Wondering why the money world got its knickers in a twist last week? The answer is simple: the global economy is breaking apart and its constituent major players are doing face-plants on the downhill slope of a no-longer-cheap-oil way of life. Let’s look at them case by case.
The USA slogs deeper into paralysis and decay in a collective mental fog of disbelief that its own exceptionalism can’t overcome the laws of thermodynamics. This general malaise precipitates into a range of specific quandaries. The so-called economy depends on financialization, since it is no longer based on manufacturing things of value. The financialization depends on housing, that is, a particular kind of housing: suburban sprawl housing (and its commercial accessories, the strip malls, the box stores, the burger shacks, etc.). Gasoline is now too expensive to run the suburban living arrangement. It will remain marginally unaffordable. Even if the price of oil goes down, it will be because citizens of the USA will not have enough money to buy it. Lesson: the suburban project is over, along with the economy it drove in on.
But so is the mega-city project, the giant metroplex of skyscrapers. So, don’t suppose that we can transform the production house-building industry into an apartment-building industry. The end of cheap oil also means we can’t run cities at the 20th century scale. That includes the scale of the buildings as well as the aggregate scale of the whole urban organism. Nobody gets this. For one thing, there will be far fewer jobs in anything connected to financialization because that “industry” is imploding. The recent action around the Federal Reserve illustrates this. When chairman Bernanke’s lips quivered last week, the financial markets had a grand mal seizure. He floated the notion that his organization might “taper” their purchases of US government issued debt and mortgage-backed securities — the latter being mostly bundled debt originated by government-sponsored entities and agencies. That’s the “money” that supports the suburban sprawl industry.
If the Fed were to reduce its purchases of this debt paper, nobody else would buy it. The reason the Fed buys the quantity it does in the first place ($85 billion-a-month) is that nobody else would touch it at the offered zero interest rates. The US Treasury and the mortgage bundlers could only sell the stuff if they paid higher interest rates. But the US government would choke to death on higher interest rates because its aggregate debt is so huge and the scheduled interest payments so gigantic that a one percent increase would destroy even the fantasy of economic equilibrium.
Apart from that unhappy equation, entropy never sleeps. Everything in America except the Apple stores and a handful of big banks is falling apart — especially the human habitat and households. Suburbia will only lose value and utility. Big cities will have to get smaller (ouch!). Tar sands, shale oil and shale gas will not ride to the rescue (they cost too much to get out of the ground). The entire declension of government from federal to state to local will be too broke to fix the roads and make “transfer payments” to idle, indigent citizens. This populace will lose faith in their institutions… and disorder will eventually resolve in a new and very different disposition of things on-the-ground. If we’re lucky, this will not include cruel despotic leadership and war.
If the “taper” talk is empty rhetoric, and the Fed continues sopping up issued debt, it will eventually destroy the credibility of its issued money. That is just another way of going broke, though it might beat a shorter path to the general loss of legitimacy of governments and other institutions.
Young people, harken: prepare for careers in agriculture and activities that support it. Consider moving to small towns in parts of the country where farming is possible and get ready to rebuild a very different economy. Also, consider repudiating your college debt en masse, since the fantasy of repayment is but another mental shackle holding you back from your future.
As for the other parts of the global economy, a digest:
Europe doesn’t have enough oil and gas to run itself. Its suppliers (Russia, various Islamic states) are all basically hostile to it. As the late, great Tony Soprano might say, “end of story.” Europe has been playing financial pocket pool with itself for five years with credibility ebbing. Soon Europe will descend into painful economic re-set. Its era as the go-to theme park of advanced civilization is ending. Go there while it’s still possible and take some snapshots of what comfort and artistry used to look like.
China is imploding under the weight of its half-assed crony command economy and banking system. Nice try. Cookie fortune says, “Industrial era entered too late in game.” All else there is desperation: e.g. the idea of moving hundreds of millions of peasants into new cities. As Tony would say, “Fuggeddabowdit.” They’re better off growing bok choy en situ. Anyway, no one should assume that China can remain politically stable. Let’s hope that its economic and political crack-up doesn’t transmute into war.
Russia’s oil production is in permanent decline. It has a lot, but it gets most of its income from selling it to other people. Hence, Vlad Putin’s notion of finding something else to base Russia’s economy on. Like…what? I don’t think they’re going to replace China in making salad shooters. Farming would be the way to go, and Vlad’s government is hoping that global warming improves Russia’s prospects for doing more of that. In any case, Russia might benefit in the long term by not selling off all of its oil and gas — though Western Europe would surely suffer from that decision. On the plus side, Russia’s government is not crippled by idiot squabbles over abortion, gay marriage, and the Bible in schools.
Japan. Sorry to repeat myself. Going medieval. They have no oil and gas. (Cue Tony Soprano again.) In the event, Japan’s financial hara-kiri will drag down the rest of the world’s banking system — or at least hasten the damage already self-inflicted elsewhere around the globe. I’m also informed that much of the essential computer chip fabrication in the world still happens in Japan, and that will go away, too, as the Japanese engine seizes, smokes, and expels its final belch of CO2.
What else is there? South America? Think: spreading jungle (or desert, take your pick). Canada? There’s an idea. Maybe Labrador becomes the new Hamptons? Second biggest national land mass… 30 million people (2 percent of China’s population). Only one drawback: the view to the south
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When Obama went before the United Nations on September 12, 2012 to declare that the Syrian regime "must end" and threatened U.S. military intervention to achieve that end he did not cite the U.S. Constitution as his authority. No American president ever does when threatening military intervention. Instead, he invoked the rhetoric of Abraham Lincoln or what the late Professor Mel Bradford called "the rhetoric of continuing revolution." More specifically, in his U.N. speech he paraphrased Lincoln's Gettysburg Address to say that U.S. military intervention is warranted because "government of the people, by the people, and for the people is more likely to bring about the stability, prosperity, and individual opportunity that serve as a basis for peace in the world."
