“American exceptionalism has led to a country that is exceptionally un-self-aware.” — Peter Thiel
The economic contraction ahead will put this borderline psychotic country through some interesting ch-ch-ch-changes. Mr. Trump now fully owns the Potemkin status quo of record stock markets poised against a withering rot of human capital at the core of an industrial society in sunset mode. Leadership at every corner of American life — politics, business, media — expects an ever-higher tech magical updraft of fortune from an increasingly holographic economy of mere fugitive appearances in which everybody can get more of something for nothing. The disappointment over how all this works out will be epic.
Globalism is wobbling badly. It was never what it was cracked up to be: a permanent new plateau of exquisitely-tuned international economic cooperation engineered to perfection. It was just a set of provisional relations based on transient advantage. As it turned out, every move that advantaged US-based corporations blew back ferociously on the American public and the long-term integrity of the social order. Sinister as it seems, the process was simply emergent: a self-organizing evolution of forces previously set in motion. And, like a lot of things in history, it seemed like a good idea at the time.
“Off-shoring” US industry jacked up corporate profits while it decimated working class livelihoods. In return, that large demographic got “bargain shopping” at Walmart, a life of ever-upward revolving debt, and dead downtowns. The country got gigantic trade deficits and government debt loads. In effect, globalism compelled America to borrow as much as possible from the future to keep running things the way they were set up to run. Now, there is just suspicion that we’ve reached the limits of borrowing. Soon it will be a fact and that fact will upend everything we’ve been doing.
You can see how this is playing out in politics, especially the proposed government-enforced redistribution of whatever wealth is supposed to be left. Of course, much of that wealth is a figment, represented in abstract financial instruments pegged to “money” that may have a lot less value than presumed. The Democratic Party detects opportunity in the gross imbalances of this notional capital and so they are promising every conceivable form of grift to voters from a guaranteed basic income and free medical care and college education to reparations for the descendants of slaves.
They certainly might win the 2020 election on the basis of that proffer, but good luck scaring up the actual financial mojo to make it happen without destroying whatever value remains in the US dollar. The predicament may be aggravated by foreign capital seeking refuge in US financial markets as the banking systems in China and Euroland unwind, giving politicians the false impression that other people’s money belongs to Americans. And anyway, what will these foreigners actually be investing in here? Collateralized loan obligations based on seven-year used-car payment schemes?
The American Left just can’t grok the fact that we missed the window of opportunity for setting up a national health system. That was a mid-twentieth century thang: cheap oil and industrial growth. Please note: it was the Democratic Party under Mr. Obama that turned the college loan industry (and Higher Ed with it) into the appalling racket it’s become, because it fit the template of a society pretending to prosper by racking up debt. That demographic of debtors will be seeking magical debt relief. If they get it, it will be at the expense of the government that took on the guaranteed backing of all that debt, now well over a trillion dollars.
Industrial growth is over, and with it the expectation that all the old debts can be paid back. A few economic commentators are predicting “stag-flation.” We’d be lucky if that’s all it turned out to be. But we’re unlikely to get a re-play of the 1970s. That was an era of geo-financial disturbance that resolved for a while with new oil from Alaska and the North Sea. That’s not going to happen again this time. Stag-flation was just a matter of going nowhere for a decade. The contraction ahead will be brutal, not going nowhere but rather going down hard to a lower and harsher standard of living.
It’s also hard to calculate how disturbing and disruptive the prosecution of the RussiaGate perps will be. If the Democratic Party is acting batshit crazy about it now after the Mueller testimony fiasco, how will they react when dozens of their partisans are marched into court to face charges of sedition. That ugly business looks on-track to collide with the coming financial distress. The result will be much more severe political turbulence than the thinking class expects. It’s easy to imagine circumstances in which normal institutions get suspended and the old major parties are superseded by “emergency” seizures of power by other parties as yet unknown.
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