Denial

It is human nature to avoid stress, if possible. One healthily perceives ordinary happenings not as potentially dangerous and cause for alarm. To be locked into a vigilant viewpoint is incapacitating. When the time is right, however, it is critical to recognise signs of actual danger and respond appropriately.

Stock markets are crashing, there are mass foreclosures, bank failures, and mass layoffs. A whole nation – Iceland – goes from affluence to a basket-case in a matter of weeks. This is not a drill, ladies and gentlemen. And how are the professional firefighters – the Treasury Departments, the Central Banks – managing the crisis? They are, frankly, running around like chickens with their heads cut off. If a multi-building fire was raging in your city and its fire department was acting like Mr. Paulson, would you have much confidence in its ability to contain the fire?

The mainstream media aren't helping the situation. They couch discussion of the economy in terms such as “being at the brink of a recession,” or “there is risk of a deep recession.” It is time to stop pretending that the current situation is merely a problem of lack of confidence.

Chances are you have suffered some financial setbacks already, or know people who have. You wonder if things in general are going to get worse before they get better, and if so, how bad will things get. The answer is that things are going to get a lot, lot worse. The problem is, in a nutshell, that the world's economy has been built on an unsound basis. If you build a house on a weak foundation, it will come tumbling down. The unsoundness of the economic system is complex and reflective of unsound parts of culture. It will not be a simple matter to begin again, aright. There will be false starts and future depressions.

Here are a few components of the unsound basis: the illusion that wealth comes from money, or in today's credit-addled world, from access to money; the illusion that human beings may increase their numbers endlessly, and claim ever larger shares of the earth's resources; the illusion that the earth's resources are in any way, shape, or form unlimited; the illusion that shielding persons or organisations from negative consequences of their actions is a good. Future posts will discuss each of these points and others.

If you disagree with these points, we would like you to make your case. Please post comments and future posts will address them.