The Discussion Industry

In my opinion, the two writers who have brought more clarity to the American problem of insolvency and imperial overstretch than any others are Chalmers Johnson and Kevin Phillips. Johnson has put down his ideas about American imperial overstretch in his Nemesis trilogy; Phillips also has a trio of books about American finances, the last of which was Bad Money, about the "financialization" of the American economy. Interestingly, both of these intellectuals were formerly Republicans who worked, respectively, in the Nixon and Reagan administrations. Since in this country any "radical" critique emanating from the Left is, ipso facto, regarded as bogus, naturally these two are afforded an enhanced credibility. (As a case in point, I note that Tom DeLay, that paragon of probity, recently concluded that Barack Obama was "definitely" a Marxist, probably meaning to imply that Barry got his ideas from the Mau-Mau uprising in Kenya.) Despite their legitimacy, however, Johnson and Phillips are largely ignored.

The reason for the obscurity of their ideas, which seem so unassailable, is that they lie outside the parameters of the "mainstream" dialogue. J & P both contend that America is on the brink of fiscal disaster, although the paths they describe leading to perdition vary somewhat. Johnson thinks that a bloated military-industrial complex is unsustainable yet politically invulnerable. Phillips contends that America's reliance on paper-shuffling as a way of life, as opposed to productive activity which builds real wealth (such as a manufacturing sector), hollows out the fiscal core of the nation. Both agree that the U.S. has huge foreign and domestic liabilities (debt to foreign countries represented by Treasury obligations and intramural debt in the form of money robbed from entitlement programs such as Social Security and Medicare), and that the United States will probably try to monetize its way out of its debt. That is, succumb to the temptation to run the printing presses and inflate the currency to make the debt cheaper.

The problem with this loophole is that it may also be closing as the world's economies, particularly in hot emerging countries such as China, India, Brazil and a resurgent Russia, enter the active phase of "de-coupling" their economies from the United States and creating their own markets. Which is another way of saying that the dollar will not necessarily be Planet Earth's fiat currency anymore, and no one will be interested in our efforts to print paper with numbers on it and present it as legal tender. They'll see us for what we are: insolvent, energy deficient and basically irrelevant, except for our adolescent tendency to start wars whenever we get tired of dealing with our own problems.

The mainstream dialogue is not actually based on these realities. The real situation is supported by mountains of converging evidence, such as the sad situation that American depository institutions (i.e., banks) have current unborrowed reserves of negative $130 billion, according to the official figures published by the Federal Reserve, but on which no one comments. In May of 2007, the reserves were a positive $43 billion, so a negative swing of $173 billion has occurred over the last year as the result of the various "liquidity crises," which were actually just the last act of financial cannibalism the U.S. could come up with as it digests its real assets and offers them up to an impatient world.

No one talks much about the unfunded entitlement programs, Medicare and Social Security; based on foreseeable outlays, each American family of four will have to come up with $1.4 million to keep the promises the government has made but broken as the result of its insatiable desire to maintain a huge military establishment. One does hear about the negative American savings "rate," and the dried up equity lines of credit which used to fund consumer luxuries like buying Asian electronics, but no more. What money is left is used for luxuries like eating and driving a car.

Actually, talking about these things won't help much at all, yet the Internet is full of blog sites, cable news runs 24 hours a day, newspapers publish on paper and online around the clock. A very small percentage of the yakking actually touches on the "radical" truth that thinkers like Phillips & Johnson write about so thoroughly and eloquently, based on such unimpeachable research. That's because the day-to-day discussions are actually simply an industry, an economic sector like bundling subprime mortgages or working in corporate "branding." It won't sell if one keeps hitting the negative notes over and over, so the tone alternates between hopeful optimism (the Presidential race! change!) and occasional nods toward reality, where some buzzkill expert like David Walker, formerly a G-Man who kept insisting we weren't facing up to things, is given a couple of minutes.

You can, in other words, buy optimism as yet another product of the relentlessly innovative American economy, one where the stock market is down a little, but is about to turn the corner toward positive growth in the "second half of the year," or where oil prices will moderate when the "speculators" are squeezed out, or where the housing market will soon recover once the loan money starts flowing again. Like a 24-hour Reality Show, only more like a 24/7 UnReality Show. Take your pick; it's on right now.