FedUpUSA

Archive for November 5th, 2012

Hurricane Sandy is another reminder of just how incredibly fragile the thin veneer of civilization that we all take for granted on a daily basis really is.  Many of the hardest hit areas along the Jersey shore and the coast of Long Island have descended into a state of anarchy.  More than 7 million people live on Long Island, and millions more live along the Jersey shore and right now they are getting a taste of what life would be like during a total economic meltdown.  At the moment, there are still approximately 4.7 million homes and businesses that do not have power.  Officials say that some of those homes and businesses may not have their power restored until the weekend of November 10th and 11th.  Meanwhile, it is getting very cold at night.  This weekend the low temperatures on Long Island are supposed to dip into the upper thirties.  There have been reports of people diving into dumpstersbehind supermarkets in a desperate search for food, and there have been other reports of roaming gangs of criminals posing as officials from FEMA or Con Edison and then robbing families at gunpoint once they have gained entrance into their homes.  If people will behave like this during a temporary emergency that lasts only a few days, what would they do during a total economic collapse?  That is a frightening thing to think about.

Most gas stations along the Jersey shore and on Long Island are either totally out of gasoline or they don’t have any power to operate the gas pumps.  It is estimated that more than half of all gas stations in New York City are closed at the moment, and officials say that more than 80 percent of all gas stations in New Jersey are not able to sell gas right now.  So needless to say, the lines at the gas stations that remain open are horrific.

It is being reported that some people are waiting in line for hours for gasoline in some areas and that state troopers have actually been deployed at every gas station along the New Jersey Turnpike and the Garden State Parkway.

The following is how one New Jersey mayor described the situation…

“Gas lines are stretching for a couple of miles,” said Anthony Ammiano, mayor of Freehold, N.J., who recalled the oil crisis of the 1970s. “It’s like the Jimmy Carter years. It’s a flashback of bad memories.”

There have even been reports of people literally fighting each other over gasoline…

“It’s so crazy. Cars are pulling up and people are fighting each other. There is no gas around here,” said Mena Aziz, who manages a Gulf Express station in Bay Ridge, Brooklyn. “It’s been so busy.”

According to Breitbart, there have been continuous reports of “fistfights and people bringing guns to gas stations” on Twitter.  The following are a couple of examples…

Just awful! RT @metrogypsy: Someone just pulled a knife at Greenpoint #gas station as line stretches with hours long wait #gettingrealFAST

— Camila Xavier (@camilaxavier) November 1, 2012

You know things are bad when you ask the gas station attendent “when do you think you’re going to get more gas?” and he just laughs at you.

— Prede (@predederva) November 1, 2012

Unfortunately, authorities are projecting that the gas shortage may last for another week at least.

How angry and frustrated will people get by that time?

There are vast stretches of the Jersey Shore and the coast of Long Island that will never be the same again.  The following is an excerpt from a comment that a reader of mine from Long Island left on one of my recent articles…

I live in Massapequa NY …..No power to 95%. almost every home south of Merrick Road ( 1.5 miles from open water ) has been flooded. No electricity, no supermarkets in immediate area, no gas (approx 80% of gas stations closed on Long Island).

This was not just another storm.  It was a life-altering event for millions of people.

Unfortunately, just as we have seen after every other major storm in recent years, looters are taking advantage of the chaos caused by Hurricane Sandy.

According to the New York Post, a number of arrests for looting have already been made on Long Island…

In the Rockaways, lowlifes were sneaking into clothing stores and cleaning out pizzerias. Two men and a woman were arrested for robbing a BP gas station on Beach Channel Drive, three men and one woman were cuffed for pillaging a Radio Shack on Beach 88th Street, and two people were arrested for raiding a clothing store near Beach 86th Street, cops said. Stores were emptied along a two-block stretch of Mermaid Avenue in Coney Island. Seven people were busted.

Over on Coney Island, looting appeared to be out of control during the immediate aftermath of the storm…

Thieves broke in to the badly damaged Mega Aid Pharmacy on Mermaid Avenue and reportedly stole more than 10,000 pharmaceutical items, including prescription drugs.

“The water went away and these people started walking down the streets and just robbed stores,” a pharmacy worker told HuffPo’s Andy Campbell.

Manager Stan Gutkin said the major heist essentially “breaks the business.”

Looters reportedly also targeted banks, other shops, and other pharmacies.

And residents are noticing.

“People are turning on each other — they’re attacking each other,” Ocean Towers resident Dena Wells told Campbell.

Amazingly, a number of not-so-smart looters have actually been displaying their looted goods on Twitter.  Just check out the shocking photos in this article.

