This is Ilargi's intro from today's post over at The Automatic Earth.
Derivatives expert Satyajit Das, in another excellent article, says the current economic order was built to fail. Not deliberately set up to do so, but set up in a way that made the downfall inevitable from the start. Das writes: "The ability to sustain high rates of economic growth, decreed by governments and central bankers, is questionable" , which seems a very kind way of phrasing the issue. Almost all of us can understand that perpetual growth of any kind, and in any system, is impossible. How to apply this principle, or even law, to financial matters is less obvious to many. Which is probably a logical consequence of the fact that our fiat money doesn’t represent anything of real value, and we are confused about what it does represent.
There's also our perception of time, and how it relates to perpetual growth: we may know that nothing can grow forever, but we can still think that growth can continue into next week, or next year, or during our lifetimes. This is certainly a paradox at heart, but it's one that's been fed by the simple reality that most among us have perceived the world we have grown up in as one in which growth has been an integral part of our lives. That fact that we perceive it that way almost entirely obliterates another fact, namely that it's not true, that overall economic growth in the western world peaked sometime in the early 1970's. There are all sorts of means to measure this, and Das provides a nice one: the amount of dollars in debt required to achieve $1 in growth.
The way in which we have been fooling ourselves into thinking there has indeed been growth in the past 35 years, despite evidence to the contrary, tells us a lot about the reasons why we do not understand today that our economic order has failed. The same forces who've had an interest in keeping the growth illusion alive until now are now trying to make us believe that a little tweaking of the system here and there is all that's needed to restart the growth machine, that the engine hasn't failed, it's merely temporarily sputtering. Nothing a mechanic with a good manual can't fix.
But there is no good manual, something that has repeatedly been admitted, willingly or not, by various parties to the decision making process. The fact that the only people who have correctly predicted the situation we now find ourselves in were, and still are, standing on the periphery, literally on the outside looking in, while those in the center have consistently been embarrassingly wrong, yet remained where they were is ample proof that there is no manual. Many decision makers have also, at times when doing so seemed convenient, talked about the unchartered waters they saw ahead. That leads us seamlessly into the next problem: there are no good mechanics, al least not where it counts.
So why are the bad mechanics and their friends still in charge of the journey, who are trying to fix a motor, and to keep a patient alive, that has long since ceased moving? First of all, because their interest, which is to stay put in the place where the money and power goodies are, coincides with the interests of the other power groups. Control of our societies lies with politicians, business leaders (especially financiers) and media. Together, they form a mighty triangle. Controlling what people see and hear, how they see it and in what words the messages are delivered, that's nine tenths of what it takes to make them believe.
Still, it's far too easy to point fingers elsewhere, and moreover, by blaming others for what's ailing you, you also surrender your power to heal yourself. The main and basic issue here remains, simple because it has to, that we ourselves wish so desperately hard to believe that growth will continue. No matter that we rationally understand it cannot, no matter that we see the signs everywhere that say growth is over, we will collectively jump on the bandwagon of the next story-teller who promises to restore the growth we desire against all odds and all logic. It's who we are, we are an addictive species. It's funny, though, somehow, somewhere, that we wish for things to change (growth changes things) because we wish for them to stay the same. We see growth as something that allows us to stay in our comfort zones, even though growth necessarily brings about change. We've never known anything else but change.
I’ll get back to this theme soon, and probably more than once, there's enough there to write a book about, and there is nothing more important when it comes to understanding what is happening to us, with us, and because of us . Who among you, for one thing, understand that, and why, growth is over, and with it our economic order? Who among you believe that the present US administration, or some other government, will be able to "turn things around", even as you realize that down the line growth can achieve only negative consequences in your lives? I've avoided trying to come up here with proof in numbers, even though it's obvious that increasing job losses, fast rising personal and national debt obligations, plunging home prices and surging foreclosures, as well as page after page of other figures, inexorably paint the picture of a profoundly deep dark black hole, which even if we were able to climb out of it, would leave its disfiguring scars on all our lives for decades.
I’ll leave you with just one question: how many are left among you who sincerely believe that their children, our children, will, individually or as a group, enjoy better and richer lives than you have? I think perhaps that is a away of looking at things that will cause people to pay - a bit more- attention.
When I first read Satyajit Das state that the current economic order is "built to fail", two questions immediately came to me:
1. how many people acknowledge that it has indeed failed, and
2. what are we going to do now?
Unfortunately, the answer to the first is that there are so few of us who acknowledge the failure that we don't even get around to contemplating the answer to the second. And that simple little fact will turn out to be even far more damaging to us then all the causes of the downfall put together. That is our tragedy, and we can't help ourselves. We want to believe. Against all we know, if that's what it takes. We desperately need to look beyond what we have, but we don't know where to look, and so we don't. We don't know where we're going, so we deny we're going there. Easy.