As the Depression takes its destructive course, many institutions will fail to deliver what they have promised. By institutions we mean everything from individual enterprises to government itself, and even abstract institutions such as "the American Way of Life," or the stories people tell themselves about how life is supposed to go.
This will be more or less disillusioning for everyone. But it will be a necessary component of what must follow: a reorganising of life - from day-to-day activities, to aims and ambitions - along new lines. Those new lines will be what promotes getting along in the world.
Of course, it could be said the life is constantly being reorganised - in good times and bad. But in the aftermath of a Depression, like a War, much is destroyed and much needs to be rebuilt, often in a hurry. Many will find themselves with careers and finances in tatters. Or, at the extreme, homeless and hungry. These people will need a new method of securing financial well-being.
Will discredited institutions manage to reinvent themselves to stay relevant? Or will they get the hook, being yanked from the stage of society babbling and gesticulating? Will new political parties form? New companies and even states? Or will people turn inwards to themselves, their friends and families for support, identity, and focus?
We put this in the interrogative simply because we do not care to prognosticate. These are very chaotic times and events could go any number of ways. Nevertheless, we are certain that the social landscape will be greatly altered, and in recognition of the new lies the path to recovery.
By the way, in using the term recovery, we mean neither getting back to the way things were nor getting the economy growing again. We simply mean the finding of a new norms after the old ones have finished breaking down. For example, this could mean anything from learning to get along without credit because it is no longer available, to choosing to live without it. Another example would be the creation of public transportation, perhaps ad hoc with informal taxi and bus services started by individuals, or perhaps by for-profit companies.
People will do what they need to do to get along in the world. It always happens that way, and it is a fascinating process to observe. Keep this in mind as so much falls apart around you in the coming months.
Showing posts with label war. Show all posts
Showing posts with label war. Show all posts
Saturday, April 25, 2009
Friday, February 27, 2009
Fire Up the Presses!
The Year of our Depression 2009 hasn't yet ended its second month, yet already a great sea of red ink is bathing the bailout-happy nations of the world. Japan's exports tanked 46% year-over-year in January; the Royal Bank of Scotland is haemorrhaging pounds like nothing else in British banking history; Fannie Mae put her lil' ol' hand out for more money after losing another $25.2 billion in fourth quarter of 2008.
Perhaps to top it all off, yesterday President Obama unveiled his $3.5 trillion budget, featuring $989 billion in new taxes. Oh, all these numbers are making our eyes bleed, dear Reader! We see a great tsunami of red ink barrelling down upon the economic landscape, and we hope to keep our head above all the mess.
Imagery aside, the implications of all these massive problems is severe: a great deal of pain and misery is required, if a society wants to honestly work its way back to fiscal health. That, however, isn't very popular with the average American, or Briton, for example. It's also political suicide to suggest such a thing: people do not want to work hard, to pay off the national bar tab, or all the gambling debts.
No, the only expedient way out of this mess, the one that is relied upon time and time again, is inflation. These debts will be inflated away into nothingness; President Obama's bloated budget makes this clear. He is only getting started with his spending spree, since he has to make up for the Baby Boomers and their underwater finances.
In summation, we turn to no less a sage that Ernest Hemingway:
Perhaps to top it all off, yesterday President Obama unveiled his $3.5 trillion budget, featuring $989 billion in new taxes. Oh, all these numbers are making our eyes bleed, dear Reader! We see a great tsunami of red ink barrelling down upon the economic landscape, and we hope to keep our head above all the mess.
Imagery aside, the implications of all these massive problems is severe: a great deal of pain and misery is required, if a society wants to honestly work its way back to fiscal health. That, however, isn't very popular with the average American, or Briton, for example. It's also political suicide to suggest such a thing: people do not want to work hard, to pay off the national bar tab, or all the gambling debts.
No, the only expedient way out of this mess, the one that is relied upon time and time again, is inflation. These debts will be inflated away into nothingness; President Obama's bloated budget makes this clear. He is only getting started with his spending spree, since he has to make up for the Baby Boomers and their underwater finances.
In summation, we turn to no less a sage that Ernest Hemingway:
The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.
Friday, February 13, 2009
What Would Lincoln Do?
Yesterday the United States Mint released the first of four Abraham Lincoln commemorative pennies, on the bicentennial anniversary of his birth. This latest sliver of copper-coated zinc is dreary as anything we've yet seen from the U.S. Mint. In all honesty, we really do wish the U.S. would just have its coins minted by the Royal Canadian Mint. At least R.C.M. coins are interesting to look at.
But seriously, this new penny is just a portion of renewed Lincoln-interest in the United States: President Barack Obama is making waves as the proverbial 'next Lincoln.' This goes beyond President Obama as a visible minority: he is a rhetorician from Illinois, and he is President at a critical juncture. The question that some are asking is the same as this post's title: What Would Lincoln Do?
According to TIME Magazine, Lincoln would spend, spend, spend. Well, our honest opinion is that President Lincoln would spend, spend, spend... and start a war. A really big war. It is conventional wisdom that war strengthens an economy; President Franklin Roosevelt found that to be true during the 1929 Depression. The War Between the States (a.k.a. 'Civil' War) helped vastly to increase the industrial base of the United States at the expense of the Confederate States. World War II did much the same for the U.S. at the expense of Europe.
