http://www.stephanie-osborn.com
And the 4th installment from Sarah Hoyt's blog today. There are those of you who may not be interested. However, I think these are things that are important to consider in today's economic situations, and the new year is definitely the time to be considering them. I don't always agree with Sarah on some things, though we are friends. (Hey, friends don't have to agree all the time. But we still get along. That's why we're FRIENDS.) But like I said, it makes some thoughtful reading. And as someone born and raised in Portugal, she brings a fascinating perspective to the topic.
~~~
The Center Cannot Hold, Part 2
by Sarah A. Hoyt
The idea of creating inflation to get
out of a disastrous debt situation is neither unknown nor rare.
Countries like Greece and Portugal coasted on it for years (and we
could go on about what losing that ability has done to them) partly
because as “touristic countries” they thrived on being “cheap”
by keeping their currency devalued.
You borrow high-value currency and pay
the same nominal amount of low-value currency. Fine. That makes
sense. But if you don’t let the savings and assets people have
appreciate at the same rate, via high interest rates, (which in turn
pushes company assets and – usually – salaries up, even though
not in real value) you’re going to have people who don’t make
enough to eat or to buy…anything. (Look, ALL intervention in
economics is stupid, ultimately, because economics is not something
someone can CONTROL. It is instead a playground for the law of
unintended consequences. It's as if we developed an ability to
control the weather and were in shock when keeping it pleasant in
Iowa buried NYC in ice or something.)
It seems to me we’re headed there.
Most of my friends are beyond pinched this Christmas, and that’s
the ones who still have jobs.
If I had to guess I’d say this
strategy was cooked up to get us out of the real estate collapse. The
inflation is supposed to catch up so that real estate assets never
“devalue” in numbers, just in real value. And the interest rates
are kept forcibly low so that people will soak up the bad assets and
so that those in marginal positions can refinance. (We know how well
that last part is working – not.)
Mind you, if that really is the idea,
this gang is dumber than dirt. First because if people's money
holdings and salary stay the same, buying a house is still difficult,
no matter how low the interest rates. Second, because they’re not
taking in account that those of us working as contractors and
getting paid on contracts made years ago, will end up destitute and
not be able to afford...not just houses, but anything. I don’t know
how many of us there are, but the fact salaries aren’t going up
means salaried employees, of which there are a lot, will end up in
the same fix.
In Portugal there was an enormous “soak
up” of completely paid off real-estate, a lot of it inherited over
generations. In fact, it might have been the norm. Having a mortgage
back then was odd. This meant that your property appreciated
massively and if you got in real trouble, you could sell it and move
on. (Various restrictions on selling rented out places, and rent
control made this more difficult than it sounds, but…still. You
weren’t talking about people having to meet mortgage payments,
house repairs, food, fuel, etc, with salaries that remain static and
depreciating currency reserves while a lot of the rest goes up. On
the food side, too, most people back then had at least some gardens
and some "creation" – chickens, goats, etc.)
On the other hand, it’s entirely
possible I’m attributing to stupidity that which is more easily
explained by malice: they want to turn us into beggars, because
beggars are easy to please. No, wait, that still means stupidity,
because what can’t go on, won’t, and like with price fixing, when
you make it impossible for people to live, people find extra-legal
means.
Okay – another way in which we’re
different: we’re the world’s charity [fund]. We still give
financial aid to most of the world, and have for close on to a
century. (We might that way have enabled tyranny, but that’s
something else.) We’re the world’s grantor of peace.
If we withdraw, even well short of a
total collapse, will the world finally grow up? Or will it go back to
the long wars of the 18th and 19th century everywhere, to the point
commerce can’t take place?
Make no mistake, whatever bad things
happen in the US will be ten times worse in the rest of the world.
And don’t say, “Who cares?” Some – if not most – of those
people are much better at WMDs than at feeding their people and will
consider knocking the “old champ off” a much greater priority
than actually taking care of their starving population.
(A friend of mine said, “Whatever
happens now, we’re going to lose at least one major city.” I’d
like to say he was wrong, but I have the same feeling.)
Other ways we’re different: we have
more guns per capita than anywhere except those places that
encourage/enforce gun ownership, like Switzerland. This is not a bad
thing because:
Even in the milder of the “things go
wrong” scenario, where things go bad first are the people who are
marginal now, living at the edge of both society and often legality.
Where you see any crackup first in society is higher crime rates –
we’re seeing that – and lack of safety on the streets. The fact
that a lot of people have guns will probably hold some of that (at
least) down.
We have a military that is more in the
tradition of service than of machismo. We’re probably the last of
the Western powers with a military tradition and our military
tradition is…odd, built on winning hearts and souls, more than on,
“Shoot them all and let G-d sort them out.” Yes, I know,
sometimes the rules of engagement (ROEs) are stupid (Okay the ROEs
are mostly stupid) but still, it has a built in, “you don’t kill
unless you need to.” This makes us different from, say, the various
Latin American countries that have had crack ups.
Will the US military fire on the
populace if things get bad enough? Some places. Some populace. As
someone said, behavior means a lot.
BUT the US military are also generally
a force for good and order, and given a central collapse, might hold
things together long enough for things to coalesce in another form.
Might. One can hope. (Of course, I keep thinking of Starship
Troopers, “And then the veterans had had enough.”)
All of these together, particularly the
economic thing, added to the chaotic force of changing technology and
the decentralization that tech has been forcing on industry and
commerce even as our politics and education and other…non-commercial
enterprises have got more centralized, has the effect of making us a
particularly unpredictable juggernaut.
It won't be like movies or books,
because those move on logic. Real people aren't logical. They're
cranky, emotional and ornery. A group of one or the other some place
can send things spinning out of control. [I'm reminded of one of my
favorite lines from the first Men in Black movie, “A person is
smart. People are dumb, panicky, dangerous animals and you know it.”
-Steph]
In the best of all possible worlds,
you’re going to hit a point where the answer to, “Are things
getting better or worse?” will have to be, “Yes.” And then
things start smoothing off, if we’re lucky in 25 or so years, so
that I can still see it. (Or maybe faster. We’re Americans. We go
fast. Hey, look, I’m Heinlein’s kid. The glass is not half full.
It’s brimming over.)
On the other hand, it’s
unpredictable, and I don’t think the people in charge know that,
just like the people in charge of publishing don’t seem to be aware
that ebooks aren’t just a “novelty fad.” There is a certain
type of credentialed-not-brilliant (but thinks he/she is,
because...credentialed) individual for whom knowledge is what exists
in books and what your professors passed to you. If reality
disagrees, then you deny reality as hard as you can.
Most of the people in charge most
places are busy denying reality. Which makes the rest of us real
nervous.
Hope for the best. Prepare for the
worst. Stay informed. Keep moving. Keep working.
~~~
Or as my grandmother used to say, "Hope for the best, prepare for the worst, and take whatever God sends."
-Stephanie Osborn
http://www.stephanie-osborn.com
