DC thanks you for your patronage
Ol' Remus

When a business goes belly up it happens the same way. There are rumors, but there were always rumors. There are odd comings and goings and a string of resignations that nobody talks about. Those things happen. Maintenance has been cut back. Suppliers avoid phone calls. The sales staff spends half their day visiting prospective employers. Times are tough. But one morning it all becomes clear.

CLOSED - EMPLOYEES PLEASE REPORT TO THE HUMAN RESOURCES TEMPORARY OFFICE AT 123 WEST GOODBYE STREET.

Looking back, everything falls into place. It always does. The rumor mill got it right again, it was all so obvious, how could we not have seen this coming?

The place had failed long before Monday's closing. The locked doors and dark buildings are what economists call "realization"—when a loss is entered into the books, when the failure is acknowledged and quantified. The failure happens first, then everybody who's anybody positions themselves for the lightest possible hit, then comes realization time.

And so it is with our economy, default looms and the scramble is on.

The economy has failed. We're insolvent and well into the maneuvering phase. It's both different and the same as "the" Depression. In the 1930s, bank runs happened on the streets, this time they happened on the upper floors of financial institutions, although at the start there was a parallel run on ATMs. By all accounts it was a bloodbath. By all accounts the Federal Reserve was more helpful than their charter, or even simple ethics, allowed. Meanwhile, our creditors see us paying debt with more debt and getting close to where we can't even meet the carrying charges and interest. And worse, we're spiraling into a black hole of prior commitments that couldn't be met by a galaxy of tax-paying planets. Anybody solvent is tip-toeing away, the rest are going Galt or long torches and pitchforks.

It doesn't take esoteric lingo and arcane math to show the problem. Fourth-grade arithmetic will do. We spend more than we take in on the theory that "deficits don't matter". Our debt is now bigger than our income. We're borrowing to pay our debt. Our debt can't help do anything but deepen. Our income is shrinking. Our creditors aren't answering the phone. The workers who still have a phone are busy networking in the underground economy. Worse, obligations are coming due that we can't possibly pay even if we had no debt at all . Put numbers to these things and you have it.

But all debts must be paid. All debts are paid. There's no such thing as an unpaid debt. If a debtor doesn't repay a loan, it's the creditor who's paid it. Don't be misled by the complexity of the financial plumbing, our debt will be paid by somebody. That's what the maneuvering is all about. The collapse foreseen by anxiety-ridden doomers has already happened, financial Armageddon is behind us, only the details of realization remain. Meaning who takes the bullet and who walks away whole. Always a messy and contentious procedure, this time everybody with an IQ above room temperature knows it's coming.

Security is already walking to the gate, padlock in hand. One way or another, ready or not, this thing is going down. Then the curtain goes up on maneuvering of a different kind.

www.woodpilereport.com