Collapse: The Blog

On Work and Human Nature

Long-time readers know that I regard employment as key to the health of any society. Employment integrates the individual with society in the pursuit of the common good; it enables him to discharge his duties to himself, his family, the state, and God; and it keeps him healthy, happy, productive, engaged, and mindful of his obligations to others. Unemployed people suffer physically and mentally, their families tend to disintegrate as they sink into poverty and despair, and they tend toward political extremism, crime, and other indicators of social pathology. A society that doesn't take employment seriously, that thinks having a sizable proportion of its people unemployed is good, and that is willing to tolerate any degree of chronic and involuntary unemployment, is radically deficient, not only organizationally but morally and with respect to its basic priorities.

Work, in other words, corresponds to human nature in a very real and powerful way. (Hobbies and social activism serve the same purpose for those who are moneyed enough not to need to work, at least not regularly). It's not for nothing that earlier societies envisioned work as a form of prayer: a divine office, executed with a humble heart, in accordance with the will of God.

Unfortunately, modern society has more or less succeeded in severing the link between work and the natural human impulses that rationalize and ennoble it. Man is atomized, reduced to interchangeable cogs in a utilitarian economic machine. He is fired wantonly and encouraged to change jobs for reasons of even minor convenience. The resulting bitterness, despair, and alienation is captured perfectly in movies like Office Space and Falling Down. The modern historical norm of hating one's job, detesting one's coworkers, resenting one's superiors and exploiting one's subordinates is grossly unhealthy from both an individual and social perspective.

For myself, I feel ludicrous guilt even contemplating leaving my current job, and not only because there are many who'd be happy to have it and my gripes are pretty minor. Work itself is a gift, and man ought to -- indeed, wants to -- be in a position in which he can cherish it, as he would any good thing. Modern society affords him no such opportunity; indeed, it abstracts from our economic order all that makes it human and salvages only that which makes it impersonal, bureaucratic, and insufferable. This is true not only at the micro level but at the macro, too. Suppose our elite was presented with two economic plans: one would cause the Dow to shrink to around 2,000 (much closer to the historical norm) but cause unemployment to drop within rounding error of zero, putting all those who want work in stable jobs that would provide for at least their basic necessities; the other would put 20% of the population out of work but cause the Dow to rocket up to 50,000. Which would they pick? We all know the answer.

What can be done to repair this situation? For one thing, recognition of the fact that stability in employment matters is necessary. It's not enough that a man should always be able to find a job somewhere; having to find a new job every 12 months is a bad, or at least suboptimal, situation. He must, if he wants, always be employed at the same place or by the same company. A community of fellows (which is really all a workplace is, and the demand for which arises from human nature) cannot spring up where the population is transient. Ask anyone who lives in a sizable military town.

Deprioritization of economic goods in favor of basic human goods matters, too. "Is this good for GDP" should be asked only after "Is this good for the health of the polity" is answered favorably. We should resort to technocratic economic number-crunching only where failure to do so imperils our primary goal of promoting a healthy and integrated social order, and even then subordinate it to that goal, seeking to cause as little disruption as possible.

How do we enforce this? Possibly the same way we enforce our present order, which seeks to smash the traditional family, unduly elevate talentless minorities just to stick it to white people, and enrich psychotic criminals. That is to say, announce a set of standards and then proceed to severely sanction--socially, financially, and legally--any employer who does not comply, while rewarding to the greatest extent possible those that do. Carrott and stick. It works for the PC apparatchiks; it can work for us, too.

The Great Depression: Then and Now

The tipping point for economic collapse is coming up quickly, perhaps as early as next year. We've been through this sort of mess once before, but the America of 2012 is a vastly different nation than was the America of 1929. Let's take a few moments to examine these differences.

First, while we're heading for depression, the coming one will be markedly more severe. GDP contracted a total of 30% in four years; the necessary correction to bring GDP in line with our present levels of economic output will be more on the order of 50%.

This time, public distrust, suspicion, and contempt of the American government is at an all-time high.

