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Off the keyboard of Steve from Virginia

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Published on Economic Undertow on September 2, 2014

Discuss this article at the Economics Table inside the Diner

John Maynard Keynes famously remarked, “in the long run we are all dead … ”

It is hard to tell whether Keynes had the entire United States in mind. Watching the leering, blithering president stumbling around like a drunk at a Christmas party it is clear that the country’s organizational framework is hopelessly corroded. The only question is how long is it going to last?

If you take some time away from the Internet (as I have been doing for the past few weeks) it is stunningly clear that content for the most part is aggravating noise. Every argument has fifteen sides larded over with conspiracy theories. The web is truly Hobbes’ war of all against all … with kitten videos. The major media outlets offer platefuls of propaganda-advertising disguised as ‘news stories’ while (most of) the rest churn out nonsense. The Internet enables those with modest mental horsepower but with co-optable ideology to disrupt/distract everyone else. Common purpose — reality — is confined to the obscure corners where the bulk of users idiots can’t be bothered to look.

— Moral clarity versus the president’s bumbling duplicity. Events of the past year or so indicate that the West has reached the end of the ‘Age of Expedients’ and entering the far more demanding ‘Age of Consequences’.

Civilization advances by way of the general increase in of the distribution of information. We humans invented language first to coordinate our activities as hunters, then to confuse our (ballooning numbers of) enemies. Prior to Johannes Gutenberg, there was the spoken word and hand copied manuscripts. Due to the labor cost of copyists, the Catholic Church was able to maintain a +1,000 year monopoly over information. The churchmen had access along with elites, the ordinary citizens were left ignorant, with edicts from above and superstitions.

Post- Gutenberg, information cost no more than ink on paper; it could not be hoarded and so the monopoly of the priests and bishops was ended. Because information on a page could be filed and accumulated, the amount of information within the reach of a literate person exploded … along with the numbers of literate persons! As an unintended consequence, the human capacity for memory and the oral tradition became diminished, then largely disappeared. It was unnecessary to recall Beowulf from memory, only remember where to find it on a shelf.

Fast forward and with the Internet has arrived with the thump-and-drag of the one-legged John Silver. The quality of information has relentlessly deteriorated even as it has become ubiquitous. Our smart phones know in advance what we want for dinner or where to park but nothing tells us what is really happening with our country! The information we need to thrive … or even survive … does not fall to hand. With the incoming tides of ‘trivinformation’ comes a decreasing ability to comprehend. We have no need to learn because we can find an app that does it for us. As a consequence … we have become bereft of the ability to make good judgements. We equivocate, rationalize every evil, we compartmentalize … our moral compasses are shut off, we drink the Kool-Aid and beg for more. With time, appreciation for all non-consumable things vanishes because our capacity for empathy is exhausted, what remains is the immediate-term stimulus of acquisition and little else. We have come full circle; from beasts, to partly civilized due to our mastery of spoken language, to print-educated, civilized literates … to machine-dependent incompetents and back to beasts. Consequences emerge to take the form of a post-Warholian dark age of electronic dazzle; the deathly white light where Candy Crush™ stands as equal to Milton. We have become our appetites and nothing more …

The fearsome and relentless Trianglial of Doom, no mincing words here or cacophony; this is the chart that kicks the modern world in the balls and leaves it gasping, by TFC Charts (click for big). With two major wars and a handful of minor ones in petroleum producing regions the present price movement is unexpectedly down. Our precious wars are bankrupting the world’s customers faster than the same wars can adversely affect oil supply. Add one more war or two and the entire world oil extraction enterprise will shut down due to insufficient funds!

Witness the change of age: The Age of Expedients => wars raise oil prices and increase profits; becomes the Age of Consequences => wars bankrupt countries so that they cannot bid for petroleum => the drillers become destitute => leaving everyone without petroleum.

Economists fail to grasp that people (in aggregate) can indeed go broke. In our world of nearly unlimited finance credit, there seems to be no end to money. This leads economists into believing that there is likewise no end to other things. That when liquid fuels run out the world can turn to ‘something else’ and use it as replacement … something like common rocks: if the price is right the rocks will become fuel. In a world of endless money, individuals or firms can be marooned without funds but others will ‘gain theirs’ and by doing so have enough to provide a market. Here is the triumph of hopeful expectations over common sense: funds are nothing more than promises made against (often faulty) expectations. Those whose promises prove empty are bereft of funds, not the other way around. In the Age of Expedients, adding credit => meant more funds available to spend on capital. In the Age of Consequences, adding credit => bankrupts the system with credit costs => there are less funds available to spend on capital. There are less funds because existing claims are exposed as worthless faster than new claims can be created.

Economists have problems with costs because individuals and firms have been so clever in shifting them to unsuspecting ‘others’ across the economic ambit. To the economist, ‘shifted costs’ are little different from ‘no cost at all’. Because he refuses to consider the externalized costs or trivializes them, the economist does not believe there is capital depletion. In the Age of Expedients more capital can be gained by drilling more holes, in the Age of Consequences the costs of holes added to the costs of credit become become breaking => adding more (costly) holes does not add more capital.

