Lovely weather we are having. The first day of 2012, it’s wintertime, it’s sixty degrees outside, shirt sleeve weather. Last year, New York City was digging out from under a once-in-a-lifetime post-Christmas blizzard. Lord Mayor of New York was accused of being unprepared for the storm which indeed he was.

It was obviously the first time it had ever snowed in New York in the wintertime.

No blizzards this Christmas, not even in the north, the blizzard arrived in October …

This is our winter without winter, or perhaps the winter without cold weather. It is notable-slash-ominous how little snow there is in the United States, how the plants and other wild things are confused by the absence of frost. Add together the uncertain season, the floods, dying animals in great numbers and weather calamities around the world it is clear the portents are grim for those who are sensitive to such things.

The end of the world? Who knows?

The ancients would have much to say about the unseasonable airs and birds falling from the sky. The augurs would demand sacrifices: what would we give up? How about television. It can’t be hard, there is nothing on television but lies …

It is too soon to come to any conclusion about the Winter of 2012 which is sure to come. The earliest of winter in December, 1993 was also balmy almost up until the New Year when it turned spectacularly cold. Washington, DC is not designed for below-zero. People aren’t used to it, there aren’t the clothes in closets for it. Passersby cried aloud from the pain of the bitter wind knifing through their layers of coats when it was five-below.

At five-below you start telling jokes to yourself. At fifteen-below it is Montana or Wyoming cold: the jokes you are telling yourself are funny. At twenty-five below you don’t feel your feet or your ears or the end of your nose. Your fingers stop working because of the cold, then they turn white, then comes the frostbite and your fingers turn black: fingers, toes, nose … everything that sticks out. It’s hard to remember because it never gets that cold, anymore …

In 1994 the pipes froze all across the DC metro area, water services and sewer drains froze in the ground, the Potomac River ice was thick enough to walk across at Key Bridge. Peoples’ toilets froze solid and couldn’t be used, the houses froze because furnaces could not produce enough heat. People turned up the thermostats then set fires in fireplaces to keep warm, sleeping next to the fire. After a week of terrible cold the city was without firewood. Snow fell in repeated storms, then sleet and freezing rain which did not melt: 1994 was a siege of ice storms and bitter cold after a mild December.

Background music was the sound of tires spinning on the icy ground.

January, 1994 was the last time it was below zero in Washington, DC. Last July was the hottest July on record. Texas and Mexico wilted under an unrelenting drought and searing temperatures. Meanwhile, in the once-frozen north the once-frozen methane boils out of ice-free ocean into the atmosphere. The great glaciers melt. One thing certain is 2012’s unforgiving weather … more floods, droughts, hurricanes and fierce storms.

Here is our drowning weather of discontent:

– Deleveraging of debts is underway worldwide. Europeans, Americans, Japanese, Chinese with finance assets are becoming poorer, those with large positions are finding themselves unable to liquidate without taking great losses. Large positions and strong hands is why there has been no out-and-out collapse so far. Asset holders have refused to sell at depressed prices and have been anteing margin out of ‘petty cash’. Holders wait by the fireplace in the cold for Santa Claus to fly hither and bring ‘growth’. Economists promise this growth will arrive any day now …

– Santa isn’t coming and the growth is a hoax. Even in China where the official policy is ‘real growth or fake’: what takes place is the relentless increase in indebtedness and the accompanying deleveraging.

– Deflation takes place because there is insufficient output from the ‘nuts and bolts’ economy to service and retire debts taken on to support asset prices. The nuts and bolts economy does not produce anything of VALUE, only (borrowed) debt-money wealth leveraged from fake collateral: the ‘Grand Illusion’ of output.

– Asset deflation is ‘austerity for the rich’.

– The recent collapse of the gold market indicates the point of margin calls has been reached, that assets at the margin are being sold by the broker. Right now is the period of modest deleveraging but this is deceiving. There are no organic buyers in today’s markets at today’s prices, only central banks.

– Real estate bubbles in China, Australia, Netherlands — and soon — Canada, Sweden and France are deflating. The borrowed wealth-effect that supported the atmospheric price levels of non-real estate assets is vanishing. The Japanese, US, UK and Dubai bubbles burst long ago. Asset prices have been supported in these countries by public borrowing and central banks buying assets in desperate rear-guard actions.

– The central banks are the last line of defense between asset prices and deflation. The banks have provided necessary market discipline by meeting redemptions. The banks cannot buy all the assets because the effect of doing so would be identical to them not buying anything.

– Taking place in Europe is the vanishing private asset market. The only bid for non-German assets is the ECB. This is an indicator the euro is on its last legs. There is no rationale for a currency that requires ongoing support from the central bank to keep the European bond markets’ doors open.

– The central banks have has created for themselves the perfect dilemma: having committed to large-scale buying of debt they cannot stop. Should a bank stops buying, it reprices its own assets (to zero). One could say a central bank buying its own assets has crowded private buyers out of the debt markets. The reason for central bank purchases in the first place is because nobody else is buying: the reason is because the market participants are bankrupt.

– The European central bank has started buying everything and is now committed to purchases without end. The more the ECB buys, the more hopeless its position becomes. Yet, if it doesn’t buy, the EU collapses under the weight of its Zero Worth assets.

– Not just the Europeans buying their own debt. The Japanese, Americans, British are buying, look for the Chinese to start buying their own assets instead of overseas varieties (QE). Assets must be bought in sufficient quantity to effect the market price of debt. If the bank cannot effect the marketplace it is the same as the bank not buying anything … which allows the problems necessitating the bond-buying to run away.

