“Last night I had a dream. You were in it and I was in it with you….”
— Randy Newman
As in this age of Hollywood sequels and prequels, America prefers to recycle old ideas rather than entertain new ones, so you can see exactly how the 2020 presidential election is shaping up to be a replay of the Great Depression, with Roosevelt-to-rescue! — only this time it’ll be with somebody in the role of Eleanor Roosevelt as chief executive. Donald Trump, of course, being the designated bag-holder for all the financial blunders of the past decade, gets to be Herbert Hoover. As was the case in the original, economic depression will segue into war, with maybe not such a happy ending for us as World War Two was.
There should be no doubt that the money part of the story is on a slow boat to oblivion. The world has been running on loans to such a grotesque degree that it’s managed the impressive feat of bankrupting the future. The collateral for all that debt was the conviction that there were ample amounts of future “growth” up ahead to service that debt. That conviction is now evaporating as car sales plummet, and real estate goes south, and nations twang each other over trade, and global supply lines wither. Globalism is unwinding — and not for the first time, either.
As in the standard Hollywood screenplay format, expect an “all is lost” moment when the “hero” (the USA) faces the existential dread of realizing that there is no more borrowing with the collateral gone. Translation: when the Federal Reserve discovers it can’t cue up yet another round of “Quantitative Easing” (QE) and ZIRP without destroying the value of the dollar — which it might do anyway, since monetary inflation is a great benefit to those who can’t pay back their debts, and the USA is the biggest deadbeat of all. An inflationary depression won’t be the same as the deflationary depression of the 1930s, but remember (cliché alert): history doesn’t exactly repeat, it rhymes. Financialization, it’ll turn out, was just money with its value removed. Imagine how pissed off the voters will be.
Note: the growth predicament is hugely misunderstood in this land, because the shale oil “miracle” was such a dazzling stunt. America is now producing above 12 million barrels of oil a day, two million higher than what was thought to be the all-time peak of 10 million a day in 1970. That is extraordinary indeed. We are the world’s leader in oil production now, ahead of Saudi Arabia and the wicked Russian bear. What most Americans don’t know is that this stunning feat was accomplished with hundreds of billions of dollars in borrowed money (debt) that will never be paid back.
The collateral for all that money was the conviction that there was a lot of money to be made in shale oil. But the shale oil industry has had a negative cash flow since it started around 2005. So, we’ve demonstrated that you can produce a lot of something at a big loss for a while, until you can’t. And the moment is approaching when there will be no more loans for the shale oil industry and then, voila, no more shale oil. And the USA will have a whole lot less of its primary energy “input” to the economy. We’ll be back to 2008. The turnaround will be fast and shocking and the American public will feel swindled. And having been already swindled out of all the other comforts and conveniences of what used to be modern life — a job, a home, a car — they will be even more supremely pissed off.
Enter stage left, the first woman president. Take your pick: Kamala Harris, Elizabeth Warren, Kirsten Gillibrand — with AOC as Speaker of the House! The new “Eleanor” will out-do Franklin Roosevelt in “innovative” economic policy. Only this time it won’t be jolly corps of brawny men marching off with pick-axes and shovels to carve trails through the national parks. It will be an orgy of collectivization, led by a gender-fluid army of commissars in an American sequel to the classic film Battleship Potemkin. Madam President will nationalize everything that’s not fastened down with square-head decking screws. Then the show trials will commence, first with the hated One Percenters going to the firing squads and then briskly moving to all the enemies of “intersectional justice.”
None of that will make the USA a better country. And then imagine how pissed off Russia and China will be when Madam President takes up her policy of exporting the New Bolshevism to other lands (because it works so well). Been there, done that, they’ll say. And maybe they’ll have to smack us down to get the point across.
Leave a Reply