Living in the techno-bubble of denial
The fear is there. You have the utter terror of Baby Boomers afraid of losing their 401(k)s. Intolerance for market risk keeps millions of individual investors from investing in the markets.
Many are convinced, rightly, that the markets are rigged, or are slanted in favor of Wall Street insiders at the expense of the general public. And they're right--high frequency trading allows stock exchange member firms to buy and sell in fractions of a second, front-running trades sent into the exchange by slower servers. Plus you have the President's Working Group on the Capital Markets (the so-called Plunge Protection Team) at work in the shadows, likely to tap down volatility at least until the election is over.
Then there's the debt system, which has entrapped many millions into a downward spiral of declining wealth and economic opportunity. The lifestyle of the rich and famous will never be open to them, even though they spend literally years of their lives admiring celebrity.
Passivity is decimating the American dream. Americans are just content enough to accept what happens to them. It's as if the Powers-That-Be know how to provide just enough eye candy and immediate gratification to keep the masses in a media-induced slumber.
Productivity trails off, made the victim of incessant pleasure-seeking. Gaming and digital devices aim to make everything we do easier. In the end, technology decimates our interpersonal skills. It begins innocuously enough, with technology simplifying so much. In time we grow dependent on automation to accomplish more and more in our lives, often as a substitute for true reason and thoughtfulness. In this sense, it's not the technology that's the threat, but rather our overdependence on it.
It's like the scene in Children of Men, where the main character Theo Faron visits his brother, who's a party appartchik in the New World Order. At the table, his nephew fiddles incessantly on some personal electronic device, never looking up, absorbed in the present, the immediate gratification, no matter how transient or devoid of meaning the longer-term outcome. For those with money, this visual metaphor captures America today, where technology substitutes for real interpersonal connectivity. Also conveyed in the scene is how the wealthy and politically connected revel with hollow amusement in their gated and guarded citadels, isolated from the impoverished hordes outside.
Once lost, many interpersonal skills are lost forever. The next generation forgets what the one before it knew about each other, about right and wrong, and the meaning of delayed gratification and shared sacrifice. Instead, as everything in America becomes digitized, so too does our individuality. Values like shame and compassion for the suffering of others are tossed aside in the quest to attian personal joy. Rather than a grave responsibility, freedom becomes pursuit of individual joy.
As it flowers in the social media, technology may offer an alternative sense of communalism. People can truly feel sorry for one another, tweet their sympathy, then move on to the next issue. A million gifts of help, spurned on by instant Facebook campaigns, can have real political weight; look no farther than the reaction to the Trayvon Martin killing.
It's not the technology itself, but the dumbing down it invites. Instant Messaging is superficial, and invites mundane comments about meaningless stimuli. Look at cell phones themselves. Yes, they're an indispensable communications tool, unless you're Amish. But how many conversations are entirely forgettable, contribute absolutely nothing to relationships, and probably never need to be made? The presence of a new or developing technology doesn't mean our lives are made materially better.
Economically, technology enhances our productivity, yes, but only if people are actually making things. If there just tweeting endlessly, or consuming foreign-made goods, technology doesn't help the real economy near as much. Arguably, technology does offer a major source of future growth and opportunity. Yet the economic benefits of adopting new technology seem to accrue to the already educated and relatively wealthy more so than serving the cause of economic democratization.
Our lives lack the depth they once had, and we dwell increasingly in the fantasy land of ones and zeros. Can a computer capture the smell of fresh bread? Can a portrait or picture, no matter how good, replace how one feels looking at the Matterhorn, for instance? Those who tell you they know what it looks like from some digital representation are far less likely to have been there or, worse when they arrive, perhaps less prone to notice the subtle details of the mountain. Instead the experience is cheapened by the over-dependence on digital experience, which is a form far less full and textured like the real deal.
Try as we might to recreate images, or smells, or experiences, the digital experience can rarely be an adequate substitute. Yes, we can fool ourselves into believing that what we hear is the real thing, but the truth is that digital music is actually different acoustically from real music. The peak highs aren't captured in the digitization process. An analog tape, for instance, covers high range notes from Jerry Garcia's guitar in a way that digitized media can't, acoustically. The highs are outside the range of coverage. [In order to be recreated, digital files must be of a limited size. To compress data, the less-used tones are therefore excluded or otherwise manipulated in their digital expression, which is ultimately a binary system.]
