Like a lot of observers in thrall to the agony of the financial markets, I have been commenting on less-than-the-Big-Picture in recent weeks. The Big Picture is the health of American society, which includes both its economy and culture. In healthier times, finance was but one part of the economy, the means for raising capital investment to apply to productive activity. For the past two decades, we have allowed it to become an end in itself.
As US manufacturing decamped to low-labor-cost nations, we turned increasingly to the manufacture of abstruse investment schemes designed to create "value" ingeniously out of thin air rather than productive activity. These succeeded largely because of the momentum of legitimacy American institutions accumulated in the years after the Second World War. The rest of the world believed our ingenuity was backed by credibility. That momentum has about run out.
You will hear about central banks and hedge funds and derivatives and mortgage backed securities, and all kinds of jargon, but the issue will really come down to matters other than finance. Are we building a society with a future? Does our culture affirm life or yearn for destruction? Are our daily ceremonies and rituals meaningful or empty? Are our hopes and dreams consistent with what reality has to offer? Can we look in the mirror and say that we are upright people?
I think we are in trouble with all these things. But I doubt we can give up our current behavior without going through a convulsion. The psychology of previous investment is, for us, a force too great to overcome. We will sell the birthrights of the next three generations in order to avoid changing our behavior. We will blame other people who behave differently for the consequences of our own behavior. We will not understand the messages that reality is sending us, and we will drive ourselves crazy in the attempt to avoid hearing it.
I haven't changed my view of what is happening to us. We have run out our string of stunts and tricks in the money rackets. We've spent our legitimacy. The rest of the world will strive mightily to get free of their obligations to us, including their respect for the value of our currency. The meta-cycle of suburban development, including the "housing" and all its accessories in roads and chain stores, is hitting the wall of peak oil. The suburban build-out is over. This will come as an agonizing surprise to many. The failure to make infinite suburbanization the permanent basis for an economy will rock our society for years to come. Hundreds of thousands of unemployed men with pick-up trucks and panoplies of power tools will feel horribly cheated. I hope they don't start an extremist political party when the re-po men come to take their trucks away.
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Even under the best circumstances, with a nationwide change of heart, and really wise leadership, America would find it difficult to make the necessary changes that new reality requires. Of course, reality will force us to make these changes whether we're on board with the program or not. The only variable is how much turmoil may ensue in the process. If we resist doing what reality commands, our trouble is certain to be worse.
What does reality command? Well, first of all (and especially for the benefit of the enviro-progressives I have met recently, who want gold medals for buying hybrid cars) we'd better drop the idea that there is any way whatsoever to preserve our system of happy motoring. The car as a mass market phenomenon, and enabler (dictator, really) of all our daily life arrangements, is finished. We'd better find something else to talk about, or the American future will amount to little more than a colossal circle-jerk on an increasingly unfixable freeway. I am hugely worried (obviously) that even the intelligent-and-educated fraction of our society cannot focus on anything but how to keep all the cars running. A failure to drop this, and move on to more practical endeavors, will lead automatically to a failure of reasonable politics in this country. It is already manifest in the abysmal failure of the Democratic candidates for president to address the looming oil import crisis that will certainly be underway as soon as any of them is inaugurated.
Reality commands that we prepare to rebuild our small towns and small cities and downsize our gigantic metroplexes. Reality commands that we get serious about local food production and local economies. Reality commands that we rebuild the kind of public transit that people will be grateful to travel on. Reality commands that we prepare to rebuild our harbor facilities for a revival of maritime trade, using ships and boats that do not necessarily run on oil. Reality commands that we put an end to legalized gambling, in order for the public to re-learn one of the primary rules of adult life -- that we generally should not expect to get something for nothing.
The trouble we are seeing in the financial sector is largely a result of blowback from tens of millions of people who tried to get something for nothing. It is a circumstance that is now beyond the control of the Bushes, Paulsons, and Bernankes. Their intended-to-be-soothing statements on Friday will not hold back the implosion of cascading defaults and cumulative insolvency. A few "poster children" may be symbolically rescued to try to prop up confidence in this-or-that paper, but an awful lot of other people and institutions will just go down, unfortunately, because of their own bad choices.
A strange new meta-reality will assert itself in America: that shit happens. We will see the ruined people and feel bad about them, but we will not be able to un-do the shit that has happened to them, that they have brought upon themselves. This is how the idea of moral hazard returns to a society that has lost its way. Meanwhile, there is too much to do for the survivors to sit around wringing their hands and being crybabies. You can start by taking all the mental effort that you are currently wasting on the subject of cars, and how to run them on fuels other than gasoline, and instead focus your energy on how to rescue our political institutions so that a truly informed public can reconstruct a bankrupt society into a living and credible republic.
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