– The banks have ceded control over their own destinies, they must buy assets or both the banks and the bond markets fail together. If banks buy enough assets sufficient to effect the markets they will also fail because any economic ‘idea’ that must be propped up by continual central bank purchases costs more than it is worth!

If (as) the euro fails, it could easily be replaced by the dollar … as a ‘temporary’measure.

– There are reasons to go to dollars, one reason is there are plenty of dollars.

– Another reason is that it would end the discount the euro currency presses onto every EU asset. Consider a commercial bank holding assets denominated in euros: a German bank that has lent €200 million to a Greek business. The real worth of the asset is €100 million (with the 50% haircut) but the ‘imaginary worth’ is the face amount. Comes now the German (non)government announcing all euro assets and liabilities will be re-denominated in D-marks. What is the asset worth to the bank? What is it worth to the German government? These are not the same thing: if the asset is assigned the worth of €200m = Dm200m, the new D-mark is as worthless as the euro … and for identical reasons! The same incompetent bookkeeping rationalizing the euro rationalizes the new German currency. A D-mark will follow the path of the euro and be devalued into worthlessness.

– Pricing the asset at its real worth of €200m = Dm100m would put the bank into insolvency. Add together all the mispriced assets held by banks and the entire German banking sector is kaput. This is what the euro crisis represents: a choice between currency extinction or banking system insolvency! Here is the ‘worth trap’ that was designed into the euro … that has proven impossible to get out of.

– If the euro is exchanged for dollars, the worth of each dollar is set by motorists around the world rather than by inept central bankers or bookkeepers. Priced in crude, each dollar is worth something. The dollar isn’t subject to the devaluation pressure that weighs on the euro … and which would weigh on any new Deutschmark. Meanwhile, the repricing of assets into dollars would be compensated for by ‘flexibility’ on the part of the Federal Reserve, which has its Treasury counter-party and can add funds into circulation as needed (to bail out the Europeans banks).

– Deleveraging in Europe and flight out of the euro is supporting the asset markets in the United States. Dollarizing the EU economy would amplify this trend: another form of QE.

– An onrushing energy shortage exists that is not recognized as such. A consequence has been the unraveling of economies built around very cheap fuel. The effect of systemic real price increases is to strand infrastructure ‘investments’. Debts taken on to produce infrastructure cannot be serviced or retired by making use of the infrastructure. A consequence is the world’s central banks — which can print money — are propping up energy wasting junk. This is not a winning strategy long-term: the best outcome is deleveraging deferred … and nothing more.

– Here is energy deflation: fuel is rationed by access to credit. As credit vanishes the price falls yet (credit supported) incomes fall faster. The consequence is rationing by diminished physical access to fuel. Shortages will render fuel use (waste) infrastructure worthless along with the debt taken on to put the infrastructures into operation.

– Unraveling of world’s economies is energy conservation by indirect means.

– The world’s ugly weather suggests climate change is well underway with significant implications. There will be far more ugly weather events in 2012. Will people take weather warnings seriously and cut carbon emissions? It doesn’t matter because energy shortages and credit collapse will cut carbon emissions.

– Unpredictable ‘black swan’ events have out-of-proportion consequences. The ongoing Fukushima Dai-ichi nuclear power station disaster is an example, radiation emissions from the reactors have not been brought under any semblance of control. A large number of individual events could cause a massive release of new radiation, enough to require the evacuation of a larger part of Japan and effect millions around the world.

– The nuclear industry offers the human race anxiety over extended periods of time in exchange for some baseload electricity, which can be had by many other means. How much is that electricity really worth? This is the question that will be put forward in 2012 as Japan appears to do well without its fleet of crumbling, shoddily constructed reactors.

– At issue will be whether Japan can afford to decommission its reactors or afford not to? How about France?

– The establishment loses its claims to legitimacy. What is revealed are institutions that are by design unable to govern effectively, with ‘leadership cadres’ as stage actors reading from scripts. Managers are selected for their ability to meet public expectations of what a public administrator looks like, how he or she speaks and dresses, where the administrator is from and how educated and to which mafia said individual is ‘connected’. Call this the principle of ‘Non-Governance’.

– Behind the scrim of government pretense operates the loose confederation of private interests acting as conquistadors, stealing whatever isn’t bolted to the floor.

– The consequence of non-governance is our current leadership vacuum. Nobody knows what to do, there is no plan, the only effective force is represented by the conquistadors. Parallel to non-governance is non-protest such as #Occupy Wall Street which offers non-leaders and a non-policy wrapped in non-strategies. Where do we go from here? Non-place!

– Non-governance made sense as a response to the 20th century as machines gave effective administrators too much power to cause trouble. A system designed to promote addled Warhol Superstars as administrators is unable to produce anything else. The world desperately needs leadership and a new plan the world gets incompetents. Look for more incompetent clowns in 2012 and more clownishness long past the point of ‘too late’.

– President Obama will easily win re-election, the result of the ‘improving’ US economy. If the economy does not cooperate the establishment will fake it. This suggests a modest bull market in US equities.

– For the first half of 2012, the US economy will improve as the rest of the world unravels and capital flees to the US. The world will see the demise of a major currency which has not happened since the end of World War Two. The euro’s end will not be the result of a lost war but rather the currency’s internal contradictions along with leadership failure. The unraveled euro will call into question the VALUE of all currencies adding more uncertainty and distrust which will feed back into the markets.

– China’s economy will grind to a halt: an unspoken reason will be expanding energy shortages in China. As its export industries falter due to American and EU consumer resistance, China will have less foreign exchange with which to buy crude oil. As China’s debt load becomes unsupportable, the Peoples’ Bank of China bank will print.

– The social ‘trend’ of 2012 will not be the ‘i-something or other’ but the bank run.