To think in digital terms is limiting. In absolute terms, a binary system of zeros and ones lacks nuance. A data bit is either a one or a zero. Not in-betweens or subjectivity involved. It either is or isn't.
We're limited by the capabilities of a digital system to replace older ones. Products of the digital age are measured in how well they depict some real event. Yet in many cases, a whole set of sounds, stimuli, and sights motivates children of the Digital Age in a way as real as the real thing. Yet seldom do any of us older ones, the enablers of the technology revolution, sit down and think about the effect of using digital synthesis instead of enjoying the real thing.
Think of all the toys that we once played with. The way we lived as children was built on creativity and imagination. We had to put those skills to use and we still do, to a degree, even in a digital environment. But I'd argue one reason we have so much excess capacity in our economy is that technology has replaced reason, and the skills which we need to flourish socially are on the wane, weakened by the cocooning and atomization of lives built around technology, particularly mass media.
Many toys today are of the cheap variety. The whole idea of building things to last has been on the decline. Why care about the real thing when the digital experience is so available, and update-able, and re-creatable, and channeled to our most narrow, superficial view of ourselves, of how we take pleasure in the environment around us. Cheating our children out of the real experience will no doubt stand as one of the great crimes of the Digital Age, as bright a future as that it may have.
When not if
I'd be hesitant to put a timeframe on the end. There have been countless predictions of doom. I will say this: the markets can't grow consistently without democratization. I've praised the merits of economic democratization before; they include stock market participation and benefits for everyone in society, elevating those in the lower income categories, a phenomena which actually benefits those at the top far more than they'd likely admit.
Is the opposite true? Does un-democratization represent economic decline? It has certainly created an era of greater economic inequity. We have in our country today two Americas, one of which isn't hurting much at all as wealth coagulates at the top. The other meanwhile, collapses, an economy representative of declining incomes, home values, and lower stock market participation.
We could blame any number of factors but we need to remember it's not so much how we got here but that we're where we are. It's all well and fine to politicize things, take blaming Obama for gas prices, but partisanship is just smoke and mirrors when it comes to the economic realities that shape our world.
The Federal juggernaut rolls on. Cracks are starting to show up. I've warned for years now that our monetary system is in real danger. Our money is being created synthetically to subsidize the budget deficit. February saw the largest monthly deficit on record at $229 billion.
Herb Stein said if something can't go on forever, it won't. Remaining as the sole variable is therefore when such a monetary system might cause the economic system damage.
Our future has already been systematically sold off. the Federal Budget deficit is evidence of this trend, one that will continue until the monetary system that perpetuates the money fraud collapses. At that point, we'll face the specter of being unable to borrow. Borrowing is, after all, the basis of economic growth in this country.
Perhaps it's not so much debt that is the problem, as access to credit, which isn't the same thing. The borrowers are always there. All it takes is a creditor willing to lend. Finding qualified buyers is harder, although the lending standards necessary to qualify for a mortgage in 2006 differ greatly than those of today, meaning what was only recently qualified is in face completely unqualified now.
The money is always there. It can be conjured into existence by Grand Wizard Bernanke and his band of Merry Bankers. The quid pro quo is the sale of Treasuries to too-big-to-fail bankers and the Fed itself in exchange for basically free rates on lending.
I bet if you could borrow a billion for less than 1/10th of one percent, you'd probably be able to make solid profits, especially when a 10-year Treasury (viewed as risk-free) is yielding 2%.
This means a billion borrowed would generate $20 million per year. A paltry 2% is not enough to placate investors in the banks, which raises the obvious question of why the banks and other investors even buy the Treasuries in the first place.
The answer: liquidity. Liquidity means there's an active market always buying Treasuries, so they can be redeemed for cash in a pinch. The cash, we know from 2008-9, can simply be conjured onto the balance sheets of any entity that wants to sell Treasuries, to "inject liquidity" into the system.