This time, our ethnic minorities are considerably more numerous, more radicalized, and more violent, to the point that they are constantly shooting people over sneakers, getting arrested for losing their minds in fast-food restaurants, and stabbing their coworkers with screwdrivers.

This time, virtually no one is a farmer or even knows how to farm (back then, virtually everyone was capable of at least subsistence farming).

This time, society is in thrall to an ideology that regards pain and suffering as the worst possible evil and suicide as a perfectly valid means of avoiding such.

This time, dependence on the government is already at a record high and there will be no money left to help out the poor.

This time, there are clear villains -- the financial-political complex.

This time, the American identity as such is considerably weakened after decades of propositional-nation nonsense, mass immigration, and political correctness.

This time, we share our porous southern border with a violent narco-state (in fairness, this isn't much worse than the violent atheistic despotism we shared it with back in the 20's).

All of this is reason to suspect, to quote Newsweek's Mark Thomas, that this time, "there will be violence."

Another Warning

"A major bank could collapse within weeks":

Many banks, including some French, Italian and Spanish lenders, have already run out of many of the acceptable forms of collateral such as US Treasuries and other liquid securities used to finance short-term loans and have been forced to resort to lending out their gold reserves to maintain access to dollar funding.

"The system is creaking. There is a large amount of stress," said Anthony Peters, a strategist at Swissinvest, pointing to soaring interbank lending rates.

...

Alastair Ryan, a banks analyst at UBS, said there would be "no Lehman moment" – or single catastrophic event – for the European banking sytem, but added that without a full backstop of bank liabilities by governments the system would "struggle to finance itself in the next year in a durable way".

"The system at the moment hasn't got funding of a duration that allows it to function, so it's failing," he said.

Worried yet? You should be.

A Warning

This morning, from Karl Denninger at Market Ticker:

The EU summit "deal" is noise; we knew going in there would be no "grand bargain" and there isn't.  Britain said "stuff it" (rightly so) along with a few others; those who went along did so pretty much at gunpoint.

The vassal state model may look attractive as an alternative to Mekosy, but they're nuts.  What they'll ultimately get out of this is a war.  Oh Archduke, is that you over there somewhere?

The internal issue for America is more-acute in the market sense.  Texas Instruments last night warned on weakening demand and got clocked in the aftermarket.  This morning Dupont issued a warning.  Either standing alone could be looked at as company-specific.  The two together cannot.

I said a bit over a year ago that PPI pressures would eventually filter through and hammer margins directly, and likely would result in cost-push pressures that ultimately would hurt the top line -- although perhaps not at the firms that had the cost pressures.  In other words the deteriorating standard of living would eventually have to show up somewhere -- "charge it" only works for a while.

It appears that it now is showing up.  This sucks, to be blunt, but it is very unlikely to be contained.

My macro-level view has not changed much; timing is everything in the markets and I still believe we'll more-or-less hold together until late in December -- another couple of weeks, and perhaps into early January, but in 2012 it's going to come apart.

This, incidentally, jives reasonably well with Denninger's prediction on December 30th of last year: "there will be a sucker sell-down early [2011], the market will bounce, and then Hell will rain on earth later in the year and into 2012."

With the contagion spreading throughout Europe, the Eurozone on the brink of collapse, and big American financials heavily exposed to it all, he may be on to something.

Enjoy yourself -- it's later than you think.

Christian Conservatism and Laissez-Faire Don't Go Together

The Bible abounds with condemnations of wealth, greed, and the pursuit of money as an end in itself:

Again, I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.

--Matt. 19:24

This is not a mere statement; it is joined with a positive injunction to help the poor:

Jesus answered, "If you want to be perfect, go sell your possessions and give to the poor, and you will have treasure in Heaven. Then come, follow me."

--Matt. 5:42

The command to live as if in poverty is intended to mirror the poverty of man's spiritual condition: excessive wealth has the potential to puff up man's self-esteem and blind him to his dependence on God. This command also jives with the natural law understanding of property, according to which no man has any more right to property than is necessary for him to discharge his duties to himself, his family, the community, the state, and God.

