Eating the Seed Corn   (June 9, 2009)

"Eating the seed corn" means that the seed necessary for next year's crop has been consumed in the desperation of starvation. Only the perverse or foolish would consume it as a gamble, as the U.S. has done.

Correspondent Don E. recently observed the power of the dread phrase "eating the seed corn:"

A phrase that has always made my blood run cold is 'eating the seed corn.' For some reason it affects me far more that the words 'spending our children's inheritance' and such. such a grim pic. I see the family trying to stay alive til spring, and then no seed to plant. Ghastly. I read pearl s. buck when i was about 12 - found a box of books of hers under a house we were renting, and she gave me a picture that stays with me: famine in china and the seed rice all gone. I think it was the mother digging up the pot of seed rice buried under the floor and eating it uncooked in absolute desperation.

We as a nation are eating the seed corn. Like Don E., I have indelible memories of Pearl S. Buck's writing: for me, it was the scene in The Good Earth in which the father pleads with his profligate sons not to sell the rice-growing land for cash to gamble away. The sons (naturally) ignored the feeble old man and sold the family's land for "the high life."

We as a nation have eaten the seed corn and sold the family land in order to gamble that confidence can replace collateral. The gamble is lost and a well-earned poverty lies ahead. The nation's future was bet on the questionable notion that euphoric confidence in the U.S. economy's future will spark a flood of new consumer borrowing and spending--even though the banking sector is deleveraging trillions in bad debt and the consumer's collateral (housing and retirement/stock portfolios) has lost $13 trillion in value over the past year.

In other words: collateral lost? Then borrow against your confidence. Eat the seed corn now and we'll borrow more later--because everyone trusts America to pay its debts.

Until they don't.

President Obama and his advisors, Treasury secretary and Fed chairman are gambling trillions of borrowed dollars that pouring the borrowed money into failed banks, insurance companies, auto manufacturers and assorted other sinkholes will somehow magically spark a renewal of those ephemeral "animal spirits" which cause consumers to run out and borrow stupendous sums and then squander it all on new stuff.

The gamble will fail, regardless of the stock market's Cargo Cult-like faith in the "green shoots" of financial recovery, for credit must be based on collateral. With their real estate and other holdings down by $13 trillion and their incomes in decline, the American consumer is unable to support any additional credit. Only a fool who perversely wants to lose money would give credit to an over-leveraged, over-indebted borrower with no collateral.

Even worse, as interest rates on the trillions borrowed skyrocket then the interest payments alone will crowd out spending on Medicare, Medicaid, Defense, etc., essentially impoverishing the American people who placidly stood by while the bet was placed ("$3 trillion on number 13, please") and lost.

Americans are also eating their seed corn. Would anyone care to guess how many American households are burning through their savings, withdrawing IRA funds or draining the last of their remaining credit just to get by? At least one of my friends is draining his retirement funds to live while some investment real estate sells and he launches a new enterprise. If the real estate fails to sell, he could run out of money despite being worth quite a lot on paper. I doubt he is the only one in this circumstance, or the only one eating the seed corn in hopes 2010 will be better.

But what if credit still requires collateral in 2010? What if "animal spirits" still need to be backed up with income? Perhaps eating the nation's seed corn on a gamble to maintain the status quo--borrow and spend, borrow and spend, brawk!--will be in retrospect viewed as the very acme of political shortsightedness and financial cupidity.

A few titles worth borrowing from your local library:

The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century by James Howard Kunstler

The Future of Life E.O. Wilson

On Peak Oil:

Beyond Oil: The View from Hubbert's Peak

The Party's Over: Oil, War and the Fate of Industrial Societies

The End of Oil: On the Edge of a Perilous New World

Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy

On chemical/toxins overload:

Our Stolen Future: How We Are Threatening Our Fertility, Intelligence and Survival

On the demographic time bomb about to explode:

Fewer: How the New Demography of Depopulation Will Shape Our Future

The Coming Generational Storm: What You Need to Know about America's Economic Future

On collapse of advanced civilization:

Collapse: How Societies Choose to Fail or Succeed (Jared Diamond)

The Collapse of Complex Societies

A realistic appraisal of alternative energy:

Sustainable Energy - Without the Hot Air

Our previous lists of hot reading and viewing can be found at Books and Films.

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--Walt Howard, commenting about CHS on another blog.

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