The Fed has the ability to purchase the Treasuries, or other kinds of securities, from anyone. The most recent effort to stimulate demand--Operation Twist--tries to invoke a recovery in the real economy by showering our economic system with excess money. As we now know, the
Treasuries can be used as collateral to further build a Ponzi pile of derivatives.
As unfair and corrupt as control over our system by Fed and the bankers may seem, leverage manifests as an even bigger threat. MF Global, for instance, was leveraged some 40-45 times, meaning a decline of just a few percentage points in the value of one underlying security--in MF Global's case, it was Euros--will spur a cascading failure, a giant margin call.
I've read many examples of how a monetary collapse might unfold. Rather than look at a crisis as economic, it's now necessary to consider the impact on our financial economy--what I've called the doppleganger economy. As more and more of our economy shifts over into the realm of synthetic profits and always expanding piles of debt derivatives, the real economy is put at greater risk.
The collapse will likely occur as a result of systemic failure, which was the apparent reason for the massive bailouts that happened after 2008. Rather than address the systemic problems, the response was to flood the monetary system with massive dose of liquidity. This policy response continues today, as Operation Twist remains on the table.
The systemic problem is too much debt, in toto. Yet the Money Power (Financial Industrial Complex) needs an ever-growing pile of newly created money to keep the system afloat. Rather than represent a way out, the ongoing bailouts have degenerated into subsidies that have, if anything, weakened the stability of our monetary system.
Ongoing appeasement of the financial industry lobby means that much-needed change in this crucial area continues to be postponed in the interest of short-run stability. Coming from the regulatory arena, such a monkey-see-no-evil attitude is clearly a worst case scenario and investors in all forms of debt should exercise extreme caution. Not to give investment advice, but with fixed income I'm looking to shorten maturity dates and up credit quality, although judging the latter can be highly subjective and based on ill-placed belief in a eviscerated monetary system called the dollar.
It's worth remembering money only has a value because it's not being overproduced. When too much money comes into an economy, the value of existing dollars declines. It may not happen overnight, or even in a few years, but the inevitable outcome of overproducing money (whether physical or digital) is a decline in a value of that money.
The only reason the dollar hasn't declined is because of its status as a world reserve currency. For years, oil could only be bought or sold in dollars or British pounds. Then along came Saddam Hussein, who sold his oil for Euros. We know what happened to him. Very recently, Iran opened an oil bourse open to accepting currencies other than the dollar. Coincidence that we bombed Saddam and are threatening to do so to Iran?
Back to Churchill's "Equal Sharing of Misery"
Obamacare teeters on the verge of collapse. It's a major competitive disadvantage in the global economy not to have health care for all like the Chinese or most anyone else. One huge economic impact of the cost of health care is the risk associated with exiting jobs that offer health care to the uncertainty of entrepreneurship and the steep cost of insurance--if you can qualify. For a family of four, a policy paid out of pocket might cost a fifty-something, self-employed entrepreneur $2,000 or more per month.
Put at the mercy of the same people who brought you Bush vs. Gore, the corpratists will certainly win the health care debate. The outcome will be higher health care prices, unless the government simply nationalizes the whole industry, as have virtually all other industrialized nations. Once the entire industry is controlled, simply say that a knee replacement costs $30,000, and it will be so. No doctor or medical establishment will be able to make any more, or less.
Socialist? Perhaps. Than again, some industries just don't work too well in the unregulated free market capitalist system we've been forced to accept by the Larry Kudlows and Mitt Romneys of the world. Health care is one of them. The sad part is that with a stroke of a pen, and better enforcement, we could instantly provide health care for everyone in our population. But too many of us persist on in the illusion that we're not socialists, that we're not propping up the pharmaceutical industries, banks, hedge funds, Military Industrial Complex, the Prisons Industrial Complex. Everyone in those industries is so dependent on the Federal doll. If they only knew how at risk their continued subsidies are, once the dollar collapses, that is.
A simple budget impasse could cause a rapid decline in government spending. On the heels of slow growth, especially in the reaches of the economically depressed fly over, budget cuts could do a great deal of economic damage. Being in denial as to the socialist leanings of our federal system though, most Americans won't see it coming 'til its here.