Re: VDH- The American 21st Century
a son thought about this for awhile, and then sent this reply back to me ....
Like many partisan commenters these days, VDH misses the point with this particular missive.
It’s not so much that he’s “wrong” about anything. It’s just that he’s missing the point. He’s “right”, but about silly, ancillary stuff that is beside the main point.
I agree with his observation that America suffers cyclical bouts of self-doubt. And I also agree with his skepticism that we’ll be replaced by a rival.
His point that we’re the worst except for everyone else is well-taken, and not discussed enough. That’s the reason I’ve maintained that markets (and the charade that is supporting them) could go a lot farther than many people thought possible.
However, what’s animating his assessment here is a belief that today’s issues are transitory and will pass like a fever, as they always have in the past. He is in denial about the nature of the problems.
This time – unlike every other time in our history – the problems are arithmetical, not political. Put simply, people have elected politicians for 70+ years that have spent too much money. Without getting into the various political angles about “good spending” versus “bad spending”, the truth is that arithmetic now forces our hand... and our political system as currently configured is not set up to handle the problem.
What do I mean by that? Easy. Social security needs to be re-done. Medicare (all parts) needs to be redone even more. Democrats will self-immolate before they let that happen, as those two programs are symbols of the Nanny State that justifies their reason for being.
Defense spending needs to be cut in about half. Our global military base footprint – an artifact from the last century, intended as a tool to prevent ongoing world wars – has proved too tempting for abuse and too expensive. It turns out (surprise!) that one country cannot police the world. Too expensive. Similarly, the size and scope of the financial sector needs to be radically reduced, as it has now taken the global economy to the brink of self destruction twice in the last ten years (five times if you count events like LTCM that were “managed-away” by the Power State). Repubs will self-immolate before they let any of this happen, as these programs are symbols of the Power State that justifies their reason for being.
The truth is, a one point rise in interest rates adds $140B to current in-year interest spending, and (properly accounted for all the off-balance sheet shenanigans and commitments) and additional ~$1 Trillion in unfunded liabilities.
So, for example, a return of interest rates to their historical norm of 5% – 7% would involve a direct increase in the year-to-year costs to the government of ~$700B direct cash and ~$6T committed. That cash cost is about 2x what we spend on defense, and the additional “racketeered” cost is about 3x the size of the entire gov’t right now.
That’s clearly unsustainable. In other words, “going back to normal” is unsustainable. Hanson misses this – as do most of his pundit contemporaries on both sides of the political spectrum.
I don’t think we’ll be replaced by some “clearly superior” rival, as is the scenario-du-jour these days. That’s because they’ve all engaged to one degree or another in the same racketeering fraud. Such is the unintended consequence of taking every government on the planet off a self-correcting monetary system, and instead giving them all a blank credit card. Thank you FDR and Richard Nixon.
Rather, I think we are set up for revolutionary change to our political system. If capitalism “fails” because Dems were too greedy and Repubs to arrogant and corrupt to refrain from abusing the national credit card, the likely outcome is that people will entertain the idea of a substitute system.
The risk is that this debate won’t happen on a disciplined timeline... it will happen quickly, in a panic, following a serous system breakdown. Just like we saw in the fall of 2008, only much broader in scope.
The most realistic outcome – if I had to guess – would be some kind of one-world-government financial, regulatory and legal system. Over the years when I’ve noted these problems carried serious strategic implications to our sovereignty, this is what I meant. In hindsight, such an outcome would be like the aftermath of losing a war in terms of lost sovereignty.
Repub and Dem wishful thinking won’t fix this set of problems. Basically, the older generations have debt-enslaved the younger generations, and transferred their property to the State or the banking system as a result. Because the current partisan power structure won’t acknowledge and fix this problem preemptively, it ends up risking the entire system. That’s what the bailouts have accomplished in the end. Instead of having some pension funds go bust (dot-com crash), or some large mega-banks go bust (credit crisis), we’ve now put the solvency of the entire system at risk because grown-ups in power behaved collectively like teenagers. Nobody could see past their flawed world view and protect the nature of the country as a first priority.
Because this hasn’t happened before – at least in this country – everyone is tempted to ignore the question of unintended consequences. But I think we’ll end up experiencing those together. Henry Hazlitt pointed out the enduring fallacy of short-sighted politicians spinning the “seen” and ignoring the “unseen” for a willfully ignorant public, but human nature seems to have forgotten those lessons... again!
If you go back far enough in history, you see similar behavior in every previous representative government.
The lack of a definitive timeline for these adjustments is used by the hyper-partisans (both sides) as proof that the consequences will not materialize. But they are wrong about that. Or else all of Western Civilization and thought is in error, and we really would be better off allowing ourselves to be ruled by Kings and elites, since we obviously can’t help ourselves.
My own belief is that, once recognized, these problems will now lead to a political upheaval in the US and elsewhere, because we nationalized what were essentially private losses so big that they eroded the solvency of governments. The alliance of power-state bureaucrats, corporate/union racketeers and partisan supporters will, in the end, sow the seeds of its own destruction. The question is, destruction of what? Their corrupt system? Or our political system?
I guess we’ll see. |