Now, if Christ is king, then the command to help the poor is at least as binding on the state as it is on individual people, or else Christ's kingship is not particularly meaningful: in that sense he is only king figuratively, the "king of your heart" or some such nonsensical formulation. But we know that's not true: God sustains all things in every moment of being, including the state, hence He has a firmer claim to real kingship than anyone. And since political decisions are no less attributable to individuals than personal financial decisions, His law is just as binding at the level of the state as it is at the level of individual finances. To say that Christ is only "king of your heart" and not literally your Lord in every meaningful sense of the word is, therefore, not only quite irrational but borderline blasphemous. God is to you whatever God says He is to you, and you'd damn well better obey.

You can take the poor and needy out of the equation for the moment: the clear message of the teachings of Christ is that an unhealthy attachment to the things of the world -- and nothing is more of this world than the idea of property -- is inducement to Hellfire. So Christianity really cannot be reconciled with any ideology that fetishizes the things of the world (i.e., property).

Yet, at least in America, the bulk of Christianity is in thrall to the worship of property. This is probably for at least partially noble reasons, i.e., most Christians mistakenly believe that the only alternative to laissez-faire is socialism, which they intuit correctly to be a profoundly evil falsehood. Nonetheless, the intellectual contortions required on the part of Christians to sustain pro-capitalism readings of the Bible is sufficient, I think, to corrupt their consciences, and often they induce them to other evil falsehoods, such as individualism.

In fact, we have more choices than mere laissez faire vs. socialism, although neither camp will admit this, since neither wants to admit that man is not a fundamentally economic animal and that society is not a fundamentally economic order. Such a concession would be fatal to both systems. Socialism and laissez faire as philosophic systems are both theologically suspect, for both give undue elevation to the economic in the organization of man's ethical life. The proper attitude of the Christian toward things economic is, at best, merely instrumental: he should see money as a means to some good end and act accordingly, even if the outcome is "irrational" in an economic sense. Most economists, for instance, would oppose the state taxing the citizenry for the benefit of the Church on the grounds that such would be an "unproductive investment" or something. To those people, I say "go to Hell" (and it may well wind up being the case that Christ will echo that sentiment in the Last Judgment). Not everything that is good is necessarily a productive investment. And much that is productive investment, as we are learning from our experiment in free trade, is not only good but positively evil.

Economic Solipsism

Germany had another failed bond auction today, and bond yields everywhere in Europe skyrocketed. The contagion is no longer confined to the PIIGS but is endemic throughout the European Union. This is good news for the United States, to which capital is fleeing, resulting in record-breaking low bond yields. At least for the short term -- the essentials here are no better, and stress tests keep piling up (MF Global, Greek instability, what will no doubt soon be Bank of America).

The West has spent years killing itself economically and covering up the shortfalls with leverage. Now we're running out of leverage. We're going to learn a very hard lesson soon about the falseness of solipsism. The economy is not merely a social construct, not something to be manipulated and fantasized into prosperity. Math may be hard, but it's real, too.

Enjoy yourself -- it's later than you think.

Debt Jubilee

Want an easy way out of the current economic mess? Two words: debt jubilee.

Collapse is coming. Why not coordinate it?

On Bank Transfer Day

For those who weren't aware, today is bank transfer day -- a day sparked by the Occupy Wall Street movement aimed at encouraging people to move their primary accounts away from big banks and into credit unions.

Whatever your opinion of OWS, I really can't recommend this move enough. The big banks are nakedly evil, and that ought to be sufficient reason to move; the fact that they're virtually all on the brink of total insolvency is only more incentive. Your money is just in safer hands in local credit unions and small banks.

Most importantly, a shift to local and regional economics is just good policy for we far-right types. Besides not being ethically and financially bankrupt foreclosure mills, smaller banks, at least in my experience, provide better and more intimate service, and stronger ties to local communities is something we should be encouraging.

