I was discussing the sorry state of the world economy with my neighbour last night and of course we couldn’t do so without addressing the ludicrous fact that in the West debt has effectively become money… He moved to Canada from India and is a University teacher.. He said something that was so obvious and yet I had never really thought about it much. “When I moved here I was shocked by how you needed a credit history to do pretty much anything of importance. Without a credit history in North America you might as well not exist”. And there you have it folks. The Powers That Be are petrified of deleveraging and even more so of having to come up with a different economic paradigm since our economies ARE debt. Our biggest failure is that our politicans, bankers and intellectuals have lost the ability to face up to reality and to do what is RIGHT as opposed to what is EXPEDIENT. I am disgusted, utterly disgusted, with where things have ended up and all I feel I can do about it is to take a deep breath, live my life as best as possible under the circumstances and hope to be spared the worst of the coming unpleasantness, whatever that may be. I am very skeptical that there is anything but a tragic ending to this story. As Simon points out the opportunity to pass strong financial legislation that could have limited the size of banks and regulated their behaviour to something resembling a public utility has most likely been lost. There is nothing left to do except wait and pray.
My neighbour also asked me if I had ever travelled to India to which I said no. He said that it is worth going but one has to go with an open mind and not judge by western standards for the squalor that the poor live in, often but a few yards from some of the wealthiest, is a brutal culture shock for many who make the trip. I told him not to worry. That I was fairly convinced that that income disparity was invarriably going to make its way to North America. China and India are definitely the future…they will continue to get richer while we continue to get poorer eventually leading to a global economy where the rich and poor are spread out evenly across the globe… The Global Wealthy Elite will live in enclaves while everyone else struggles to make ends meet or simply to survive another day. Travelling between enclaves of wealth will be increasingly dangerous.. From what we see going on in the U.S. it is clear that the process is well underway and is likely irreversible pending the series of natural disasters and conflagarations necessary to force our hand to change or deliver us to our fate.
Things will have to get MUCH worse before there is even a glimmer of hope that they get any better. Anyone who’s ever been over their heads in personal debt knows how depressed and powerless it makes you feel. Western economies are up against the wall. Politicians are scrambling to keep up appearances but the facts on the ground are incontrovertible: When the population at large becomes depressed (and I’m not talking lack of confidence here, I mean all out depression..as in..the future looks BAD no matter how you look at it) the economy follows.. There is much discussion about kicking our oil habit and “replacing” it with renewable energy.. But our habit has gotten so out of hand that we must start preparing ourselves for painful remedial action. Replacing the heroin of oil-driven growth with the methadone of renewable energy is only a first step. If we leave it at that we are still addicted to the idea that growth is essential to our wellbeing and our economic health problems will persist. We need to come up with a new paradigm… a new religion if you will. The Bible has outlived its usefulness, mostly because it’s most important message – DEBT IS EVIL – has been ignored one times too many. In that sense the West has forfeited it’s moral leadership of the global economy and we’ll have no choice but to wait and see what the new leaders, China and India, have to offer.
In the meantime the coming hurricane season should scare the hell out of everyone. There is a tangible risk that it will amplify the crisis in the U.S. and bring the cauldron to the full boil of ecological, economic and political cataclysm.