The mirage of the "inevitable" rebound

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mainecooncat's picture
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The mirage of the "inevitable" rebound

In the midst of the current financial crisis it’s commonplace to hear people from all walks – people you run into at parties or at work, mainstream economic commentators, etc. – talking about "hitting bottom," "turnarounds," "rebounds" and the like. Such cute vernacular finds its origins in the idea/theory of economic cycles as well as more general cliches as, "What goes around comes around," and "What goes up must come down."


These ideas are then built into our cultural economic consciousness and, consequently, it has become mainstream conventional wisdom that at some point – and when that point may be is indeed debated among these believers – the economy – however one may evaluate its health – must get better.

That bears repeating. It is a widely held conviction that when the economy is suffering it must get better.

Recent American economic history, say, the last one hundred years, is certainly replete with such examples of turnarounds. And it is this history that commentators most frequently turn to for the evidence of the 21st century’s inevitable – in their minds -- turnaround.

But a broader look at history – one that goes deeper into the past and includes the larger world – reveals that it is filled with failed/debased currencies, devastated societies and civilizational collapses due to economic and resource crises. Essentially, then, processes or entities that were not capable of restoring or reclaiming their previous luster and power – or even a faded version of it – following significant downturns. (Note to reader: The preceding paragraph does not mean that I believe that this route is the only one for our current situation, only that history is filled with those whose fate was just that, and to point this out is critical to an analysis of where our predicament may lead.)

What is oft overlooked – and unfortunately, and what in some cases is intentionally, so – is the fact that extraordinary measures have routinely been taken to revivify the American economy when it’s been in trouble over the last century. We’ve almost always had to turn to some trick or sleight of hand to tease out a rebound. In other words, rebounds aren’t necessarily naturally occurring phenomena.

The economic flurry set off by the US’ entrance into WWII was of no small consequence to a country still attempting to achieve some baseline of normalcy following the Great Depression of the 1930s. In fact, it was WWII that permanently set into place the military-industrial complex and set in motion billions and billions and billions of dollars of contracts over the proceeding decades and through to today that would simply not exist had it not been for what author Fred J. Cook calls the warfare state. (In fact, he wrote a book called that in, I believe, 1962. An indispensable read by the way.)

If we are to take the idea of a debt-based money system that must constantly grow as a serious problem, than the introduction of widespread credit card use in the 1950s can only be seen as a milestone of unprecedented importance for the perpetuity of our economic system. Now people could spend more than ever feeding the monster of debt. Ever since that fateful time credit has been expanding in every imaginable direction: limits keep going up, credit score eligibility keeps getting lowered, retailers who offer their own credit cards keeps expanding.

The middle of the 20th century also saw vast programs of government largesse in the form of social security, medicare, medicaid, and unemployment to prop up citizens who weren’t or couldn’t make it on their own. All more or less unsustainable programs when population growth is figured in or under extremely stressful conditions, say, like 40% unemployment.

The termination of the gold standard in 1971 is yet another moment in time when extreme measures were taken so that the US could live beyond its means and create a temporary fix for a long term, indeed, terminal problem.

Faced with another downturn at the turn of the last century, the financial world turned to the nebulous and essentially depraved world of sub-prime mortgages to hold off the wolf at the door for, perhaps, what could be the last time. Though not only were mortgages being given to an entirely new stratum of people – the sub-primers -- but loans of all kinds were being given to people with conforming scores with such absurd conditions as no income verification, no asset verification, and no (or virtually no) down payment.

Now in 2008, the cornerstone of the economy, the source of any kind of turnaround, the consumer, is arguably as strapped as they’ve ever been. Historically large percentages of people are unemployed or underemployed (looking at the real statistics), those who are employed are barely making a decent wage as real incomes have been stagnant since the Reagan years, wealth disparity now mirrors the Gilded Age, household debt is at an all-time high, and consumer confidence at an all-time low.

The country as a whole is in an identical situation: record yearly national budget deficits, record national debt, record long-term obligations from the entitlement programs. And this filters right down to the state and local levels.

The United States government -- in its latest extraordinary measure -- has become Bailouts' R' Us, throwing trillions of dollars around the room haphazardly in an unprecedented move, like those blindly swinging at a pinata desperately trying to release oodles of sweet candy for the cheering throngs.

Hardly conditions presaging a robust rally.

This leads a reasonable analyst to proffer the following hypothesis: The American economy and the details of the policies upon which it is built have been and are fundamentally volatile and unsound, and without such aforementioned extraordinary measures it would have ceased to exist long ago. Further, our economy is fundamentally dysfunctional and, essentially, has never operated for more than a few years without life support of some kind.

