet fuel, and heating oil distillates, making it less valuable.

Trouble in the credit markets could shut down shale production for a period of time and create dire problems for the American economy. That could happen in 2019 as poorer-performing companies fail to get new financing. As mighty as it seems to be, the industry is fraught with fragility. Meanwhile, discovery of new, producible oil has fallen to the lowest level since the 1940s, after three recent previous record low years. Current low oil prices at around $45-a-barrel may give Americans a false sense of security. Low prices are mostly indicative of the collapse of the demand for oil at the global margins and among the large US demographic that cannot afford it anymore — that is, the impoverished former middle class. As the damage becomes more obvious, we could hear calls to nationalize the oil industry. The attempt to do that would collide with the aforementioned trend for government to become more strapped for revenue, more impotent, and more incompetent.

Geopolitical

The Golden Golem has gone an extra mile to antagonize Russia the past two years. Is it to demonstrate how not Putin’s puppet he is? If so, it’s pathetic. For instance, heaping ever more sanctions on Russia, tossing Russian diplomatic staff out of the country because of the laughable Novichok poisoning of the Skripal father-and-daughter in Britain. Nobody believed that set up — who recovers from the world’s supposedly most potent, high-tech military toxin? The larger Russia hysteria, ginned up by the US “Intel Community” to cover the embarrassment of Hillary Clinton’s election loss, has destroyed the brains of thousands of Washington insiders and infected whole sectors of the educated coastal elites who really ought to know better. Meddling in elections? Is that something the US has never entertained? Recall that 1996 Time Magazine cover with the headline that bragged, “Yanks to the Rescue: the Secret Story of How American Advisors Helped Yeltsin Win.” And now we’re wetting our pants over a baker’s dozen Russian Internet trolls on Facebook? Yes, this is what the brightest people in the room have been doing for two years. The net result is a new cold war, pushing Russia into the arms of China, giving both of those countries an incentive to construct a new framework for global relations that excludes the toxic US as much as possible.

That new framework, by the way, will not be the same as the late, unwinding Globalism Release 2.0 (Release 1.0 was 1870 – 1914) that allowed America to exchange IOUs for flatscreen TVs lo these many years. Let’s call that Tom Friedman Globalism, after the pundit who said it would last forever. The world will become a wider place again as the Great Powers are increasingly bound to their own regions for trade relations in a world growing short of energy and capital resources. The exception to that is in weaponry, now that Russia has demonstrated its ability to launch hypersonic rockets that can reach the US in little more than a few Noo Yawk minutes. Do we have anything like that? I suppose we wish we did. The media is not even talking about it, the implications are so dreadful.

Has Mr. Trump actually accomplished anything with his deal-seeking in China while beating it on the snout with his tariff stick? Well, he got a lot of US companies loading up on inventory of goods they feared will carry costly duties a year hence, so they’re all stocked up just in time for a vicious bear market and the recession / depression that it entails. A lot of that stuff may end up being distributed by the bankruptcy judges.

How does our antagonism against China work with the campaign to “normalize” the behavior of North Korea. I doubt it helps. In 2019, North Korea will be the whoopie cushion that China places under America’s seat at the negotiating table. Mr. Trump defied the conventional State Department wisdom by meeting face-to-face with Kim. It got the two Koreas actually speaking with each other for the first time in 60 years, with some concrete steps toward ending the de facto state-of-war. Will Li’l Kim play the role China assigns to him? I think so. They can squash him like bug. And, of course, everything that the US congress and Mr. Mueller do to injure and weaken Mr. Trump will make further progress in Korea unlikely.

How about the second greatest economy in the world? That would be the European Union. The EU’s financial system is way more dysfunctional than even ours, with no mechanism or provision for regulating each country’s spending vis-à-vis the debt generation of the Union as a whole. There’s no way it can continue and no prospect for debugging the set-up. What’s more, decades-long shenanigans of the European Central Bank have created imbalances that will never be corrected. Even the attempt to normalize operations — as the ECB ceases its debt monetization routines staring in the first quarter of 2019 — is guaranteed to crack up the EU economy, which is a horror show of zombie companies and zombie banks. They will suffer particularly in the recession / depression to come. The next domino to fall, theoretically Italy, will take the EU down, whatever happens with the dithering over Brexit. Without the ECB vacuuming up unwanted EU paper, nothing really pencils out over there. In 2019, expect a substantial fall in the value of the Euro, and possibly its demise as a currency.

