"Good times, noodle salad" is essentially a designation for envy. In one of the most extraordinary movies of the 90s, As Good as It Gets, there is a scene where Helen Hunt’s character, Carol, expresses sympathy for her gay friend, played by Greg Kinnear. He tells the story of how his childhood was made wretched by being gay and having a father who would not accept his lifestyle and thus rejected him. Jack Nicholson plays Melvin, a most unsympathetic oaf who averts empathy in favor of his usual callousness:

Carol (to gay friend): “OK, we all have these terrible stories to get over, and you—“

Melvin: “It’s not true. Some have great stories, pretty stories that take place at lakes with boats and friends and noodle salad. Just no one in this car. But, a lot of people, that’s their story. Good times, noodle salad. What makes it so hard is not that you had it bad, but that you’re that p***ed that so many others had it so good.”

Envy is certainly a terrible evil, and it brings forth the consequences of government intervention, redistribution, and a socialist framework for societies. Instead of exploring the phenomenology of envy, however, I want to raise a question that is worth contemplating: what happens when the State concocts the noodle salad and provides for the "good times"?

The Roman poet Juvenal coined a phrase, panem et circenses, translated as "bread and circuses". It described how the ruling elite kept the masses docile by providing them with State offerings — parcels of food and mass entertainment — in order to keep their minds off society and State and avoid unrest amongst the citizenry.

“Now that no one buys our votes, the public has long since cast off its cares; the people that once bestowed commands, consulships, legions, and all else, now meddles no more and longs eagerly for just two things — bread and circuses.”

In modern times, here in America, the ruling elites consider themselves to be blessed by a representative democracy and a collection of constitutional amendments that allows them free range to direct the entire economy on a whim, as surely as the sun rises each morning. The bread and circuses, in the modern sense, are monetary, and the device that supplies the clownery and acts as the rolling pin flattening the collective dough is the Federal Reserve System.

The Fed is the ace-in-the-hole for the State’s charmed circle in their quest for rule over the nation’s economy — and thus control of the individuals that comprise the market system. Patrick Brantlinger, in his book Bread and Circuses, points to them as being a necessary narcotic for the masses. Conversely, instead of providing public games of carnage and free grain and olive oil, as did the Romans, the modern State, through its monetary monopoly, has been providing two principal narcotics for the public at large: the housing bubble and a system of easy, almost unlimited credit.

Americans are stepping up to mainline this new kind of drug known as debt. Instant money, after all, is something that satisfies their craving for on-the-spot gratification and pacifies their anxieties about their status in the social order. Indeed, one can have it all, at the drop of a (fiat) coin, and without the standard save-and-wait period which earlier generations experienced.

For instance, the starter home is no longer a viable concept for many young home buyers. The 2,000+ square foot newlywed manor — with the obligatory swanky zip code — is a must-have for many middle-class shoppers. Even the "previously-owned" home carries with it a ho-hum connotation. Many young couples, in their thirties, are already on new construction home number three, or even four. Oddly enough, home buyers are never quite happy with each successive purchase, and thus every few years will find them buying bigger and better.

Extravagant home purchases are oftentimes justified on the grounds that "it’s a good investment." Not so. Speculators who flip houses while seeking profit and managing risk are attempting an "investment." A home for living purposes, however, is never an investment — it’s a durable consumer good that provides shelter, utility, and a piece of the "good life" that we seek for ourselves and our loved ones.

What’s noteworthy is that household debt, bank card delinquencies, and bankruptcies have reached all-time highs in recent years. Depending upon whose statistics are the most precise, the rate of household savings, as a percentage of disposable income, has fallen to almost a half of one percent, down from as high as 3.4 percent in 2001 and 7.9 percent in the early 1990s. Lower savings are due to a spending frenzy following years of tumbling interest rates, thanks to the Federal Reserve’s policies. Borrowing to buy cars, furniture, electronics, clothes, homes, and even plastic surgery has become the norm.

