 Return To What?
Peter Souleles
Sydney, Australia
Oct 26, 2009
"Sacred cows must be
slaughtered, especially if they are too fat to walk on their
own. Cash for clunkers, stimulus cheques, tax credits for home
buyers, and rescue packages for auto manufacturers are nothing
more than the equivalent of burning ones furniture to keep warm."
Let me tell you up front and
very clearly that the recession is not over until your wealth,
income and purchasing power have ALL been restored (on a sustainable
basis) to where they were before the Global Financial Crisis.
Forget the other definitions. Until we return to that level of
"affluence" there can be no end to the recession. The
problem however is that yesterday's level of affluence was largely
a series of dovetailing mirages. Thus the mirages were not only
transient but also undermined whatever strengths there were prior
to that period of "hedonistic" unbridled capitalist
aberrations.
So what were these dovetailing
mirages? YES we can keep fighting wars forever, YES
cheap interest can cure all economic ills, YES we can
use our homes as ATMs, YES we can become rich by
flipping condos, YES we can increase government expenditure
and still reduce taxes, YES we can print money and still
remain the reserve currency of the world, and finally, YES
we can spend our way out of trouble. This would all sound insanely
funny had the outcomes not been so devastatingly sad.
 So the question
is largely, "where do we return to?"
What is certain is that there
will be no return to past glories. The USA is like an Olympic
athlete who 60 years after his victory (WWII) has been found
guilty of having taken metabolic steroids and is stripped of
his medals. The athlete realises the error of his ways and vows
a comeback. The problem is the body of the athlete is no longer
what it was as the ravages of time and loose living have turned
muscle into fat and sinews into cellulite. The USA today is faced
with an unpayable and one day unserviceable government and private
debt, a disembowelled manufacturing sector, a less than prime
demographic trajectory and above all government structures that
place power and vested interests above people and democracy.
If the balance sheet of the USA is the US dollar then it too
is clearly sub-prime.
Lies unfortunately, can last
two or three generations and it is only history that eventually
catches up to them to punish them. The lie of money printing,
the closing of the gold window and the subsequent arrogance of
the US in shoving this increasingly worthless paper down the
collective throats of the world was topped off by a hungry and
gullible world that until recently mistook the alchemy as an
elixir of eternal prosperity. At least other regions of the world
were able to create infrastructure, manufacturing capacity and
a better standard of living and this is the reason why many accepted
these pieces of paper with images of dead presidents. Other nations
were convinced to spend their dead presidents building fantasies
in the deserts of the Middle East.
A return to yesterday is out
of the question. Whilst the Chinese make noises about the value
of their US dollar holdings, they are also fully aware that they
have the US squirming in a corner regarding its immediate reputation
and choices. They are also happy to see the US continuing to
bleed whilst trying to maintain the Empire through force rather
than trade and clean diplomacy. Furthermore, the US is highly
constrained about making noises in relation to the manipulation
of the Yuan and other issues. The weakness of China on the other
hand is its huge population that needs to work so as to survive
and thrive, and any disruption to this process can cause incalculable
political unrest. China at least has the sense to understand
that job security is preferable to Social Security.
The US Government is also doing
its own squeezing. Despite the increasingly desperate situation
of its various States, the government refuses to have them "bailed-out".
The purpose of this is not only to exhibit fiscal rectitude to
the world but to also force the States to make structural changes
that it itself is not willing to adopt.
As the USA's affluence and
influence comes under threat there is a danger that steps will
be taken by the elite to concentrate in their hands whatever
assets and power they can. Legislation, law enforcement and the
courts will close ranks behind them. This will be a retrograde
development and will be in stark contrast to the principles and
aspirations of the founding fathers. In fact this is the pivot
upon which the USA's fortunes rest. If the US is to re-invent
itself the lead must come from high minded money and power that
have the means to initiate change without the further inefficiencies
of a bloated government structure. Imagine if the cost of treating
lung cancer and Type 2 diabetes was cast upon the top 5% of income
earners? You can bet your last dollar that the influence of the
rich upon the legislature would pretty soon see changes to laws
relating to the availability of cigarettes as well as to the
fat, sugar and salt content of a whole range of foods.
This is the reason why reform
of the Medicare system cannot be truly entertained without the
reform of lifestyles, particularly in the area of eating, exercise
and drug consumption.
Sacred cows must be slaughtered,
especially if they are too fat to walk on their own. Cash for
clunkers, stimulus cheques, tax credits for home buyers, and
rescue packages for auto manufacturers are nothing more than
the equivalent of burning ones furniture to keep warm. If your
boat is sinking and you are in the water, the last thing you
do is try to hold onto your baggage. The baggage of course is
a metaphor for "yesterday's fantasies".
In the meantime Sheila Bair
closes 2-3 banks virtually every Friday afternoon. In fact it
perplexes me that some betting agency does not offer people the
opportunity to bet on which bank will be the next to bite the
dust. The frogs in the slowly simmering pot however think they
are in a jacuzzi. But then one Friday, banks will start to close
and depositors will receive only 90 or 95% of their deposits
back. The truth is that the FDIC would love to cull ALL deposits
with a one-off impost of say 5% but is probably fearful of being
painted as another Argentina and creating panic.
The battler who has no lobbyist
in Washington but who has his children in Iraq and Afghanistan
is between a rock and a hard place. Perhaps if the top 1% were
also required to supply soldiers to the "cause" they
would see and do things differently. When the political system
has become nothing more than a manipulative and opaque duopoly
what hope is there for democracy and the future?
I therefore close with three
suggestions which will give people a louder voice:
(a) All corporations engaging
lobbyists must contribute an equal amount to a fund which will
allow "the little people" the opportunity to also engage
their lobbyists and argue their causes both face to face with
their elected representatives and in the media.
(b) The next elections should
have a third choice, namely, the right to tick a box which says,
"I do not wish to vote for either of the candidates as neither
of their parties has served the interests of this nation."
(c) Finally, a return to honest
money as the present dishonest currencies will lead to increasingly
dishonest transactions and outcomes.
In the meantime we will all
remain hopeful that some catalyst (perhaps a Ron Paul or a Peter
Schiff) will bring the US out of its destructive death spiral
before it ends up like some socialist/communist style mutation
that is relegated to the annals of greatness. Only two things
are certain. Firstly, the better the quality of the democracy,
the better will be the outcomes of the nation. Secondly, financial
and economic solutions must have philosophical underpinnings
that are enlightened. This is where we need to return to.
October, 2009
Peter Souleles
email: psouleles@hotmail.com
Sydney, Australia
321gold Ltd
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