Defrosting The Denial - The Bitter Bite Of 700 Billion Deaths genre: Econ-Recon & Polispeak
Conventional wisdom would suggest that Americans should be heartened by the plan to stabilize the struggling financial industry. We Americans like action as it soothes the angst created by a stock market in free fall, a housing industry in the tank, a shrinking supply of job prospects, and a general sense of uncertainty as the 2008 election approaches.
As much as I've tried, I simply can't find the reasons for optimism. Frankly, it has all the feel of the death of a loved one...that unease one has in the pit of one's stomach...an eery recognition that the die have been cast and there's nothing that can be done to change the trajectory. At times like this, it's not unusual to grasp at straws...playing games with ourselves in the hopes of turning back the clock and washing away the events we find so troubling. Unfortunately, that isn't going to happen.
As I've attempted to make sense of my own thoughts, I kept coming back to the thoughts of death and the steps psychologists tell us we go through to deal with the grief it brings. If one ascribes to this theory, the first step is denial. Truth be told, I find that an apt description of where we're at. Rather than focus on our loss, we point our thoughts towards the proposed bail out. In fact, I suspect there is comfort in the sheer size of the endeavor...so much so that the bigger it is, the better we may feel.
It's akin to sitting in a chair while mom consoles us and applies a bandage to cover our skinned knee...only in this case the injury is far more serious and the salve is far more ethereal. I suspect it will take time for us to adjust our mindset...a mindset that's been carefully crafted over a number of years with the rhetoric of rah rah...rhetoric that tells us we live in the promised land...that we can do no wrong...that we will prevail because it is God's will...that our actions are inevitably and invariably enlightened.
Yes, we're the nation that survived a civil war, the nation that overcame the great depression, the nation that won two world wars, the nation that promoted democracy to the detriment of communism, and the nation that has been the envy of the world. In as much as history predicts the future, we Americans have an expectation that tomorrow will simply affirm yesterday and all will be well. Unfortunately, our optimism is predicated upon ignoring the historical plight of virtually all other societies.
I'll recount a story I've told many times...since this may actually be the moment at which its full magnitude can best be understood. When I was in high school, I had a Social Studies instructor who was quite the character. In fact we called him Wild Bill. He was a colorful man who was well-traveled and full of stories one might expect to find in a Hemingway novel. At the same time, he possessed a keen understanding of the big picture...one of those thinkers who could quickly make sense of the obscure and connect all of the dots.
One day, while I was seated in his class, he proceeded to impart some of his insights, and for whatever reason, the sheer significance of his hypothesis was seared into my brain. As he spoke of the world and the interactions of societies and nations, he paused, as if to question whether he should allow his thought to escape his lips...and then as one would expect, he let rip the following, "The day is coming when the wealth we have in the United States will be challenged. At some point, the family in South America or the family in Asia is going to say, 'we want a refrigerator too', and the intertwined nature of the world will force us to address their demands. The disparity that exists today cannot be sustained forever."
In retrospect, it's difficult to know the basis for his prescient thought. My own suspicion is that it was a combination of recognizing the advantages of being an American traveling in a world filled with poverty and his own appreciation for the excesses that are an integral part of human nature. In other words, I think he was sure that our freedom and our wealth would not go unnoticed as we Americans traveled the world and allowed others to witness the essence of the American dream and seek to make it their own.
Returning to grief, I would suggest that the denial we're experiencing is, in fact, predicated upon our first recognition of Wild Bill's prediction...the moment at which the rest of the world has made its demand for a refrigerator. Yes, it's been building for a number of years...but not in a manner that slaps us in the face and says wake up. One need only look at the globalization of manufacturing, our shift towards a service economy, our inability to supply our ever expanding energy needs, our growing reliance upon imports, and our inability to compete given the fact that our standard of living (wages) must be factored into all of our transactions with the rest of the world.
So where does this leave us today? Well, if one accepts the validity of the grief model in explaining our current predicament, we're barely beginning our march towards the final stage of our journey, acceptance. Right now, 700 billion makes us feel better because it is the language we understand...a money driven construct. Unfortunately, we're still attached to the notion that the dollar can dictate value to the rest of the world...and while that may well be a valid view, it remains to be seen for how much longer.
Optimists like to point to the debt ratio of other nations in order to dismiss the significance of this bail out and our unrestricted deficit spending. However, the fact that we've doubled our debt in eight years can't be ignored. At some point, the advantages the dollar has afforded will no longer exist and the more debt we assume, the sooner it will erode.
You see, it isn't just 700 billion for Wall Street...it's 700 billion annually for importing oil...it's half a trillion and counting for an endless war...and it's entitlement programs that cannot be sustained. Even more concerning, it's a housing market that may never again be the primary wealth creation mechanism for the average American. Absent this key component, the engine of the American dream may have eclipsed its life expectancy.
I suspect one could reasonably argue that the last seven years prove as much. Truth be told, the money that has kept our economy from acknowledging the shadow of a global reality came from artificial interest rates that allowed Americans to keep spending by borrowing against their expanding, though contrived, home equity. As the world waits to see the shake out, there is little reason to believe that confidence in the American economy will be fully restored. As the inevitable autopsy is completed, the endemic toxicity of our superficial economy will cause a shift away from contact with the infectious dollar.
As we move into anger, the second stage of grief, we will likely face our greatest test. Try as we might, blame will come with anger and there will be calls for accountability as we cling to our hopes of preserving the American dream. As we watch the world advance around us, the heat of our anger will eventually give way to a cold reality...a reality that will put ice in the lemonade of our global neighbors...and leave us wondering if we can stand the bitter bite of the lemons we're left with.
Look on the bright side...if we survive this most sour sojourn...there's only three more steps to navigate - bargaining, depression, and acceptance.