Here, ‘capital’ always means non-renewable resources; capital the basis of all of our so-called ‘production’ (which is really extraction and waste).

In the Age of Expedients, costs are shifted forward by multiples of generations so that great-grandchildren are on the hook for yesterdays’ generations’ waste. The economist blithely assumes that the future will be avoided with time machines or other technological whizmos that somehow denature consequences. Else, he is the cynic, realizing that the future is irrelevant because he, like others in the ‘long run’ will be dead: that consequences are someone else’s problem.

In the Age of Expedients, certain direct actions produced certain predictable results. Rattling the sabers in the Middle East was always good for a ten-dollar pop in the price of crude. Building a road would generate more real estate- and retail ‘growth’. Lowered interest rates would generate more borrowing and spending, it would trigger needed inflation … that fighting a real war would stimulate the economy and increase ‘growth’. Growth is the reason behind the state of perpetual war that has occupied the United States since the end of World War Two. In the Age of Expedients, there is no penalty for stupidity, all of it contributes to GDP.

In the Age of Consequences, actions produce … consequences. The future becomes the present bringing demands for repayment of old debts that cannot be retired with new loans. The toxic waste of prior generations becomes a problem we cannot move away from. Wars are likewise too costly to fight, there is no growth to give nations second chances at ‘victory’. Instead, the consequence of defeat is permanent devastation. Waste-infrastructure does not add anything but to the burdens of debt repayment which in turn are stranded as the infrastructure is fundamentally non-remunerative. Perpetual war = national suicide; stupidity now has dire consequences. The non-linear shift from expedients to consequences emerges as a perilous Fifth Horseman: every habit we have learned during the Age of Expedients is now set to work with deadly effect against us; the time to learn new habits simply does not exist.

The War Against Labor

The businessman’s class war against labor began with the flowering of US industry during the 19th century. The Long Depression in the late-19th century as well as the 1930’s Great Depression were class wars. During the latter, the citizens fought the tycoons with the one instrument that the rich had left them: their refusal to spend their money. Instead, they held onto it, giving bits of paper value while denying it to the tycoons. Prior to the Depression, the country’s industrial laborers had vented upon them every sort of abuse, and then the full fury of militarized authority: clubs and bats of strikebreakers and Pinkertons, knives in the dark from goons and machine gun bullets from the Army. All of this failed, yet by their refusing to spend, by keeping clear of finance industry speculations, the public starved the tycoons who could not meet the service expense of their own enormous debts; the tycoons and American-style capitalism became wraiths.

The citizens would have destroyed capitalism save for the rise of the powers in the East and the desire on the part of government to accommodate the industrialists … the government needed the products of industry to engage in World War Two. The reader can come to his- or her own conclusion as to the economic necessity for the war and the roles played by the industrialists in enabling Hitler, Stalin and the Japanese in the first place.

After the war came the crusade against Communism. This crusade was of a piece with the prior labor struggles. In America, ‘Communism’ has always been a code word for labor agitation as well as civil rights for blacks. As during the previous periods of labor strife, the crusade against ‘Communism’ was dark and violent. As Hedges indicates, institutions as well as reputations were destroyed by public witch-hunts, overseas, the US pursued a series of ruinous yet inconclusive wars. When the Soviet Union collapsed — undone by the failure of its agriculture — and China took the path to Las Vegas style ‘reform’, there was no more Communism, no ‘enemy’ that could be superimposed upon the what remained of organized labor. Keeping in mind that by the time of Communism’s decline and fall, these remains had been thoroughly co-opted by mafia criminals, undone by endless ‘investigations’ and rendered impotent from the inside by union corruption. In place of the Communist boogeyman came the ‘terrorist’.

The Man in Black, is he a terrorist murderer … or a Navy Seal? Who can say for sure? The government will not tell you only the examination of US interests gives the game away.

In the twilight of empire the US tries again and again to enrage the citizens against the boogeymen it creates by itself; what better, cheaper way to buy some cheap rage than to cut off a man’s head on television? Already there are Americans fighting again in Iraq, the third (or fourth) attempt to impose our will on that country. Besides attempting to push up the price of crude, the purpose of our wars is to elevate the price of Boeing, Raytheon, General Dynamics, Northrup-Grumman, Oshkosh, etc. shares. Without perpetual war there are few perpetual defense industry profits, no need for half of the country’s discretionary spending to flow toward the military, and from there to our precious hedge fund managers (gangsters).

In the Age of Consequences, success = failure, assets are now liabilities. There is little on the way to mark the change, certainly nothing discernible in the media or the Internet scramble. Instead of rage and fury, the Fifth Horseman ‘non-linearity’ steals in on little cat feet. We are obsessed with the increase in growth, we equate this with success … not realizing that very same success has instantly become a deadly poison. Make quick, now; sell more cars and build more freeways, towers, bridges as this process of selling and building is the means by which the car-and-tower building monster annihilates itself.