Retail America is riding this roller coaster of cheap money, and not surprisingly, even while retailers endure the higher costs of staying in business and lower revenues and/or profits, they take to offering every breathing consumer the opportunity to "have now, pay later," courtesy of the Fed’s discounted lending rates. Here in 2006 we are awash with big-ticket retailers offering terms of no payments and no interest until distant points in the future — sometimes as far away as 2010. By taking advantage of the centrally-planned, economic environment thus can retailers take to the illusion of profitability by making sales and moving inventory, even though the risks involved in deferring the collection of cash payments can be enormous. The lending banks, however, enabled by the Fed, absorb the risk of non-payment of interest. But with government-supplied insurance and/or bailouts covering their backs, where’s the incentive to maintain sanity-in-lending?

Additionally, the auto industry in Detroit has been riding the same lively rollercoaster, and it’s been hard times for all involved as the bottom has started to fall out on that industry’s illusion of profitability. For example, when cars are cheaply financed, even the "poorest" among us can own them without encountering much opposition from the credit structure. Thus, cheap money means that financing a new automobile results in payments nearly as low — or lower — than leasing it. This drives out the lease option, in many cases, because owning a $30,000 SUV becomes a reality to even the barely-above-minimum-wage crowd.

Statistics show that leases accounted for just under 30% of all retail auto sales in 2001, but as the interest rates steadily dropped for the ensuing four years, buyers on the margin — who otherwise could not afford an auto purchase — became empowered by cheaper financing. Therefore, leasing rates dropped from "29.2 percent of retail car sales in January 2001 to 21.7 percent in October 2004." Meanwhile, purchasing incentives, or rebates, have risen "from $2,295 per vehicle in January 2001 to $3,521 in April 2003 and $4,249 in November 2004." Moving cars and counting sales, however, is not necessarily equated with profitability.

On the other hand, when money becomes less available, and the Fed tightens its grip on the printing presses and interest rates, the market tends toward leases as the auto industry seeks to keep line workers working, and inventory moving, as they offer up one unprofitable lease deal after another.

For the auto companies, jumping from the "no profitability" lease stage to the giveaway purchase incentive phase has not been a profitable venture. Many significant auto industry manufacturers have filed for chapter 11 bankruptcies in the last two years, and countless other manufacturers are pursuing out-of-court or international restructuring plans. Delphi, formerly a $30 billion dollar supplier will likely emerge from bankruptcy two-thirds that size or less. Visteon has turned to Ford for bailout assistance. Other big-time auto suppliers running to bankruptcy court are Tower Automotive, Dana Corp., Collins & Aikman, Venture Industries, and Federal Mogul. ArvinMeritor has restructured its debt and is doing exactly what it needs to do to avoid calamity: planning for plant closings and diversifying its business far beyond Detroit and all of its problems. Not surprisingly, Ford and General Motors have balance sheets that look like a sharpshooter’s target at 50 yards.

In addition, the public is being saturated with countless announcements of accounting scandals, snafus, or restatements, as public companies scramble to keep up with quarterly earnings expectations from bearish Wall Street zealots whose philosophical underpinnings are in sync with the Fed’s money-pumping, inflationary schemes.

In the housing sector, one city after another is experiencing bubble mania, until suddenly, bubble meets pin. Stephen Roach of Morgan Stanly notes (in a June 2005 article):

Today, nationwide US house-price inflation is at a 25-year high in real terms. That doesn’t mean every home in the country has hit bubble-like valuations. But in the first quarter of 2005, double-digit house-price inflation was evident in 23 states plus the District of Columbia. In 25 of the top 100 metropolitan areas, the rate of home price appreciation was at least 20%. Investors — not owners — are currently accounting for 11.5% of newly-originated conventional mortgage loans; that’s up from a 2% low in late 1995. And mortgage financing has shifted dramatically in recent years into exotic and risky floating rate obligations such as interest-only and negative-amortization loans; moreover, as Tom Lawler of Fannie Mae notes, this shift into floating-rate borrowing cannot be explained by the factors that traditionally drive such trends — the level of mortgage rates and yield curve spreads. Something else must at work.

