Fortune magazine's Andy Serwer just said on CNN that there has never been a day like this one in US financial history. Spengler explains what the revelation that so much of America's prosperity was built on a fantasy means in the long run. I found this part of his rich analysis to be particularly interesting:
The failure of Lehman and Bear Stearns does not reflect the breakdown of a particular kind of corporate culture. As noted, the two firms embodied radically diverse views of corporate culture. What took both firms down, rather, is a sudden break in the chain of expectations between the present and the future. Today's savers no longer can have any confidence that they will earn enough to fund their retirements by putting money at risk. They have discovered that in one form or another, their investments have fed a securities market bubble rather than the creation of value.Market participants are responding by running away from risk, as well they should. That is the stuff out of which great crashes are made. The bouncing-ball pattern of declining stock markets was marked by bear market rallies each time the American and other governments stepped in to bail out the latest victim. The US government's ability to influence events, however, seems exhausted. The Treasury and Federal Reserve can't bail out everyone.
Earlier in the piece, Spengler notes the role that population collapse in Japan and Europe play in this crisis, concluding:
There is nothing complicated about finance. It is based on old people lending to young people. Young people invest in homes and businesses; aging people save to acquire assets on which to retire. The new generation supports the old one, and retirement systems simply apportion rights to income between the generations. Never before in human history, though, has a new generation simply failed to appear.
This brought to mind a portion of the film "Demographic Winter" (trailer here) in which the connection between demographic and economic decline was fleshed out. Harry S. Dent,, a financial analyst, used graphs and charts to explain why Japan's financial decline in the 1990s tracked its demographic decline. To be sure, Dent's predictions overall are spotty. Caveat emptor, and all that.
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As Spengler notes: "The US government’s ability to influence events, however, seems exhausted." Go figure. Tax cuts on top of tax cuts following tax cuts, spending increases, an unnecessary, never-ending, bottomless pit of expenditures in Iraq. Who'd have guessed it would come to this?
Well Stephen Sondheim perhaps: Isn't it rich? Isn't it queer? Losing our timing this late in our career? And where are the clowns? Well, we are fixing to reelect the same team of jokers who brought us to such dizzing heights of success, simply because we're enraptured by the persona of an inexperienced but attractive young person who has all the right answers to all the wrong questions. Ah, yes. Send in the clowns. There ought to be clowns. Well, maybe, if not certainly, next year.
I am one of these "young people" Karth speaks of. They do come to this blog. As far as having children in my generation, I will make an observation of questionable relevance:
I am soon moving in with my girlfriend in Leipzig, and I am curious what effect Leipzig's baby-friendly atmosphere will have on our relationship. Yes, that's right, baby friendly. Leipzig is one of those cities that is absolutely devastated by demographics. You see it everywhere, shuttered schools, empty parks, oddly quiet streets, perfectly good neighborhoods blighted. And there, it is suddenly becoming fashionable among young people to have kids, there are few 10 year olds in the city but a ton of infants, and fashionable looking people drag them around everywhere. Putting aside the questionable idea of "child as fashion accessory", I think that this does point to the fact that even in Germany, eventually some basic human instinct to reproduce notices the lack of childrren's voices, and kicks innto overdrive. I hope my anecdote has been correctly generalized.
My second point is one that I've made many times. People my generation are aching to grow up, perpetual delayed adulthood is not a happy place, contrary to how the media shows it. But the obstacles to weddings and families are huge. We are saddled with debt and are supposed to be putting our expensive degrees to good use in professional positions, which we are shocked to find out pay squat at entry levels. And call us pampered if you like, but I am totally sympathetic to people whose desire for family are overridden by their desire to not take a gigantic lifestyle hit. I don't mean giving up luxuries, I mean a situation where both parents would have to work mentally exhausting fulltime jobs just to make ends meet while raising an infant, and naturally giving up all social lives and perhaps even ruining good marriages. Great atmosphere for raising a kid. So we put it all off until our mid thirties. Somehow, I don't think it was this bad for our parents.
And that's why Social Security privatization remains a terrible idea. It does nothing to create new wealth, it would simply fuel a larger bubble than we fueled with our 401k and IRA plans.
Lord Karth,
Beautifully put. Add the omnipresent power of advertising and its relentless message of immediate gratification to the mix and you have it nailed down.
Pyrrho @ 8:43 AM writes:
"Add the omnipresent power of advertising and its relentless message of immediate gratification to the mix and you have it nailed down."
You have added them, and very properly so. Indeed, one could argue that the said Omnipresent Power is what actually fuels much of the State/Corporate alliance.
Your servant,
Lord Karth
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