In conclusion, then, has the well run dry? Are Paulson, Bernanke, and Obama’s team rummaging through the bottom of the bag with increasingly sweaty and frantic hands because there just doesn’t seem to be another trick in it?

To those who walk about with such swagger and speak with such bravado about the inevitability of a turnaround and a return to the good ole’ days, you have been presented with Exhibit A.

radiance's picture
Status: Silver Member (Offline)
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Re: The mirage of the "inevitable" rebound

Another cogent piece Mainecooncat!

Please be thinking how a lose band of cyberspace intelligencia could thwart or diminish these scoundrels agenda.

switters's picture
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Re: The mirage of the "inevitable" rebound


I've been thinking of posting something similar and I'm glad you beat me to it with such an eleoquent and insightful essay.

I have found that the hardest thing for people to accept when they learn about the Three Es is the very real possibility that there may never be a "recovery", "turnaround" or resumption of life as they have known it.  I know many people that acknowledge the challenges we're facing, but can't seem to even consider an outcome that does not involve an eventual return to business as usual or at least some "greener" version of business as usual.

What I've found interesting is that those of the progressive, liberal persuasion (a group I would include myself in generally) have a particularly difficult time coming to terms with a future that may be permanently less energy dense than the present and may be one in which sustained economic growth is impossible.  These folks often point to promising renewable technologies they've heard of and the recent economic stimilus package as evidence that things will get better, and not worse.  This is a clear case of "a little knowledge is a dangerous thing", because their understanding of energy and economics often woefully inadequate.  This limited understanding has led them to believe that "green technology"  and aggressive bailouts will somehow protect us from the coming crisis.

I recently had a conversation with someone who is more aware than most about these issues.  We were talking about the possibility of dramatic change in the next 20 years.  He said: "That's not the way the world works.  The world changes slowly, and dramatic changes take time."

While there are certainly cases where that is true, anyone who has lived in close contact with nature knows that there are as many examples in the natural world of that statement being false.  Ask anyone who lived in New Orleans prior to Katrina.  The world is in fact quite capable of dramatic upheaval, and the fact that we've lived through a long period of relative stability does not mean that it cannot unravel very quickly.

I'm not arguing that it will, or even that such a precipitous decline is even the most likely possibility.  But I am arguing, as you have, that it is a possibility and should be considered as such by anyone seriously thinking about these issues.


mainecooncat's picture
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Re: The mirage of the "inevitable" rebound

Thanks, radiance, and I'll be sure to take up the challenge of your suggestion over the weekend.

mainecooncat's picture
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Re: The mirage of the "inevitable" rebound

Hey Switters,

Thanks for taking the time to read and respond at length to my post. I was hoping to get a bigger response to it then I did, but, oh, well, perhaps it’s simply too matter-of-fact.

Your musings spurred me to have some of the following thoughts as I’m sitting here tonight regarding rates and breadth of change within a society and how different rates and breadth of change will inevitably be perceived in radically different manners by different people. In short, then, it’s a highly relative and subjective topic.

You pointed out something that I’ve found to be true in most of the discussions I have with people, and that’s the idea that business-as-usual will continue but only in a green or greener manner than it is today. I think people who aren’t involved with the Three E’s to the degree that readers of this site are clearly see a trend within society moving in this direction and observe the presence of the green meme becoming almost pervasive. Supermarkets sell inexpensive and reusable shopping bags at the checkout and frequently provide receptacles in the front of the stores for people to recycle the standard issue plastic bags the stores themselves still regretfully use.

I think because of this most people feel that something is being done even if they themselves aren’t doing any of the things that they see others around them doing or even if they don’t quite understand why these things are being done.

My response to such people –those that point out the obvious greenification of our society – is that much of this is purely symbolic. For example, there’s probably not a single energy company out there that doesn’t spew the obligatory lines about being stewards of the environment and moving beyond fossil fuels (BP being the most egregious example of this through the actual changing of their name to Beyond Petroleum) in their advertising. Also in advertising, car companies push the lingo of hybrid, energy efficient, smart, fuel cell, etc. while actually having disclaimers in small print on the bottom of the screen stating that the car you just watched a commercial doesn’t even exist! Talk about the Big Lie.

But more to the my main point here, which was the relativity of change. I think the more aware you are of the Three E’s the less surprised you will be by the changes that our coming down the pike. Even our friend, hewittr, believes that there is a serious depression coming though he doesn’t buy the Peak Oil/environmental angle. On the other hand, the more oblivious you are essentially to reality the more shocked you will be. That’s why I think any discussion of the severity or speed of the changes afoot are almost irrelevant without a serious discussion of perspective.

