Shake me, wake me! | James Howard Kunstler

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James Howard Kunstler -- World News Trust

Feb. 3, 2014

The rot moves from the margins to the center, but the disease moves from the center to the margins.

That is what has happened in the realm of money in recent weeks due to the sustained mispricing of the cost of credit by central banks, led by the U.S. Federal Reserve. Along the way, that outfit has managed to misprice just about everything else -- stocks, houses, exotic securities, food commodities, precious metals, fine art.

Oil is mispriced as well, on the low side, since oil production only gets more expensive and complex these days while it depends more on mispriced borrowed money. That situation will be corrected by scarcity, as oil companies discover that real capital is unavailable. And then the oil will become scarce. The “capital” circulating around the globe now is a squishy, gelatinous substance called “liquidity.” All it does is gum up markets. But eventually things do get unstuck.

Meanwhile, the rot of epic mispricing expresses itself in collapsing currencies and the economies they are supposed to represent: India, Turkey, Argentina, Hungary so far. Italy, Spain, and Greece would be in that club if they had currencies of their own. For now, they just do without driving their cars and burn furniture to stay warm this winter. Automobile use in Italy is back to 1970s levels of annual miles-driven. That’s quite a drop.

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