… The US is very much in control of its own destiny insofar as coping with the excesses in asset markets. In that important respect, America’s equity and property bubbles have one key ingredient in common: The principal blame for both bubbles, in my view, lies with the Federal Reserve.

Once again, marginal buyers enter into the housing market — lured by easy money, bountiful lending practices, and the opportunity to purchase overpriced, fantasy homes on "buy now, pay later" terms. According to press releases from Merrill Lynch, America’s hottest housing markets — read: housing bubble areas — are seeing the ARM (adjustable rate mortgage) account for over half of all home sales. Most people still don’t think there is any such thing as a housing bubble, so they continue to spend and "invest" in housing. An ARM still can’t afford you a fool’s paradise? Then disregard paying your principle and go for broke with an interest-only mortgage, once a luxury financing alternative that private banks offered to wealthy individuals that has now become a financial hustle marketed for the housing bubble and the dupes that ply within.

In an article titled "Our Credit Crunch," The Motley Fool tendered some hard facts:

A long time ago, we were a nation of cash-rich, house-poor people. Then, we became house rich and cash poor. Today, we’re a nation that’s credit dependent and cash broke.

That’s right: Broke. Completely bust. According to a Business Week report, total household debt — including car loans, mortgage, and student loans — topped 100% of disposable annual income last year for the first time ever. Contrast that to 20 years ago when the nation’s debt stood at just two-thirds of our disposable income.

On average, we carry eight cards per person and have a balance of $8,400 in credit card debt. Twenty percent of our cards are maxed out, reports CardWeb.com, which tracks the lending industry’s machinations. And just 40% of Americans pay off their accounts in full at the end of the month.

…It’s not just that we’re borrowing more money and paying it back more slowly; it’s that we’re spending money we used to consider off-limits. Home equity loans are more popular than ever as people borrow against their home to feed their spending binge. Today, average homeowners owe nearly 50% of their home’s value. Twenty years ago that figure stood at 30%. Can’t you just picture the modern-day needlepoint plaque? “Home, Sweet Credit Line.”

The "have pulse, will loan" approach brought forth by the Fed’s loose monetary policy is akin to a "No Adult Left behind" policy for the credit-intoxicated masses. With real wages being near stagnant — after factoring in the government’s inflation figures, which are likely low — it comes to bear that Americans are losing ground through inflation, and thus are financing their continued extravagant standard of living through debt.

The problem is that as these individuals become more highly leveraged, long-range planning ceases to progress, and in fact it abruptly retards as the debtors become more focused on daily survival. They abstain from long-term strategy in order to sustain current, day-to-day operations. Hence the government-coerced shift of time preferences from low to high as we move from an economy of saving and capital investment to one of spend-and-consume. Consequently, we witness the decline of savings, wealth, and legitimate entrepreneurial investment — all of which are necessary for the advancement of a free market economy.

However, in order for the State to maintain its kingmaker’s turf, the good times and noodle salad must go on, and in as veiled a manner as possible.

In a stunning move by the Federal Reserve, in late 2005 it announced that it was going to stop publishing the numbers for the M3 money supply — this means that the public will not know the total amount of money circulating in the United States at any one time. M3 is the combination of the four following measurements: M0 (all coins and paper currency), M1 (M0 + all checking accounts), M2 (M1 + savings accounts, money market accounts, and CDs < $100k), and M3 (M2 + all other CDs, deposits of euro dollars, and repurchase agreements > $100k). A Federal Reserve spokesperson, when asked about the discontinued published figures, replied:

The decision to discontinue publication of the M3 monetary aggregate was based, in part, on a determination that the M3 does not appear to convey any additional information about economic activity that is not already embodied in the M2 aggregate. In addition, the role of M3 in the policy process has diminished greatly over time. Consequently, the costs of collecting the data and publishing M3 now seem to outweigh the benefits.

