Yes...but!

April 7 2008

Home > Columns >Yes...But! Year 8-22

We are living in a “Fool's Paradise.” We think we are in charge; we think we are on top of the world; we think we are the masters of the universe, but nothing could be further from the truth.

Being truly independent was much more true four generations ago, when the population was mainly concentrated in rural areas, and small villages like Tweed flourished, hubs for agricultural and forest-related activities. There its farmers and foresters bought their weekly necessities from tea and coffee to axes, horses, wagons and other needs such as clothing and entertainment. There too were located the small industries. Then basically life was ordered and in a sense predictable: people were indeed 'masters in their own small universe'.

This now has changed dramatically and mountains of debt – both monetary and environmental - are the prime reason.

Not all that long ago money played a minor role and pollution was no problem. People were self reliant and barter was common, with neighbour helping neighbour the rule rather than the exception. In many ways people then were basically self-sufficient, subject to weather and market conditions, of course.

No, I don't want to idealize this situation. But I do remember how my mixed farmer-grandparents lived: simple, uncomplicated, contented lives. Of course then too there was financial hardship and poverty. Still churches flourished and most of their huge structures – far too large for our needs today even though the population has tripled – stem from those days. Today we have trouble just repairing the roof or replacing the church's furnace, or paying the insurance, in spite of unprecedented wealth.

Typically the only contemporary certainty is uncertainty. Jobs that a generation ago were secure, are now subject to drastic change or elimination.

Even four decades ago the money sector employed a small number. Bank managers took in the little savings people had and gave a small loan now and then.

Today's financial services sector is a grasping, grandiose, gigantic gamut of bankers, stockbrokers, insurance agents, lawyers, loan sharks, bad -debt collectors, credit-card issuers, hedge fund speculators, security specialists, mortgage brokers and real estate appraisers: one in five is involved in some sort of money racket, a full 20-21 percent of our Gross Domestic Product, the largest segment of the private economy.

As recently as 40 years ago workers in manufacture outnumbered the money-handlers two to one. Now factory employment is a mere 12% of GDP, while 80 years ago farmers outnumbered them all.

With all these money-juggling jobs has come debt. It used to be that when we wanted something, we saved and scrounged and did without until we had enough hard cash to buy the desired object. No longer. Debt-debt-debt has become our dubious base, thanks to computerization and the rise of financial mathematics.

We now owe so much that we run out of zeros to calculate it. Public and private debt has become the mainstay of the American make-up and economics: in the last 20 years the sums owed by corporations and private citizens in the United States quadrupled from just over $10 trillion to $43 trillion. Plus $10 trillion US national debt.

No longer we, but greed is in control: greed, the enemy of all reason. Common sense has collapsed in our drive for more desirable dollars, thanks to 57 varieties of exotic mortgages, responsible for America's biggest ever housing bubble. Combine this with an alphabet soup of investments vehicles, thought to be secure but now proved to be basically bogus, and with people maxing out their five credit cards, turning life into a “Charge it to the Future” culture, where 20% interest rates and late fees for just about everything are commonplace, and an economic depression becomes a certainty.

Depressingly that future is here. Reality has come knocking. Now our debts possess us. At this juncture unprecedented financial obligations, tumbling home prices, reckless money supply expansion, growing inflation, insufficient and expensive oil, an eroding US dollar, all spell super disaster.

Once our financial house, built on IOU's, crumbles, gone also are the highly paid jobs in the money-debt industry. Hundreds of thousands of lucrative positions are vanishing, blown away as chaff before the wind, people with no other skill than punching figures onto a screen.

Our life in 'fool's paradise' is ending. Just as all humans eventually must face demise, so too the world's good times are going. Add a pinch of pollution, a few drops of Peak Oil, the quickening of Climate Change, an aging population, and we experience the bursting of the capitalistic bubble, fueled by debt, which has allowed everybody to live beyond their means: corporations, states, families, depleting non- renewable resources in the process.

Paul Kennedy in his book “The Rise and Fall of the Great Powers” predicted it all. In 1987 this Yale University historian wrote that the United States runs a risk of 'imperial overstretch'. Twenty years later this has come true. In his final gasp before he leaves the White House the Greatest Fool of all may attack Iran which, paradoxically will spell the finish off our “Fool's Paradise,” and force us to face reality.