The Swirling Sound

More often than not, I find myself disagreeing with Niall Ferguson, but it's probably more a matter of ideological incompatibility than anything else. Ferguson is certainly not a showboating neocon bozo, does not hail from that inbred tribal stripe that boasts truly incompetent thinkers such as Jonah Goldberg. And yet, Ferguson seems to be engaging here almost ritualistically in glossing over some very profound structural issues in the American economy, and in turn its geopolitical stability.

In fact, in enumerating the various ways in which our consumerist economy is unraveling, Ferguson effectively refutes his own argument, which is that rumors of our demise may be premature after all. You know, as disciplined as the Roman historians were in chronicling every episode of indulgence, every quirk of imperial overreach, I doubt they ever transcribed an incident of one citizen asking another as the barbarians were at the gate, "Think the empire's falling?".

Thanks to the arcane machinations of international finance, that fall is now somewhat cushioned by our collective counterparts abroad. However, it is also because of that financial system that we find ourselves in this fix. When people who create nothing of value convince other people to invest money they don't have in their Ponzi scheme, you're headed for a fall. It may take a year or a decade, but it's going to happen at some point. How long did anybody think that selling East Bay tract homes for $800K (plus side overbids of as much as $50K) to people making $40K/year was going to last? Well, these geniuses were so convinced that it couldn't possibly end, they put all the liar loans in a big pile, bought derivatives on the margin, and staked everyone's pension funds on it.

Still itching for those supercool Social Security private accounts?

So even though our defense budget is typically estimated at around 5-6% of GDP, the finance fiasco should be a clear indication that some portion of said GDP is largely fictitious, or at least tied up in some suspendered asshole's highfalutin' scam. Of course Wall Street breathed a sigh of relief as the week ended -- who wouldn't under those conditions? These fuckers made ridiculous money running a numbers racket, and when the Jets finally failed to cover the spread, someone still shows up to bail them out. We should all have that kind of luck.

Ferguson correctly asserts we have gotten out of previous crises before. But we recovered from the Great Depression with a shitload of wartime spending and domestic projects. After bailing out the scam artists and pouring a trillion or so into a bloody hole in the desert, we're going to be cash-poor for quite some time. And we've been borrowing from China in order to buy shit from them, which as Ferguson acknowledges, is going to change as China engages in some economic re-stratification. They're cultivating other markets, and beating us to the resource-rich African continent.

We've gotten away with this stupid, reckless behavior because we've always been too big to fail. But we've been our own worst enemies for so long, that may have changed. And like many important econometrics, it's something of a lagging indicator. We find out for sure the hard way.