Tuesday, April 12, 2011

Life As We Know It Would Not Exist

Call it the politics of “life as we know it would not exist”.  You know, when there is a big crisis in this country, our politicians state that if we don’t act now – this very minute – “life as we know it would not exist”.  They don’t really say this but they clearly intimate such notions.  It is the politics of fear.  If we don’t act now, there will be grave consequences and “life as we know it would not exist”.

Think Iraqi war with the evil Saddam Hussein and his elite Republican Guard.  An ill conceived war that has costs billions of dollars and untold suffering and loss of lives on both sides.  Saddam was billed as the financier of terrorism and the procurer of WMD’s, but in the end, none of it did stick, and the best I can remember, this country just attacked him because he was a threat to "life as we know it". 

I am not trying to defend Saddam or second guess the war effort, but back in 2002 and 2003, there was a rush to judgment, and here we are 10 years later, and there is little if any stability in the region.

And how about the bank bailouts of 2008 and 2009?  The way this was sold by our leaders, I was sure that the sun was not going to come up ever again.  If we don’t act now and commit $800 billion to those entities who got us in the trouble in the first place, “life as we know it would not exist”.  According to our leaders, there was no other way to handle this crisis other than to act now, act decisively and act boldly.  The bank bailouts and subsequent after math of moral hazard have preserved the status quo but done little to purge the system of the weak.   Ah, but “life as we know it” has been preserved.

So as we come into 2011 and likely into 2012, budget deficits, record spending and a struggling economy dominate the news headlines.  Be on the lookout for the “life as we know it would not exist” moment.  I can already hear a congressman saying, “We cannot cut the deficit because it will hurt the economic recovery.”  This is short sighted thinking, yet it is becoming the norm.  But let’s be clear: if we continue down this path of making poor and reactive decisions, someday “life as we know it will really not exist”. 

So here is a new concept: let’s let capitalism work.  Let the strong rise to the top; let the weak fall and go away.  This will do more for preserving “life as we know it” than another government program designed to preserve “life as we know it”.     


Jim said...


No need to apologize for 'second guessing the [Iraq] war effort.' That war was a flat-out fraud, as those of us who protested in the streets in February 2003 were saying BEFORE IT STARTED.

For practical purposes, since 1971 (when Nixon cut the dollar's last link to gold) 'life as we know it' has come to mean keeping both the fiscal and monetary accelerators floored most of the time, even as debt builds alarmingly.

With a negative net worth of nearly $200 trillion (according to Laurence Kotlikoff), the U.S. is now 'liquid but insolvent.'

Needless to say, when an entity is insolvent, creditors eventually are going to cut off the flow of liquidity. Only the timing, not the destination, is in doubt.

Obviously, in terms of regaining solvency (probably impossible) or at least staving off the grim day when illiquidity sets in, it would help to end grandiose, costly campaigns for 'regime change' in faraway lands. The U.S. has more than a full plate of issues at home, and could probably use a regime change itself, judging from how poorly it's being managed.

The Farm said...


As usual well said. Pure capitalism does not exit and probably can't in a complex a system as ours.

What are your thoughts on an asset based system versus a debt/usury one that is in the end unsustainable? (ala Money as Debt video)

Thanks, John