December 15, 2009

Tin foil hats and other seasonal costumes

Sometimes I wonder whether I actually have to have some quote or news item to base one of these cognitive spasms upon. For example, one idea that occurs to me this morning (as I siphon some Peet's coffee into my synapses) is that maybe hikers should just stop climbing Mt. Hood in Oregon in the dead of winter. You know? I mean, doesn't this tragedy get a little repetitious? Is it actually surprising that blizzards would hit a mountain 11,240 feet high in the Cascade range in mid-December?

Just a thought. That's not actually the text of my sermon. I keep getting drawn back to the Economy as a subject. As I've said before, my inspiration, Henry David Thoreau, based his longest chapter in Walden on Economy for the simple reason that what we call the economy is essentially a description of the means by which humans derive their vital heat from Planet Earth in order to sustain life. For this you need food and shelter. Of course, very few Americans are actually engaged directly in these processes anymore. We eat food and we live in houses, but we don't grow the first or build the second. That's because we're "advanced," and live in the "organic" society, which is a very complicated contraption built upon hyper-specialization. Meaning, of course, that most of us are engaged in completely useless functions which can be easily discarded by society with no discernible loss to the core function of maintaining vital heat.

As part of the elaboration of our complexity, American elites thought it would be a good idea to get into a symbiotic relationship with the People's Republic of China, a Communist dictatorship, and to outsource our manufacturing jobs. Those are the jobs we built our former middle class upon. The Commies in Beijing run a command economy of the type favored by Josef Stalin, noted tyrant of the former Soviet Union. This means they can play any game they want with wages, currency fluctuations and anything else. They pegged their yuan to the dollar, which allows them to keep Chinese wages at the munificent average sum of 31 cents an hour, or about $2.50 a day. So the average annual compensation in China is about $3,000. In America, for a little while longer, the average annual earnings are $47,000. However, because of the symbiotic, and somewhat paradoxical, relationship that exists between our two great nations, one would expect that, as water seeks its own level, a gradual evening out would occur to "fix" this disparity. This is currently underway, although it won't continue.

So as I was hoovering in some of Peet's rich, oily, aromatic caffeinated brew, it occurred to me that we could forecast America's fate by simple mathematics. One cannot simply add the two income levels and divide by two, because China's population is four times larger than ours. So a weighted average makes more sense. We can take the sum of $12,000 (4 x $3,000), add that to $47,000 [$59,000], and divide by 5. So we're headed toward average annual earnings of a little under $12,000 per year. Isn't that nice of us to lever up the Chinese that way? I think so. They make stuff and export it to us; we export dollars to them; they export the dollars back to us; we make cheap loans to ourselves and inflate "assets" we can borrow against. This creates "money" that we use to buy more stuff from them.

Oh hell. Like all perpetual motion machines, this neat little setup ran afoul of the laws of thermodynamics. The contraption broke down. While this is a disaster for us, it's also a calamity for the Chinese. They have those 100,000 factories, they're up to their eyeballs in salad spinners, Snugglies, pirated CDs, flat screen TVs, poison dog food and radioactive Gerber's, and they don't have the money to buy it from themselves.

Meanwhile, back at the Ranch on Capitol Hill, certain expectations about the continuance of this neat symbiosis had taken root. We really, really need the Chinese, and other helpful Asians, to help our government with its spending problem. Lately, it's gotten somewhat out of control. In addition to rolling over the Mount Hood of debt (see: this is called "thematic unity") we had already amassed, we thought it would be a good idea this year and the last to throw on another $1.5 trillion or so of new debt, sort of like fresh powder over the frozen pack of yesteryears. So we need a lot of help with flogging about $150 billion per month (October and November indicate we're on pace for a $1.8 trillion deficit, not quite as good as we hoped) of Treasury bills, notes, bonds, you-name-it, over and above all the stuff that keeps coming due from all the previous decades of empire building and defending the world against -- well, Communists.

And dag nab it, right when we needed them most (and isn't this just like a Commie?), the Chinese became kind of disinterested in our problem. They are becoming net sellers of our Treasury IOUs. You see, the conveyor belt needs to run in a complete loop to keep the Chinese focused on our problem. If we stop buying stuff from them (and we're stopping), then they don't receive those dollars to send back to us. And do you think the Chinese are just going to come up with the money to take care of us? My sentiments exactly.

You see, here in America the idea that our standard of living should go down just because the vast majority of us are engaged in completely unproductive employment was absolutely - politically, emotionally, even morally - inadmissible. We would "stimulate" the American economy back to life, dammit.

Well, we still have a few tricks up our sleeve, you know. If the Chinese won't give us our money back (because we didn't send it to them to give us), we'll just make some more, because we are not going to settle for any 12,000 bucks a year, even if it's what we deserve. So if you're looking for a good investment play, I would suggest Lexmark. They make toner cartridges, you know.

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