I live in a relatively rural area of the country where we grow a lot of our own food. We preserve some, not a lot but some, of the food we grow and even do things like make our own salsa, etc. from store-bought ingredients and preserve them in large quantities. We heat with cordwood simple because it’s cheaper (not to mention the ambiance factor), though now much of the wood we use is free as I harvest it from the property. I installed a hand pump on our well for times when we lose power, which is an event that has happened quite often in the last couple of years.

But the most important point here that I want to make is that we chose to do all this because it’s how we wanted to live our lives, not in response to some impending crisis. I grew up backpacking, canoeing, and in general living the life of I guess what one would call an "outdoor enthusiast."

Now, as events unfold in the 21st century, much of what I’ve learned throughout my life is turning out to be the skill-set of choice and much of what we’ve done here with our lives will give us a great advantage over others. So from my perspective, even though I will no doubt be saddened by the suffering of others that I’m convinced I’m about to witness, I won’t be surprised by the speed or severity of change about to occur.

However, to those who not only don’t know anything about the Three E’s but have none of the skills or background to deal with a more self-sufficient, stripped down life they will no doubt be quite surprised by the changes about to hit them.

I think the greatest weakness of America right now is the non-self sufficiency of its people that is clearly the byproduct of a service society. The average person knows very little about where most products come from or how they’re made or how to make a temporary or home-made version of something they normally buy at the store. I’m constantly shocked at the number of people who know nothing about how food is grown or what various vegetables actually look like when they’re growing in the ground. I’m also constantly shocked at how non-physical much of the population has become. Not necessarily out-of-shape or obese mind you, just unable to perform basic physical tasks like hiking up a mountain or chopping wood or repairing a bike.

Because most Americans fit into this latter category of uninformed and unprepared I think the consensus view of reality will be one of shock and awe over the coming months and years.

One last thing, as I've started to ramble, a lot of things that I think would be positive changes for humanity, say, like the death of "big box" stores or the elimination of most trinkets and widgets or the loss of TV most people would respond with horror to even though they are completely non-vital for a high quality life.

ckessel's picture
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 486
Re: The mirage of the "inevitable" rebound
mainecooncat wrote:

You pointed out something that I’ve found to be true in most of the discussions I have with people, and that’s the idea that business-as-usual will continue but only in a green or greener manner than it is today. I think people who aren’t involved with the Three E’s to the degree that readers of this site are clearly see a trend within society moving in this direction and observe the presence of the green meme becoming almost pervasive. Supermarkets sell inexpensive and reusable shopping bags at the checkout and frequently provide receptacles in the front of the stores for people to recycle the standard issue plastic bags the stores themselves still regretfully use.


I appreciate your discussion as regards the "inevitable rebound" in your previous post. And per your comment above, the general population I think has the idea that energy and the environment are being taken care of with the new green movement. " It has to continue  .... doesn't it?"

I am a member of the US Green Building Council and the America Institute of Architects and a good deal of the "green talk" is all about marketing and obtaining a rating for your building or project. I don't mean to downplay the efforts because they are well intended but my point is that the real actions needed to address the problem of the three E's will require a much more draconian approach to adjusting to new lifestyles, building types (as regards space conditioning) and work related activities.

But the general public is woefully under prepared by way of skillsets to deal with any major change. Today you have to know  how to slide credit or debit cards, you need to be up on all the music and movies, especially as it pertains to the lifestyles of the musicians and actors,  text messaging and cell phone operation are critical,  I-pods and downloading music, what malls are best to hang at and knowing what car is best to own and what clothes are hip. 

Forget about what it takes to hold a job, play a musical instrument, go to a play, write a letter or attending a local meeting or join a service club or sew up a tear in your socks. Those activities are done now as an exception, not as a rule. And don't even consider how you would raise a foodcrop that you could survive on.

So now if we fast forward to the upcoming scenario ar regards changing lifestyles I see the next 100 years unfolding in reverse. The curious aspect is that we will begin with huge technology, resources and cheap oil. We will end with basic survival methods, scarce resources and very expensive oil when it is available at all. Hopefully our knowledge base will remain intact.  Past civilizations have had difficulty with this one. Curiously, I see a much healthier and appropriate fullfillment to life as we work our way back. This in my estimation is an improvement over what we now have although an adjustment in population has me concerned. It may be a harder lifestyle but the rewards can be greater.

I too have been raised with basic skill sets and I enjoy using them. Today I set posts for a perimeter garden fence. Yes I had to dig several 3' deep holes and set and tamp in the poles. The post hole digger had a split tyne so I had to weld it up first. It was a nice day and I loved every minute of it.  My neighbor went to the gym, then shopping at Wal Mart, then to a movie.  As he returned he asked why I was working so hard.  I joked with him and said it was my home gym project. To me the issue is all about viewpoints. 

 I think that is what this website is all about. We need to get the facts presented to enable others to see what is happening to our civilization and discuss ways to create a new one.






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