Issue VIII: American Apocalypse?

22 Sep

Nixon will be remembered as a classic case of a smart man shitting in his own nest. But he also shit in our nests, and that was the crime that history will burn on his memory like a brand. By disgracing and degrading the Presidency of the United States, by fleeing the White House like a diseased cur, Richard Nixon broke the heart of the American Dream.

Hunter S. Thompson on the death of Nixon (1994)

Nixon was a professional politician, and I despised everything he stood for — but if he were running for president this year against the evil Bush-Cheney gang, I would happily vote for him.

Hunter S. Thompson (2004)

Is America done for?
I haven’t driven out into the Nevadan desert with a Samoan lawyer, a potato gun, and a trunk full of drugs, but I’ve been starting to see the fear and loathing of the American Dream. Hunter S. Thompson in his rant/obituary of Richard Nixon said that Nixon “represents that dark, venal and incurably violent side of the American character” and that by “shitting in his own nest… he also shit in our nests…. Richard Nixon broke the heart of the American Dream.”

And if Nixon broke the heart of the American Dream, and Reagan (as they say) broke its back, did Bush just discard it in a haze of torture, preemptive war, crackpot pro-rich policies, and a Red Sea of a deficit?

What does that leave us with? The American Nightmare?

The American Nightmare? What is it? It’s been something I’ve been thinking about for a few years now, particularly since the invasion of Iraq. The basic gist is that the United States is losing power and declining due to an imperial hubris, and like a Greek play, those in power ignore the voices of the wise. The ancients told us to be humble and respect the Gods, but this country has no god but power: the rule of both gun and money. Is our forsaking coming?

Collapse?
I’ve been reading Jared Diamond’s book Collapse, about how society’s choose to succeed or fail. While we have advantages that ancient Easter Islanders didn’t have, are we being any brighter than the man who cut down the last trees that supported Easter Island? Will we like Oedipus deny reality like blind men only to see reality once blinded by it?

Diamond argues that besides climate change, human-induced environmental change, foreign/trade relations with neighbors, the role of the ruling classes also sealed or prevented a collapse the civilization. If the adaptations and changes in cultural attitudes needed conflicted with the short or long-term interests of the elite, and the changes needed weren’t made, it could hurt a country as much as cutting down that last tree, having that extra baby, and despoiling that last source of clean water.

So I ask if the same is true here of our rulers. Will a turnover in power change whether our political system gets out of hospice care or will the replacements just take advantage of the vast powers and broken precedents taken by the previous president?

People will say, “We never saw this coming.” But we did. People in the know pointed this out and were ignored, marginalized, or shooed off stage to talk about Paris Hilton. And then it falls like a Minnesota bridge. Does anything say bread and circuses stronger than the fact that there were twice as many journalists at the Michael Jackson trial than in Iraq?

How?
I know, I know. People always are doomsaying. What great wisdom do I have? None really, but these are things I think could “bring us down.”

Its clear that the United States government needs to borrow $2 billion a day to cover its deficit. Invading countries on borrowed money is expensive. What is needed is basic investment in health, education, and (apparently) bridges. Which we aren’t doing.

The biggest buyer of this debt is China, Japan, and other East Asian central banks. Meanwhile, the average American income hasn’t increased (inflation-adjusted) for around 27 years while the the income/wealth inequality in this country has skyrocketed since 1980. All the growth since has mostly gone to the top while the rest of the country finances its consumption with debt (credit cards and mortgages). This borrowed money goes right back to East Asia, just like they expected.

But what happens when Asia cashes out its chips? Or even threatens too? That day may be coming soon.

Subprime meltdown (as my small brain understands it)
A strange thing happens when a bunch of “smart guys” in suits with computers try to make money with algorithms. They loan money to people without money. Now, you may think this is crazy, but that is basically what happened where banking industry engaged in a practice called “subprime lending” were poor people (mostly minority) were lent money to buy houses they couldn’t afford. After the economy began to tank and housing price boom ended, the poor defaulted on their loans. But instead of this hurting the banks that loaned the money, the defaults floated up macroeconomically. This is what a good explanation I found (not by a business/economic analyst) said,

The banks bunched all these mortgages, both the sound and unsound, into packages, then sold those packages to investment companies. These investment companies packaged many mortgage packages together and sold them to bigger investment companies – really big investment companies, involved in really big deals. Those really big investment companies used these mortgage packages as collateral for their really big deals. When shaky (“subprime”) mortgages started defaulting, it meant that those mortgage packages weren’t worth as much as everyone had believed; therefore, the really big investment companies don’t have as much money and credit as they thought they did – and that, in turn, scares the crap out of lenders up and down the line, who’ve suddenly become reluctant to loan money to anybody, even individuals and companies with proven credit.

Fun stuff like this causes runs on the bank (in England), state bank collapses (in Germany), and a (basically) devaluation of the dollar. This is the complaint from the Asia Times about the Federal Reserve.

Its policymakers initiate policies that they know full well will weaken the US dollar, and they just don’t care. It’s almost as if the nation can pay for goods with checks it knows the other party will never cash; if you could do this, you’d probably be living pretty large too.

This is particularly true in the case of China. China’s foreign exchange reserves are now approaching the trillion and a half dollar level, and this massive wad of cash is mostly kept as US dollars. China has earned this treasure through being the gleaming supermall for the shop-till-you-drop obsession that has swept the US, and to a lesser extent the rest of the Western world, this decade.

I’d like to write checks no one will cash. I wonder how long that lasts.

More stuff:
The Austin Chronicle“Letters at 3AM” Not a superpower
The Economist argues America is A-OK. Despite stuff.
Asia TimesLike a Blow to the Head

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2 Responses to “Issue VIII: American Apocalypse?”

  1. BS October 5, 2007 at 11:47 am #

    One additional (but often overlooked) consideration in the sub-prime issue is the role of credit rating agencies. These agencies were paid to rate the bundled mortgage products by the issuers of these products (conflict?). These agencies are necessary for the continued functioning of our credit markets (all the way from consumer loans to the largest institutional loans) and are highly reputation-dependent.

    Additionally, this crisis threatens the business model of banks (borrow short term, lend long term) as the banks become reluctant in a tight market to lend to each other at low rates. The Fed has attempted to correct this by assuring low rates at the discount window, and this appears to be working in the short term. However, the long term results are unknown.

Trackbacks/Pingbacks

  1. Issue XIII: Cadillac Dixie? « The Bhatany Report - January 6, 2008

    […] XIII: Cadillac Dixie? I’ve written about the possible collapse of the United States in Issue VIII mostly based on economic mismanagement and poor political leadership after reading Jared […]

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