April 13, 2011

Apocalypse fatigue

I have to admit that it was more fun to write this blog (which I've been doing, off & on, since 2006) when the idea of American decadence, of an actual fiscal or resource-based collapse, was more the stuff of dystopian fantasy than present-day reality.

I just looked at the latest Monthly Statement from the Treasury and it's a true horror show. About $150 billion in revenue against $330 billion in expenses. The figures are so far out of whack that they would make more sense if one of them, say revenue, was from Angola or Belize or somewhere, and the second was from the combined budgets of the entire European Union. They just don't belong on the same balance sheet. It raises a serious question: who are we trying to fool with this nonsense? A $180 billion deficit in one month.

I do not consider myself a deficit hawk or a deficit dove or a deficit anything in particular. I think I can understand, in broad outline, how this absurd situation came about. I have watched it happen over my lifetime. The largest whole number divisor of my age, other than the age itself, is 21. To give a further clue, I am not 21, 42 or 84. If my life is divided in thirds, then the first segment belongs in the period of American Triumphalism, 1948 to 1969. The second occurred during the beginning of the Descent Phase, 1969 to 1990. And the third happened during the period of American Decadence, 1990 to 2011.

It is fashionable now to engage in Good Guy/Bad Guy narrative analyses and to begin American history in 2007 or slightly later, at the Fall of the House of Lehman. This is convenient for political polemics because it enables both groups to analyze America's current predicament from the viewpoint of innocent victims. The Commoners are the victims of a sell-out political system and Big Business. The fat cats themselves are the victims of Socialism and excessive government regulation.

Having observed this slow-motion train wreck, however, I am more inclined to see American decadence as a broad-based social enterprise. America was once very rich and worked very hard. After we stopped working hard, or shipped all of the jobs where hard work was productive, to nations where slave labor is allowed, we lost our competitiveness and assigned all of the benefits of Globalization to an elite managerial class which could leverage foreign low wages to domestic profitability. This process was enabled by the federal government through tax laws and free trade agreements. It never made any sense that it could redound to the benefit of the American commoner, but it was sold to the American public as if it could by its many champions, including stalwart "Liberals" such as Thomas Friedman and Paul Krugman. The Conservatives never bothered with the populist cover story; they were just in it for the money.

The Commoner was not left totally out of the picture. The flow of the world's reserve currency, the dollar, between the United States and mostly Asian producers (of consumer goods and oil), allowed America to keep interest rates low and to produce serial bubbles in, first, the dot.com field and then in housing. This produced a "wealth effect" despite wages which stagnated and which by themselves were incapable of supporting the actual standard of living which the country pretended to. This "system" of recycled dollars worked until the actual wage structure of the American middle class was inadequate to the demands of the debt service assumed in order to keep the consumer society functioning.

The whole thing, at long last, finally crashed. The political class, such as the feckless President Obama, are left with a smoldering pile of debris where a Borrower's Shangri-la used to be. Since the political class cannot explain to the American people how this came to be without admitting their complicity in the ruination of America, this End Stage must be treated as a temporary blip, a "Recession," which will be cleared up with adequate money-printing, fiscal stimuli or some other gimmick.

As I say, however, an uninformed American electorate permitted all of this by continuously electing politicians who allowed it to happen, or even encouraged it to happen. Freed from hard work and encouraged in the belief that prosperity consisted in the accumulation of gaudy toys and distractions, Americans began to believe that their privileged lifestyle was a matter of "Exceptionalism" separated from the Laws of Thermodynamics or even common sense, and that we would continue to prosper in the Information Economy or some other arrant foolhardiness.

It's not going to happen that way. What happens when such thinking continues too long is that a country pretends that it has a $330 billion lifestyle based on $150 billion worth of income, and fights tooth and nail over cutting so much as a dime from the sum of expenditures (the vaunted $38 billion in "cuts" represents in point of fact a reduction in planned increases in the budget).

Under such circumstances, I think it is ludicrous to discuss seriously Paul Ryan's idea to balance the budget in 2040 or President Obama's plans to cut expenses long after he's already left office. It's not going to happen like that. This is not a country that is going to engage in an orderly process of sorting things out. It will lurch and careen from side to side with both sides continuing to blame the other for what was, at base, a failure of the democratic process. Where it ends up will be based on the dictates of Reality, which has a well known Realistic Bias.

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