I just read an excellent blog entry over at Consent of the Governed called 2010: Brace for Impact. In it, blogger Judy Aron discusses the scheme of Quantitative Easing, a way in which federal reserve notes (I refuse to call it 'money') being printed in unprecedented quantity over the coming year in order to keep up with federal spending, will be released onto the marketplace. The Fed is doing this hoping to pump enough money into the banks to get them to lend money instead of buying treasuries. The problem is that by making the prime rate 0 -0.25% (the prime discount rate is the rate at which banks lend to other banks--which they are not doing much of at the moment) the Fed has left itself nowhere to go if Quantitative Easing does not work and flooding the market with dollars cannot be turned on a dime. In this case, the dollar crashes, which means that the currency becomes worthless to those holding dollars, and then as Marketplace.org's Senior Editor Paddy Hirsch explains, it will leave "everybody badly needing a drink."
What is interesting is that, despite the fact that anyone who can do elementary math can see that it remains physically impossible to continue consuming far more than one produces for very long, such magical thinking is still engaged in by everyone from senior Senators in the halls of the Capitol to my neighbors.
The Engineering Geek and I had the pleasure of having dinner with another East Mountain couple recently. We are not well acquainted with them, although they had come to our Passover Seder once or twice. During an excellent dessert with wonderful coffee, the wife asked me about Common Sense, Inc., my consulting business that runs Retake Congress. I began by explaining the four points to the contract that our candidates sign. But I never got to finish, because when I got to the economic point, our hosts began to argue and object to the idea that the United States economy could be badly impacted by the fact that the federal government is spending money like water and then borrowing more to spend just as profligately.
We were told that a currency crash and hyper-inflation simply cannot happen here because:
- the United States is a superpower
- Obama is the messiah (not said in so many words, but implied)
- China will keep lending us money because we'll keep buying their goods
- times have changed and human beings have never before had technology and a worldwide marketplace
- the laws of nature do not apply to economics
Although there was a moment when the Engineering Geek's explanation of the fall of Weimar in Germany due to hyper-inflation began to dawn on the wife, the husband quickly pointed out that Germany was not operating in a world market. (Oy, the abyssimal failure of our public schools to teach history!)
Finally, I attempted to draw an analogy using the energy exchanges in ecosystem ecology. At this point, the husband simply said that he did not believe me because economics is not a natural thing, it is human made and therefore not subject to natural laws. Therefore he said, it is not impossible for people to continue indefinitely consuming more than they produce.
I was absolutely floored at first, not understanding how a smart and successful director of a major Albuquerque employer could possibly not understand this simple concept. (The EG said I was getting frustrated). Then I realized. My neighbors are in denial. They simply cannot imagine that a system that they depend upon, one that allows them to live the rather extravagant lifestyle they enjoy, could possibly fail. Like many of the passengers on the Titanic, they tell themselves the story that the good ship U.S. Economy is unsinkable.
According to researchers who study the psychology of disasters, many people freeze in the first minutes of a disaster because they simply cannot believe that their reality has altered so suddenly. These people are the least likely to take positive action in the first moments of the disaster, and are therefore less likely to survive. (See, for example, The Unthinkable: Who Survives When Disaster Strikes--and Why by Amanda Ripley). Those who survive are often those who have thought about and planned for the unthinkable.
As a child growing up, I spent a lot of time reading science fiction, and a fair number of those short stories and books placed characters in the unthinkable situations of disasters ranging from nuclear war (Alas, Babylon) to an astroid impact (Lucifer's Hammer). Such books do get one thinking about the possibilities of disaster. But the book that made me realize just how quickly a situation can deteriorate from normalcy to surreal horror was John Hersey's The Wall, a novel that portrayed the history of the Warsaw ghetto. In the beginning one of the female characters is returning from the bakery in her Warsaw neighborhood, her basket full of bread. Within the first third of the novel, that same character is hungry and scrambling for food in the ghetto. By the second half of the novel, she is making her way through the sewers filled with barbed-wire in order to escape. The time portrayed in the novel, about six years, is telescoped to the main events, but for an impressionable freshman in high school, the idea that one's world can change dramatically in a short time became real to me with this book because it was about real events.
For some time, as I have watched the country I inhabited before September 2008 change before my very eyes, I have been aware of how fast something wicked this way comes. (Yes, Ray Bradbury borrowed one of his sci-fi fantasy title's from Shakespeare). Not quite believing it could get bad, I nevertheless began thinking about what we would need in case of, say a bank failure, or even civil unrest. That thinking became planning and purchasing as I watched our purported leaders scramble all over each other to deny reality through insinuation and outright lies. The more outrageous their behavior, the more planning and purchasing I did. Now, working with others, we are planning for various contigencies.
I have been called a tin-foil hat conspiracy theorist, a person wedded to doom and gloom, and the other night, unpatriotic. That's okay. Call me all of those things. Because when I get called those names, I remember the Donner Party. They ignored all the signs, did not heed the warnings, took an untried "short cut" that led to a long delay, and ended up in the High Sierra completely unprepared for winter. And most of the members of that group from Illinois came to a horrific end. So call me all the names you want, but also call me "Scout" because my motto is still Be Prepared. In winter, for example, I carry an emergency kit in the car. (Such a kit should at least contain candles, water, high-energy snacks, a sleeping bag, a shovel and kitty litter).
If one is unprepared for even a mild disaster, one's chances of injury and death are increased. In the face of a serious disaster, being able to accept the unthinkable and being prepared for many challenging situations makes one's chances of surviving and even thriving much greater.
The sunshine patriot and the summer soldier will not be prepared to weather hard times. Winter soldiers are prepared for more than one kind of hard time.
Denial of reality can lead to serious consequences. So now, in order to "brace for impact", the Engineering Geek is working with others who think logistically on contingencies for a group of us, so that we can provide ourselves with the mutual aid and comfort of community in the coming hard times. Because hard times are predictable. When enough people in power in a society evade reality, hard times become inevitable as that same reality comes back to bite us in the butt.
Denial. It ain't just a river in Egypt.