In fact, expect wholesale disintegration of many structural arrangements all over Europe beginning in 2019, along with more political violence that exceeds the simple street actions of the Yellow Vests in France. NATO has been staging war games on Russia’s border for two years, apparently with no awareness that the NATO members are deeply dependent on Russian oil and natural gas to remain advanced nations with comforts and conveniences, like heating their homes. Perhaps that recognition will hit in 2019. But there will be plenty of noise for that signal to cut through.

Climate Change

Something’s going on ‘out there’ though the picture is deeply non-linear and is being confused for the moment by an extraordinary low level of cyclical sunspot activity. Not being a scientist, I have only two salient points worth considering about the issue:

The first is, we’re not going to do anything about it — because nothing can be done about it. Whatever’s happening, we’re going to have to roll with it. I’m also not persuaded that many of the proposed mitigations — carbon taxes, seeding the upper atmosphere with reflective particles — will accomplish anything.

The second thought is this: the civilized world has experienced many many instances of climate change over the past several thousand years. Civilizations rise and fall with these changes, but the human project as a more general matter continues, with periods of history that appear to be restful time-outs. The Roman Optimum (warming period) segued into the Dark Age Cooling, and then the Medieval Warming (viniculture in England!), and eventually the Little Ice Age comes along with Isaac Newton and skaters on the Dutch canals. The difference this time is that our civilization is so deeply complex that successful adaptation to new conditions is a low percentage outcome, at least in the form of salvaging many of our current arrangements. In other climate disruptions, people adapted, sometimes with very severe changes in customs, practices, political arrangements, and life-styles.

It will be especially stark this time, and the broad pop culture of Collapse suggests that we intuit this — everything from Game of Thrones to The Road, to my own World Made By Hand novels. It begins with the wobbling of the most abstract and fragile of our systemic arrangements, finance, which is mostly based on ephemeral trust (that the other fellow will pay you). From there, the trouble proceeds to politics and culture. A few concluding words on the latter:

Culture

2018 was a low point for American culture, such as it is. The idiotic drivel emanating from the university campuses has infected the entire nation like a toxic shock disease. Most damaging, of course is the umbrella ideology of “multiculture” in a society that formerly thrived precisely because of the opposite of that: a common culture composed of ethics, customs, norms, and standards of decent behavior that people not insane could subscribe to. Remove the common culture of a nation and you will not have a nation — it’s that simple. Hence Americans are divided foolishly into battling identity groups who do not believe in a common culture and are doing everything possible to defeat it. They have no idea what E Pluribus Unum used to mean and they have no desire or intention to rediscover it. I return to the cardinal theme of The Long Emergency: that we can’t construct a coherent consensus about what is happening to us, and therefore we can’t make any coherent plans about what to do.

The financial hardships of 2019 provide an opportunity for some overdue mind-cleaning on these matters. There may even be a significant number of survivors among the brain-damaged former thinking classes who refuse to go along with the emperors-new-clothes ideas of recent years any longer. The main thing to understand about the so-called Progressive Left behind this toxic shock is that the whole crusade has been less about ideas of justice or fairness than the sheer joy of coercing others, of pushing people around and punishing them because its fun! The ideologies around that behavior are just window dressing.

The response to it so far has been surprisingly mild. If the financial unwind shapes up as harshly as it looks from here, the response will get more severe. The universities themselves will suffer hugely as their budgets crash through floor and all, of a sudden, they have to issue pink slips to a half dozen Diversity deans on six-figure salaries. Many colleges will begin the process of shutting down in 2019 as their student loan racket disintegrates.

Well, you’ve suffered long enough for today, and I’ll leave it at that.

Happy 2019 everybody!