M3, in fact, has risen much faster than M2 over the last year. Since M3 is no longer public information, it is evident that the Fed can hide its numerous market manipulation activities under the guise of a "cost-benefit" approach. However, since government entities cannot calculate a profit, such an approach is irrational — if not impossible. Instead, what the Fed achieves is a lack of transparency in regards to creeping inflation and a looming market crash. Let the legal counterfeiting begin.

One congressman, Ron Paul of Texas (who else?), has introduced legislation to counter the Fed’s move and require the reporting of M3 statistics. It’s unlikely, however, that this peoples’ hero can run over an entire division with a standing Army of only one.

Eventually, unstable conditions within the economic environment — such as we are beginning to experience with inflation, the stock market, housing bubble, and Federal Reserve coming unhinged — render the good times unsustainable, and thus the consumer shopping and debt frenzy tanks and takes with it the wealth of individuals.

Bubbles, you see, occur by government design, and they have the effect of pacifying the masses into docile state as they get to experience a pseudo-luxury lifestyle that is not a genuine step ahead in the fiscal pecking order, but rather, is wholly of the "live now, pay later" variety. The government is good at creating the illusion of wealth and profitability through centrally-planned policies that corrupt the monetary system and skew the markets. The result is a euphoria among the masses that leads to the binge buying of consumer goods, leaving the populace with a delusion of "sound economic times" and enhanced personal wealth.

On the contrary, the government’s bubbles — of both the asset and credit variety — have left America well-supplied with members of the "Two-Thousandaires Club": those with oversized, luxury homes; the BMW and the Hummer; vacations to exclusive resorts overseas; gas, groceries, Starbucks, and dance lessons purchased on plastic; and $2,000 in the bank. So, like powder up the nose, fiat dough up the wazoo becomes the stimulation that provides the entertainment — or rather, the bread and circuses — that keeps Americans fat and happy, and far from a state of unrest. With the masses driving cars they otherwise couldn’t afford, living in dwellings far beyond their means, and furnishing their house and lifestyle through plastic and unsustainable debt-to-income ratios, the ticking time bomb is getting louder and louder.

William Bonner and Addison Wiggin, in Financial Reckoning Day, wrap up their exceptional 2003 book with these words of wisdom:

The trends that could not last forever seem to be coming to an end. Consumers cannot continue to go deeper into debt. Consumption cannot continue to take up more and more of the GDP. Capital investment and profits cannot go down much farther. Foreigners will not continue to finance Americans’ excess consumption until the Second Coming — at least not at the current dollar price. And fiat paper money will not continue to outperform the real thing — gold — forever.

America will have to find a new model, for it can no longer hope to spend and borrow its way to prosperity. This is not a cyclical change, but a structural one that will take a long time. Structural reforms — that is, changing the way that an economy functions — do not happen overnight. The machinery of collectivized capitalism resists any change of sort. The Fed tries to buoy the old modal with cheaper and cheaper money. Government comes forward with multibillion-dollar spending programs to try to stimulate real demand. And the poor lumpeninvestoriat — bless their greedy little hearts — will never give up the dream of American consumer capitalism; it will have to be crushed out of them.

In 1854 Henry David Thoreau said, "It is said that the British Empire is very large and respectable, and that the United States are a first-rate power. We do not believe that a tide rises and falls behind every man which can float the British Empire like a chip, if he should ever harbor it in his mind.”

Unfortunately, it’s likely that Americans overall are too fat and happy with their daily dose of the State’s noodle salad to ever stop, think, and challenge the status quo, let alone take on a role of insurgency against the entrenched establishment when they can instead delight in Fed-induced, ostensible luxury.

Subsequently, let the games begin.

The Best of Karen De Coster