Obama repeated this hoary theme - that Lincoln's rhetoric "justifies" or "legitimizes" endless American military interventionism all over the world - in his first inaugural address. "What makes us exceptional," he shouted, "is our allegiance to an idea articulated in a declaration made more than two centuries ago . . ." This "idea" was not, of course, the Constitution and not even the Declaration of Independence, but a few words from the Declaration taken out of historical context. The words are the "all men are created equal" phrase.
Nothing could be further from the truth than Lincoln's notion that America was founded on the idea of egalitarianism. The essential principles of the Constitution were based on the freedom of individuals from governmental control of their lives, not "equality" however it may be defined. If government is to have a role in society, said the founders, it is to protect lives, liberty and property, not to promote "equality" (which Lincoln unequivocally did not believe in in any case).
It is this "rhetoric of continuing revolution" that the American state has invoked for more than a century now to "legitimize" all of its powers, especially its endless aggressive wars. It is the opponents of endless military interventionism, men like Ron Paul, who alternatively invoke the Constitution as defining the legitimate role of government in society. The myths, legends, and superstitions surrounding the story of Abraham Lincoln ("Father Abraham," as the neocons are fond of calling him) are what are used to legitimize the power of the American warfare/welfare state, not the Constitution.
This fact explains the odd but perfectly predictable occurrence of recent hysteria among the neocons, especially one Rich Lowry of National Review magazine, over criticisms of the Lincoln dictatorship by yours truly and many others. They have become strangely unglued and freaked out over the fact that many young Americans, especially, no longer buy into the standard propaganda line that is always invoked to "justify" more war, more killing, more debt, taxes, inflation, spying, and other attacks on civil liberties. The neocons are still punch drunk, in other words, from how the Ron Paul phenomenon, during the congressman's two attempts at securing the Republican Party presidential nomination, captured the imaginations of millions of young people and continues to do so.
One of the clearest examples of the importance the neocons assign to the Lincoln legend in supporting never-ending war is a small book by an American Enterprise Institute neocon named Walter Berns. His book is entitled Making Patriots. In an important chapter on Lincoln mythology Berns bemoans the fact that too many of today's youth are too hesitant to join in the neocons' crusades to overthrow governments in place like Syria, Lebanon, Iran, North Korea, and elsewhere. They are too selfish and self-centered, says Berns, being so preoccupied with their own education, careers, and families. They must be mesmerized into the fascist/neocon militaristic mindset by some kind of "national poet," says Walter Berns. "Fortunately," he says, we already have such a "poet" in the political rhetoric of Abraham Lincoln. "Making Cannon Fodder" would thus be a more appropriate title for Berns' book.
In his essay on "The Nature of the State" Murray Rothbard pointed out that all states, no matter how tyrannical they may be, rely crucially on inculcating in the minds of the public the alleged grandiosity of the state and the alleged failures of private enterprise and the civil society. That's why the state and its court historians and other apologists (such as the neocon magazine writers, talking heads, and court intellectuals) spends so much time and effort trying to dominate the educational system and the domain of "acceptable" public discourse.
Such propaganda is essential to statism, said Rothbard, because it is essentially an economical way to get the public to acquiesce in being enslaved by the state. It is much cheaper and less risky than other historical means, such as terrorizing and mass murdering one's own citizens, thereby risking a violent revolution (See Death by Government by R.J. Rummel). Lincoln mythology is the propagandistic cornerstone of American statism and has been for generations. It is why politicians like Obama always fall back on the rhetoric of "American exceptionalism" to "justify" their endless wars and military adventurism.
The neocons are becoming unglued and freaked out because they no longer control the culture of ideas among "conservatives" as they did when the former CIA employee William F. Buckley, Jr. was at the helm of their flagship magazine. No longer can the ideas of a Frank Meyer, one of the founders of National Review who was a harsh critic of Lincoln, be thrown down the memory hole. There are too many independent scholars who are more interested in pursuing the truth than in "spinning" 150-year-old political rhetoric to "justify" the scheming plans of the military/industrial/congressional complex. Young people especially are concerned about the erosion of civil liberties and have become highly suspicious of tired old, belligerent neocons like Harry Jaffa and his followers (like Rich Lowry) who assure them that NSA spying, warrantless wiretaps, state snooping on all financial transactions, censorship of the internet, and intimidation of the media is all kosher because, after all, "Father Abraham" suspended Habeas Corpus, censored telegraph communications, and shut down opposition newspapers.
A prerequisite for the final collapse of the Soviet Union was the widespread disbelief in all the lies, myths and superstitions about socialism that the people of the Soviet empire had been brainwashed into accepting. Once no one any longer believed in socialism, the system was doomed despite all of its military might and all of the willingness of communist politicians to brutalize their own people.
As Rothbard said, all state power ultimately rests on a body of ideas that occupy the minds of the citizens. That is what so terrifies the neocons like Rich Lowry: They know how absurd it sounds to America's youth to hear Obama invoke THEIR rhetoric about the Declaration, government of the people, by the people, etc., and "American exceptionalism" to make his case for yet another war in yet another Middle East country that poses no threat whatsoever to them. More and more young Americans have come to understand that it is the warfare state, propped up by the neocon propaganda apparatus, that is the biggest threat to themselves and their futures.