Sunday, 15 April 2012
Permanent Deck Chair Season
On an unrelated note, we got our deck chairs out early this week. In fact, we never had to put them away. You could say humanity has entered the era of permanent deck chair shuffling.
Happy Titanic Anniversary everyone! It is significant that the centennial one of the most studied and defining events of modern 20th century culture, the foundering of the H.M.S. Titanic, is occurring today, while the same mentality of hubris and bravado that was partly responsible for this event is careening the global economy into a deep sea rust bucket wreck of its own right now.
When I was a child, I received a book on the Titanic as a gift which detailed, with excellent pictures, the mid-1980s undersea expedition led by Dr. Robert Ballard to the site of its wreck. When I picture the night of April 15, 1912, how not to be as captivated today as I was a child learning this story? It is such a stirring event that I don't mind rehashing the important points here, even though you know them and it's been done a million times. Late at night on its maiden voyage, the "unsinkable" ship, the most modern and high-tech of its time, strikes an iceberg. The six compartments in the hull (that were actually designed for such an occurrence!) quickly flood; after a couple of hours, the massive steamship is so waterlogged that it is half underwater on an incline. It snaps in half from the pressure, and the bow sinks majestically to the bottom of the Atlantic Ocean where it remains well-preserved today. The stern, on the other hand, takes a terrifying 90 degree tilt with people still on it, and sinks broken end first. It ends up half a kilometre or so away, on the ocean floor, in significantly worse shape.
The telegraph lines were buzzing and the newsroom typewriters were clacking then and really, the flow of content around this event has continued with impressive vigour since. Essays, books, film...yes I saw James Cameron's grandiose epic in 1997, and my 14 year old brain had to admit it was entertained. I haven't bothered to revisit it, not least because of that terrible chest-thumping Céline Dion song.
But to more serious matters at hand - because no amount of ingenuity is going to bring that ship back(remember when they tried?) The Titanic can be and is often used as an analogy to describe the state of certain things like the economy, a nation state, a sports team, a military or a company. In short, anything which, like it, is 1) subject to a lot of attention 2)has very high expectations placed on it 3) can expect to encounter danger and hazards and 4) affects people's lives. More than anything, the widespread use of the Titanic analogy is because it symbolises the arrogance of Homo Sapiens and the way the species comes to grips with the epic failures that sometimes befall it.
Our culture is so replete with Titanic references, and I am sorry to be using the most unoriginal and lazy Titanic cliché of all by saying that central bankers of "rich" countries are “re-arranging the deck chairs on the Titanic” with their tricks machinations. But unfortunately, for all their smug smartness and pretensions of all-knowing that we have the pleasure of witnessing, that’s exactly what they’re doing!
The Titanic was infamously described before setting off as "unsinkable". We know that despite this assertion from the shipbuilders and business people behind it, the laws of physics, gravity, etc could not be flouted on the high seas. And now, nearly four years into the aftermath of the September 2008 financial collapse, the same pernicious mentality has inflicted the entire financial system, which is global. Yet we foolishly talk about a "recovery"
Every week, you're still hearing about "stimulus", "stabilization funds", "holding steady on low interest rates", and "sovereign debt". This all means that the European Central Bank and United States Federal Reserve are doing all they can to contain the "crisis", but the societies whose financial systems they preside over remain awash in debt and stricken with high unemployment and anemic economic growth. Every move by these Central Bankers which devaluates the currency (causing inflation) by adding more debt has the effect of filling yet another compartment with water, despite being portrayed as "taking action"
What does that mean? Forgot all this crap about "austerity" and "pulling back on stimulus" - no broke Western government from France to the UK to Ontario has spent less this fiscal year. It's record spending across the board. Barack Obama is going to bring down an insane record like 3.7 trillion budget this year, 1.6 trillion of which will be deficit. Make no mistake: when 2008 happened, it took a trillion dollar intervention to bring the stock market back to the 12,000 level, from the fall from 15,000 to 7,000 that happened over a few days in September. What you don't know is that it's taken nearly three trillion more dollars of slush from the Fed and the ECB since then to keep the Markets at those post-bailout levels. Recovery my ass - it's more like a refusal to acknowledge reality. Couple that with the refusal to raise interest rates, causing new housing and debt bubbles, and the destroying of the average guy's purchasing power from all this shadow money printing, and you see that we are witnessing a very clear case of rearranging the deck chairs on the Titanic indeed!
The ship was divided into first, second, and third classes, or upper, middle, and low classes if you like, and all three suffered losses with the disaster (the low classes the heaviest). Which class will lose the most when this Titanic goes down? The elite have heavily tilted the playing field in their favour, but the middle classes will pay dearly with their car loans and home equity credit ponzis. The poor, who live on shitty calories and cheap booze now but seem to find money for satellite dishes and cellphones, may come out ahead in this with their lack of real estate/investments. That may sound callous but it's less heartbreaking in some ways to start from zero, which is what it looks like most of us will be doing after the financial collapse that is currently being engineered.
I have an Atlantic magazine from last month with Bernanke on the cover. This guy just thrives on being vilified. I get it, I get it. Soft-spoken, chooses his words carefully, neatly trimmed beard, school teacher wife. The guy oozes modesty and humility and his stature only seems to grow with all the hot-headed cranks in Congress and on the blogosphere complaining about his endless money printing and bubble blowing. His pronouncements are staid and professional but have a distinct I-have-a-phd-in-ecomonics-from-Princeton so I know what I'm talking about and F--- you vibe to them. Except Mr. Bernanke has done a total William Shatner and gone where no Fed Chairman has gone before. Namely, since China and other nations have stopped buying bonds from the U.S. treasury, about 1 year or so ago, he has just started buying them himself. Essentially, the U.S. is now buying its own debt off of itself. That's like me sitting at my Kitchen table and writing IOUs to myself to pay my Mastercard bill.
So don't listen to the mainstream propaganda about this guy being a magician and a genius, hanging onto his every word. I'm sure he's a very nice man and I don't wish to attack him on a personal level. But it is abundantly clear on this Titanic anniversary that he is rearranging the deck chairs on the Titanic. We didn't have a winter in Canada this year so we didn't need to put away deck chairs. And evidently, Bernanke and the world financial system are dealing with some deck chairs of their own. The powers that be seem to think they can just shuffle these in perpetuity.