We're not saying that President Obama is necessarily a war-monger. However, if he is indeed the next Lincoln, or the next Franklin Roosevelt, then there are certain unspoken policies that we expect will come into play. Those policies are ones of war; not small, overnight invasions like Iraq or Afghanistan, but major engagements the world hasn't seen since World War II.
But seriously, this new penny is just a portion of renewed Lincoln-interest in the United States: President Barack Obama is making waves as the proverbial 'next Lincoln.' This goes beyond President Obama as a visible minority: he is a rhetorician from Illinois, and he is President at a critical juncture. The question that some are asking is the same as this post's title: What Would Lincoln Do?
According to TIME Magazine, Lincoln would spend, spend, spend. Well, our honest opinion is that President Lincoln would spend, spend, spend... and start a war. A really big war. It is conventional wisdom that war strengthens an economy; President Franklin Roosevelt found that to be true during the 1929 Depression. The War Between the States (a.k.a. 'Civil' War) helped vastly to increase the industrial base of the United States at the expense of the Confederate States. World War II did much the same for the U.S. at the expense of Europe.
We're not saying that President Obama is necessarily a war-monger. However, if he is indeed the next Lincoln, or the next Franklin Roosevelt, then there are certain unspoken policies that we expect will come into play. Those policies are ones of war; not small, overnight invasions like Iraq or Afghanistan, but major engagements the world hasn't seen since World War II.
Saturday, November 29, 2008
How Likely is Hyperinflation in the USA?
Hyperinflation is certain in Zimbabwe, but can such a thing happen in the USA? Typically, hyperinflation occurs quickly when economies are under extreme stress such as during wartime. The USA had that experience during its Revolution, and many European countries did so during and after the World Wars, and after the collapse of the Soviet Union and its satellites.
Are present economic conditions suitable for the formation of hyperinflation in the USA? The use of paper money creates chronic inflation, but what speeds up inflation to the point where doublings of prices occur not over decades, but weeks?
Typically two factors occur to induce hyperinflation. The first is when governments spend money well beyond their ability to collect taxes. This can occur when spending increases significantly (such as for a war). The second is when tax receipts fall significantly such as during a depression, and the government is unable to borrow money, and yet the government maintains, or even increases, spending.
Clearly, the first factor may come into play since the USA is presently engaged in expensive military campaigns abroad, and is undertaking a nationalisiation of the financial system. More subtly, the federal government has liabilities of over $60,000,000,000,000 (or $200,000 per person) - and growing. There is no way to tax the population sufficiently to honor this commitment in full, so 'printing up' money will be a temptation. Whether debasing the currency will continue at a fairly moderate pace, or will get out-of-control, waits to be seen.
The second factor has come in to play only so far as tax receipts are falling and spending is increasing. The USA still maintains its ability to borrow, at least for a time. Three things may come to pass that may end that privilege. First is the unwillingness of lenders - though at present that seems unlikely since Treasury Debt and Federal Reserve Notes are highly regarded. The second is the incapacity of lenders. As foreign trade crashes, foreign central banks and other corporations will simply have less money to invest in the USA. Increasingly poor domestic investors will be similarly unable to buy. Finally, the knowledge that increasing public borrowing at the expense of private investment (e.g. more money for unemployment benefits and less money to dig new oil wells) would likely make the Depression worse, may prompt the government to 'print' rather than borrow.
We do not care to make specific predictions of how much prices will rise and how quickly. We do believe that hyperinflation in the USA is a definite risk, as the 2008 Depression causes increasing income loss. At the moment, hyperinflation is not imminent, but stand by for further updates.
Are present economic conditions suitable for the formation of hyperinflation in the USA? The use of paper money creates chronic inflation, but what speeds up inflation to the point where doublings of prices occur not over decades, but weeks?
Typically two factors occur to induce hyperinflation. The first is when governments spend money well beyond their ability to collect taxes. This can occur when spending increases significantly (such as for a war). The second is when tax receipts fall significantly such as during a depression, and the government is unable to borrow money, and yet the government maintains, or even increases, spending.
Clearly, the first factor may come into play since the USA is presently engaged in expensive military campaigns abroad, and is undertaking a nationalisiation of the financial system. More subtly, the federal government has liabilities of over $60,000,000,000,000 (or $200,000 per person) - and growing. There is no way to tax the population sufficiently to honor this commitment in full, so 'printing up' money will be a temptation. Whether debasing the currency will continue at a fairly moderate pace, or will get out-of-control, waits to be seen.
The second factor has come in to play only so far as tax receipts are falling and spending is increasing. The USA still maintains its ability to borrow, at least for a time. Three things may come to pass that may end that privilege. First is the unwillingness of lenders - though at present that seems unlikely since Treasury Debt and Federal Reserve Notes are highly regarded. The second is the incapacity of lenders. As foreign trade crashes, foreign central banks and other corporations will simply have less money to invest in the USA. Increasingly poor domestic investors will be similarly unable to buy. Finally, the knowledge that increasing public borrowing at the expense of private investment (e.g. more money for unemployment benefits and less money to dig new oil wells) would likely make the Depression worse, may prompt the government to 'print' rather than borrow.
We do not care to make specific predictions of how much prices will rise and how quickly. We do believe that hyperinflation in the USA is a definite risk, as the 2008 Depression causes increasing income loss. At the moment, hyperinflation is not imminent, but stand by for further updates.
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