America's political debates, it seems to us, constitute primarily a struggle among the deaf, the dumb, and the blind. Much of the time, the quantity and intensity of energy directed to argument over each particular issue seems to be inverse to its real importance. Of even greater significance, we think, is that the core issues and core conflicts are ignored, obfuscated, and packaged in a highly misleading way. Since we are not conspiracy theorists, we do not believe that this crucial aspect of the political and economic debate is deliberate. Conflict occurs at the margin, rather than the heart, of the great issues because all key players -- politicians, bureaucrats, media, corporate powerhouses, organized labor -- are in IMPLICIT, but nevertheless binding, agreement over the decisive importance of maintaining the economic and financial system as they are. In the matter of the current debate over the role of the great banks in the financial catastrophe and the derivative economic implosion, and over the proper role of government regulation and/or control, the heart of the issue is never discussed. This core, in our judgment, is just this: Is it true that government intervention in the financial system via monetary policy, and in the functioning of the economy via legislative enactment, regulation, subsidies, and government programs Secondly, and more importantly, the core question is this: Are we willing to exchange a significant degree of economic growth, household consumption, rise in living standards, and the general level of economic prosperity DURING THE UP-CYCLE IN EXCHANGE FOR A DIMINUTION OF PAIN DURING THE DOWN-CYCLE? The question of the balance between free enterprise/capitalism and government intrustion/power is merely a DERIVATIVE of this crucial question. Since we do not believe in fairy tales, we must necessarily reject the IMPLICIT CONVENTIONAL WISDOM of politicians, economists, and the media that THE PERPETUAL FREE LUNCH IS A VIABLE OPTION. It is NOT. Underlying the debate over the proper course of public policy, monetary policy, fiscal policy, the optimal role of government in business, is this very fairy tale. Clinging to this consoling illusion is politically popular -- perhaps essential. This consolation is an amplification of the American "can do" ideology -- an ideology which has frequently been translated into reality. Glossing over the fundamental and unchangeable reality of the economy as, in many respects, a ZERO SUM GAME, precludes the possibility of any basic reform. This is fine with the prime beneficiaries of the existing system, and of those who represent their point of view in the halls of government. However, it is not only untrue, but is becoming INCREASINGLY UNWORKABLE. Moreover, as it becomes increasingly clear that magic cannot be worked, social tensions and stresses must inevitably intensify, at what pace and to what culmination we cannot forecast. We must consider the truth behind the remarkable rise in the standard of living in this country since World War II. Certainly technology, institutional structures supportive of capitalism and economic growth, and the deep-seated spirit of enterprise have made a significant contribution. But there is another, more important factor, we think. This is: the agglomeration of DEBT. The secular increase in the growth of accumulated debt has been a linchpin of the long-term and very impressive rise in the standard of living of American households. Yet this debt accumulation is not free, though it may seem so while Ponzi financing, as Minsky observed, remains viable even as it amplifies at an ever more frantic pace. At the end of the day, however, the chickens DO come home to roost. At this point, the decisive question is: HOW SHALL THE INEVITABLE PAIN AND LOSS BE ALLOCATED? This is the great question no one cares to address. The great question which must inevitably force its way onto center stage, to the point where it can no longer be ignored, or bandaged and sent on its way. Moneysage |
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Money Sage |
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