This piece from AP suggests positive results so far for small banks:

Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. are keeping mum on whether they've seen an uptick in account closures in recent weeks. But credit unions and small community banks have been basking in the spotlight and issuing press releases highlighting what they say are superior interest rates and more intimate service, along with tips on how consumers can transfer accounts. They haven't been shy about the surge in new business they're enjoying either.

Navy Federal Credit Union, the largest credit union in the country, says new account openings in September and October were up 38 percent from a year ago. National Capital Bank, a two-branch community bank in Washington, D.C., says the vast majority of its new account openings in recent weeks have been by fed up Bank of America customers.

(BofA is getting punished for its now-scrapped $5 monthly debit card usage fee.)

Bear in mind, too, that withdrawing money from an account, while a modest hassle to you, is even moreso to the bank itself; given the reserve requirement, the liquidation of a $10,000 account requires the bank to offload $100,000 worth of debt (or otherwise replace its lost reserves, i.e., from its own capital).

So while it's probably too late today (why'd they schedule it for a Saturday, anyway?), do it on Monday. You may well end up regretting not doing it.

It's Not a Question of Economics

Keeping up with my post from yesterday, the problem we face is fundamentally not an economic one at all -- which is why the (economic) objections to my proposal to outlaw usury fall flat.

I'm not advocating abolishing usury because it will enrich society economically. It would probably impoverish it. But it would almost certainly stabilize and, more importantly, ennoble it. The trade-off, to me, is worth it.

I don't care if people see paying interest as a worthy exchange for the ability to consume right now. People simply don't have a right to live beyond their means. (In fact, in a natural law sense, they have no right to any "means" beyond those necessary to live). Frankly, I'd much rather people's material appetites be curbed, by force if necessary.

The question, really, is: what kind of society do we want?

At present, we have one that is organized on the principle that economic goods are supreme -- and that all other goods must, if necessary, be sacrificed in order to achieve it.

So we are quite content to serially blow bubbles in the economy that explode, leaving people destitute and perhaps even homeless. We'll permit banks (and the people who run them) to launder drug money, commit fraud, and harrass and terrorize debtors into an early grave in order to get a 2% rise in the Dow. We'll sell our children into debt slavery which they can never escape so that we can keep tenured professors of sociology living in luxury while their TAs teach all their classes for less than minimum wage.

Some folks like to imagine that the political class is in thrall to the big banks because of campaign donations. That's nonsense. Men like Barack Obama are not failing to take the big banks into receivership and orderly liquidation because they're bought and paid for (though they are). They let big banks destroy people's lives in order to keep GDP growth barely in the black because they think it's a good thing to do. The money comes after this belief, not before it.

This is what you get when you have a social order predicated on (a) materialism and (b) consequentialism.

All you pro-family, God-fearing "conservative" Christians out there who think this is capitalism (much less that capitalism is the way to go) -- be warned. This monster will turn on and devour you in a moment. Capital, as they say, is agnostic. It doesn't care about you or your family or the colors on your flag or the nature of your God. It will screw you over for a buck just as surely as it will all those poor and unskilled workers you deserve to live in squalor. One big slip-up and this nation will be ground into the dust as capital flees, and you and your children will curse God and die, starving in the gutter.

And when it happens you will only be living out the logical consequences of your own beliefs: your belief that the only real god worthy of worship is the invisible hand of the market, and that all that other stuff -- family, community, food on the table -- is expendable.

At the end of the day, the present crisis is economic: but it is born of conscious decisions about how to moralize and organize our society. The way out, then, isn't some contrary economic policy -- not communism, nor the internalization of our creepy national socialist bureaucracy -- but the abandonment of economic policy as the organizing principle of our social lives.

We Really Don't Need More Inflation

Reuters has observed that inflation doves are getting more aggressive, beginning with Chicago Fed President Charles Evans' call for monetary easing based on inflation and employment targets rather than arbitrary calendar schedules. The media's picking up the call, with Rex Nutting declaring boldly that "we need more inflation" and Philip Pilkington pointing out that Nazi Germany revitalized their devastated post-war economy through policies that would today be considered inflationary.

