Insanity Prevails As The Economy Unravels

Hey, hey, hey. Don't be mean. We don't have to be mean. Cause, remember, no matter where you go, there you are.
   —Buckaroo Bonzai

In trying to maintain a sense of decorum here on DOTE, perhaps I have downplayed the state of public life in the United States. I will thus state my conclusion in the strongest possible terms. Where do we stand? America's public life—our political discourse, the media coverage of that discourse—has gone bat-shit crazy.

The last time panic took over the nation was in September, 2008 after the fall of Lehman. You will recall that Henry Paulson told us that unless the financial system was bailed out, the world would end. Extortion worked then, and it may yet work now during this fabricated debt ceiling "crisis." At least in 2008, there was something bad happening. Although the longer term budget issues are a real concern, there was nothing happening in the bond markets in 2011, outside the typical craziness we have grown accustomed to. You know, stuff like the Fed monetizing America's debt (QE2). The real budget negotiations occur in the fall.

This "crisis" is based on imaginary future events (putative tax increases, higher interest rates on T-bills) which are "real" only in the minds of those who concocted it. The psychological rule says the craziness we can see is directly proportional to the size of the problems which must be banished from consciousness. These problems reside in the unconscious, where they fester and stew and inevitably grow larger. We then naturally ask what problems must be banished from consciousness? At this point, we could simply answer the United States is falling apart and leave it at that. But let's be more specific.

Insanity prevails as the economy unravels. It's getting harder all the time to focus on our deteriorating economy for the aforementioned reasons, but the evidence is all around us. Ironically, it is the poor performance of the American economy which largely determines future government revenue shortfalls. Oil is nearing $100/barrel again, not least because of the falling dollar caused by the craziness itself. Forecasts for the preliminary GDP number, which will be announced this coming Friday, range from 1.5 to 1.9%, which basically means that the economy is not growing at all. We all know that the job creation numbers have been beyond dismal for the last few months, and new unemployment claims have been above 400,000 per week for a long time now. And then there are stories like this one, reported July 21 by Bloomberg—

Consumers in the U.S. are increasingly using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices.

The dollar volume of purchases charged grew 10.7 percent in June from a year ago, while the number of transactions rose 6.8 percent, according to First Data Corp.’s SpendTrend report issued this month. The difference probably represents the increasing cost of gasoline, said Silvio Tavares, senior vice president at First Data, the largest credit card processor.

“Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem.”

I'm sure many of you are aware of how a "cash-flow" problem works—you don't have enough money to pay the bills! You whip out the plastic so you don't starve or so you can get to work.

Rising costs of food and gasoline are leaving Americans less money to spend discretionary items, slowing the pace of the recovery, Tavares said. Household spending accounts for about 70 percent of the world’s largest economy.

After-tax income adjusted for inflation fell 0.1 percent from January through May, according to figures from the Commerce Department. The drop came as Labor Department data showed energy prices rose 8.2 percent and food climbed 2 percent during the same period.

You don't have to be a rocket scientist to see that when food and energy costs rise, and incomes fall, down & out Americans are going to get squeezed. That's precisely what is happening.

None of this is being discussed as July winds down. All of this Bad News has been relegated to Carl Jung's shadow. It has been shoved into the unconscious and banished from conscious thought. In fact, so much stuff has been placed in the unconscious that, as with your attic or basement, there may no longer be enough free space to cram more stuff in there. Given the cursory psychological analysis above, that implies that we as a nation have reached maximum craziness.

Of course, that would be maximum craziness with respect to our current state of mind as we struggle to keep even more Bad News out of sight. Perhaps our insanity will undergo a phase-transition to an entirely new lunatic state, something much worse as occurred in Germany in the 1930s. Who knows what evil lurks in the hearts of men? The collective shadow knows

It's important for you to understand now just how bat-shit crazy public life in the United States has become. Recently I issued a warning—Don't Fall Asleep. Where we go from here is anybody's guess, but wherever that may be, I doubt we can look forward to it.

Bonus Video — "Ladies and gentlemen, when you hear the shadow's blood-curdling laugh, you can be sure exciting entertainment will follow..."

 

Comments

[E. Swanson]

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