But most people living in the areas that were most affected by Hurricane Sandy are decent people that just want some assistance.  One resident of Hoboken, New Jersey became so frustrated that he inflated an air mattress and used it to float down to city hall in an attempt to get some answers…

Nearly 20,000 people have been trapped at home in the New Jersey city of Hoboken, just across the Hudson River from New York City, amid accusations that officials were slow to deliver food and water.

One man blew up an air mattress and floated to City Hall, demanding to know why supplies had not reached residents – at least a quarter of homes there are flooded and 90% do not have power.

Just like we saw after Hurricane Katrina, the response by the federal government and by big aid agencies such as the Red Cross has been very slow.  In fact, Staten Island Borough President James Molinaro has gone so far as to call the Red Cross an “absolute disgrace” and is urging people that live in his area to quit giving money to them…

“You know, I went to a shelter Monday night after the storm. People were coming in with no socks, with no shoes. They were in desperate need. Their housing was destroyed. They were crying. Where was the Red Cross? Isn’t that their function? They collect millions of dollars. Whenever there’s a drive in Staten Island, we give openly and honestly. Where are they? Where are they? I was at the South Shore yesterday, people were buried in their homes. There the dogs are trying to find bodies. The people there, the neighbors who had no electricity, were making soup. Making soup. It’s very emotional because the lack of a response. The lack of a response. They’re supposed to be here….They should be on the front lines fighting, and helping the people.”

If this is how angry and frustrated that people become over a temporary disaster, how angry and frustrated would they get if there was a total economic meltdown that was permanent?

Sadly, the truth is that what we are seeing during the aftermath of Hurricane Sandy is just a very small preview of what is coming on a national level.

Our economy is a complete and total mess right now, and things are going to get a whole lot worse.

When unemployment starts skyrocketing again and large segments of the population realize that there is no hope for a turnaround, many of them are going to totally give in to despair and become very desperate.

And as we are seeing along the Jersey Shore and on Long Island right now, desperate people do desperate things.

That is why I am constantly pounding on the need to prepare for what is ahead.  There are signs of social decay all around us, and most Americans are not equipped to deal with the pressures that come with a major emergency.  When things totally fall apart, you don’t want your family to be totally unprepared and surrounded by millions of angry and desperate people.

Hopefully Hurricane Sandy will serve as a wake up call for millions of American families.  Time is definitely running out, and we all need to get prepared while we still can.

The Economic Collapse

The center cannot hold because it has failed the nation by defending the Status Quo kleptocracy.

Let’s start with William Butler Yeats’ (1865-1939) poem, The Second Coming:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Though the poem was penned in 1919, it speaks presciently to our era. If we take “the center” to be the political machinery at the gravitational center of the Status Quo, Yeats is suggesting the center cannot hold as things such as the economy and living standards fall apart.

As a case study, let’s look at Greece, a nation that is the leading-edge of Status Quo delegitimization and destabilization. As I noted last week, ( In a Dysfunctional Status Quo, Reform Triggers Collapse), corruption isn’t a feature of the Greek Status Quo: it is the Status Quo. Any reformation that eliminated corruption would dismantle the Status Quo and bring down the Elites who have been looting the nation at will.

Corruption Continues Virtually Unchecked in Greece:

How can someone who has declared an annual income of €25,000 ($32,400) transfer €52 million abroad? What kind of supplementary income must an individual have who, according to his tax returns, earned €5,588 in 2010, yet still managed to move €19.8 million abroad? And how can it be that a Greek citizen sequesters €9.7 million abroad although he supposedly earned exactly zero euros?

The “Lagarde List” contains the names of 54,000 Greek citizens who have transferred major assets out of the country. The Greek Establishment is (naturally) doing nothing to investigate these 54,000 people, because the 54,000 are the Greek establishment.

I have long held that Greece Is a Kleptocracy (June 28, 2011). This chart is the acme of unsustainability.

By all accounts, these tax revenue figures are wildly optimistic, and so the actual current deficit is much higher.

To cut to the last act: the Status Quo of Greece is expending the last dregs of its legitimacy and cash defending its kleptocratic Elites from their fellow citizens and from the nation’s creditors. As noted above, it is impossible to “reform” a Status Quo whose foundation is corruption, just as it is impossible to wean an economy based on debt and leverage for its “growth” of excessive debt and leverage: financialization isn’t a feature of the economy, it is the economy.

The entire eurozone is a kleptocracy as well: 500 Million Debt-Serfs: The European Union Is a Neo-Feudal Kleptocracy (July 22, 2011).

Here are the key dynamics of delegitimization:

1. The consequences of austerity. The kleptocratic “fix” is to divert more of the debtor nations’ national incomes to debt service. In other words, money that once went to labor (wages) and social services now goes to debt repayments and interest.