I appreciate Pilkington's tacit admission that we in the West have adopted the Nazi economic model, which is something I had never heard anyone say prior to reading Robert Locke's column on the non-neoliberal Japanese economic model. (I owe Locke a lot of credit for my philosophical development; his writings were the first to liberate me from bland American pseudoconservatism and introduced me to the works of Peter Drucker. For further readings on how the Western economic model is neither truly capitalist nor meaningfully socialist, see his articles "What is American Corporatism?", "Is Capitalism Conservative?", and "Conservatism Under Corporatism." Be aware that he writes from a hardcore Burkean perspective).

What I don't appreciate is his apparent uncritical acceptance that this model is worth preserving.

Debt and money are fungible: $10,000 in cash is worth exactly the same as a $10,000 debt owed to you, which (in a pinch) you can always liquidate for cash. But debt has to be paid off, or else it's not really debt and no one would have incentive to lend. But if debt has to be paid off, and debt is money, then logically paying off debt destroys money -- and therefore reduces the amount of money available in circulation to pay off other debts. In an economy that permits debt to exceed the amount of money available (i.e., a fractional reserve system), this means that large-scale deleverage is fatal to the economy, which in turn means that debt must grow exponentially (forever!) in order for the economy to continue functioning.

There are obvious flaws in this system. People have a natural limit to their ability to finance things: there is only so much, after all, that you can buy. Thus, this system is necessarily inflationary; prices exist to match supply with demand, after all, and debt circumvents this rationing measure, forcing prices upward. (This works solely because inflation lags, so that increasing the monetary supply today doesn't rise prices for, potentially, several quarters; if the price-jacking effect were instantaneous, there'd be no advantage to inflation at all). But if this system is inflationary, then incomes must keep up with the monetary supply. If they don't, people will very quickly find their ability to take on new debt is taxed, eventually hitting a "ceiling" in which they can no longer do so. When new debt cannot be created, defaults happen -- and defaults destroy money, causing people who were treading water before to sink, which cause more defaults, in an ever-tightening spiral of monetary collapse. Fiscal stimulus and monetary accomodation are all aimed at plugging the hole caused by a lag in new lending, introducing new money into the economy so that the house doesn't collapse in on itself.

This means that the economy must be very carefully managed. Even small differences in growth compound to ludicrous extents over a sufficiently long timeline, and if the debt curve runs away from the income curve, you get the abovementioned collapse; this has necessitated the creation of large institutions with tremendous power to manage the economy and virtually no oversight (e.g., the Federal Reserve). Over time, the job becomes progressively more difficult, as the spread between the curves must narrow in order to keep one from running away from the other; again, even tiny differences, over time, compound.

Now, the inherent evil of such a system that essentially compels people to become indebted in order to maintain the same standard of living is bad enough. What is worse, though, is that the managing institutions have done a terrible job here. Free trade and mass immigration has destroyed the ability of income to grow (indeed, one of the chief arguments of the free traders was that American workers were overpaid and needed to take a haircut). The result was predictable: in 2008, we hit the ceiling. Debt creation slowed, the overleveraged defaulted and those leveraged at capacity became overleveraged. The financial system (and the entire American economy) nearly exploded. Only a tremendous influx of debt (now sovereign debt, since the private sector was overleveraged) plugged the hole.

Of course, there's a limit to how deep in the hole sovereign nations can go, too. Ultimately, this game can only be played long-term through raw money-printing. This will continue until the wages of American workers reach equilibrium with those of, say, Uganda and Thailand, whereupon economic goods will be distributed with relative uniformity across the world.

The calls for more inflation make sense in this respect: the monetary supply must grow to keep the Ponzi scheme from collapsing. But when was it decided that the Ponzi ought to be permitted to run at all?

That is, when was it decided that it is really quite OK for Americans to be sacrificed to the gods of the ever-growing Dow and GDP?

We don't need more inflation: we need an economic system that is rational, sustainable, and humane. That's not what we have now. And we'll see the logical consequences of it soon enough.