What are the consequences of this massive diversion of income? The economy shrinks. Less income means less spending, which means negative growth.

The Eurozone’s “solution” of debt-on-debt depends on debtor economies “growing their way out of debt.” If labor’s share of the national income is falling, and both private and government spending and income are falling, precisely where is the “growth” supposed to come from? As private income falls, tax revenues fall, causing the government to raise taxes and junk fees. This further reduces private income, and so on in a self-reinforcing feedback loop of contraction.

Austerity sets up a positive feedback loop of less income and less spending. The people in these debtor economies can look around and see the consequences: everyone has less money, and less confidence that the “austerity fix” will do anything but put debt-junkies into fatal withdrawal.

Once an economy becomes dependent on debt that rises faster than the resulting “growth,” then that economy is set on an unwavering path to implosion. (The Cycle of Dependency and the Atrophy of Self-Reliance).

When Belief in the System Fades (March 12, 2008), institutions lose their legitimacy (The Three Ds: Delegitimization, Definancialization, Deglobalization July 1, 2011) and people naturally save more as insurance against an uncertain future. Fewer people are willing to risk their capital in new ventures, and as the economy loses vitality then these trends reinforce each other.

2. This loss of faith and confidence triggers hoarding and capital flight. As Ludwig von Mises noted long ago, the only way to organically “grow” an economy is for capital to accumulate faster than the population, that is, capital increases on a per capita basis. Capital means savings/cash, not debt, that is invested in productive assets and enterprises.

So what happens when you skim more of a nation’s income to service debt? There is less capital accumulated, and thus less capital available for investment.

What happens when people lose faith in the financial institutions and their coercive “fixes”? They move their capital to less-risky, more productive climes. In other words, capital flight is another positive feedback: as people move their capital out of the country, then there is less available per capita for productive investment. Toss in a kleptocratic government which increases taxes while misallocating precious capital on crony Capitalism and corruption, and you get a death-spiral of capital flight and risk avoidance.

The irony of a loss of faith is people instinctively place their capital in non-productive savings: in gold, Swiss lock boxes, and so on. This instinct removes capital from the pool of investments in productive assets.

As the Status Quo fails to protect the national interests and the citizenry from the neofeudal kleptocracy, faith in the political center fades. The centerist parties cannot “reform” corruption because they are the embodiment of corruption. In desperation, people move from the center to the extreme left or right, seeking a party that is willing to overthrow the corrupt, failed kleptocracy.

This is of course the pathway to dictatorship and fascism: Love or nothing: The real Greek parallel with Weimar.

These were the men who tried and failed to use a mixture of austerity, tough policing and what we might now call “technocratic” rule to save German democracy. They failed.Horrified inertia is now seeping from the world of the semi-outlawed young activists into the lives of ordinary people.

On the streets of Athens there is already the answer. You can feel what it is like when the political system – and even the rule of law – becomes paralysed and atrophies.

The “hopeless inertia” begins to grip even the middle classes, as the evidence of organised racist violence encroaches into their lives.

My Greek sources report that the abandonment of the failed political center is well under way as austerity is tightened while kleptocrats maintain their grip on the machinery of governance.

The solution has long been obvious: Greece, Please Do The Right Thing: Default Now (June 1, 2011).

The same holds true for every nation ruled by kleptocratic Elites that has attempted to “grow our way out of debt” by piling debt on debt. Doesn’t that include Spain, Italy, China, the U.S. and a host of other nations?

For more on this topic:

The First Dominoes: Greece, Reality, and Cascading Default (February 13, 2012)

Do We Really Know Greece’s Default Will Be Orderly? (February 17, 2012)

Greek Theater Double-Feature: A Farce and a Tragicomedy (June 19, 2012)

Charles Hugh Smith – Of Two Minds

As I’ve said many times before, here it comes!

Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

The shift is one of the first significant steps by employers to avoid requirements under the health-care law, and whether the trend continues hinges on Tuesday’s election results. Republican presidential nominee Mitt Romney has pledged to overturn the Affordable Care Act, although he would face obstacles doing so.

Let’s not mince words — that’s a 25% reduction in the impacted worker’s gross wages!

It’s already started with some “pilot projects” among certain employers, and this will spread.  Bank on it.  The results will be catastrophic for people in this income class, as on top of having gasoline double in price over the last four years along with other forms of energy rising precipitously along with food and health care now you’re going to see a 25% reduction in their working hours, meaning that their income is going to come down by that same 25%!

Both Darden (corporate parent of Red Lobster and Olive Garden) and some Subway franchises have been testing these changes already.  When the first “real” bite comes from Obamacare in as of January 1st 2014, expect all the lower-wage service industries to do exactly this.