(week of December 17, 2008)
For more stimulating ideas, please visit the Of Two Minds blog.
First Step: Triage (December 16, 2008)
I have been reading your articles for some time and really appreciate your clear thinking and thoughtful writing.
I am very interested in seeing how our generation deals with the growing financial/real estate/employment crisis. In a sense, what we have experienced is quite similar to the bombing of Pearl Harbor in 1941. Life as we knew it is over and we are at war with forces that are dedicated to our destruction. However, the nature of the attack is different and we probably lack the insight and mental discipline to recognize the threat. We are in denial.
Your writings are a wake up call. Perhaps I can add a few ideas for you to consider for future writings:
1. The real estate boom resulted in direction of large amounts of fixed capital into uses that will generate negative future cash flows. Those future cash flows will be influenced by several mega trends: (i) smaller houses [do we really need almost double the house sizes of decades ago?], (ii) higher taxes and fees [local governments have an insatiable appetite for more $$ for local programs...whether or not there is a reasonable payback in social well being], (iii) increased mobility that will make the need/desire for an oversized permanent home less compelling, (iv) aging of the population and reduced population growth will cause people to seek to liquidate excess real estate assets. Redeployment of this capital is virtually impossible unless we take renters into our homes.
2. The entitlements bubble will be bigger than the real estate bubble by a factor of 10. This problem will only further strain the ability of the nation to fund its real needs and pander to the expectations of the masses.
3. Foreign competition [both economic, social and political] will only increase. Borders and oceans will continue to provide little protection. We must realize that we have been living too large and must "downsize" both our consumption and our beliefs that we can force others to behave in the way we expect.
4. The existing structure of government, education, business and social networks is a rigid system that lacks the ability to morph into more useful behavior. We are an antiquated lumbering giant of a society.
I personally think that we have become a nation of pampered whiners. Our
lust for immediate material gratification is probably natural, but it has grown
out of control due to the funny money accounting of our government and the
breakdown in personal ethics and values. It seems that the scientific destruction
of religious mythology has also undercut any foundation of moral/ethical behavior.
The complexity of modern life and the distraction of daily routine makes sober
reflection virtually impossible.
As a senior citizen, I worry for my children and grandchildren.
I've read the various steps and agree with you. You highlight the problems and the painful change in our future. Basically, we need to wipe away the facade of this cowboy capitalist circus and get down to basics. You cover an enormous amount of change we will swallow or accept. I would only add this to your triage. The largest distortion in our economy which crushes labor and investment is this blind acceptance of privileged land holders.
No matter how productive our economy increases, the reward for high productivity will always be absorbed into higher land values. This occurs because all land is legally owned. In effect the landlords (mostly corporations or very rich folks) who do absolutely nothing to bring value to their property reap a privileged reward. I should say a royal privilege. Stop and think of the achievements the past 130 years since land in the USA was finally privatized. Why do we still have a permanent landless underclass? Fannie and Freddie jog your memory. Why are wages always depressed? Do food stamps and welfare and other social programs jog your memory. Essentially, our economy is the Hamster treadmill going faster and faster as productivity and technology increase, but we the hamster stay in the same position.
Now look at how our governments tax the population. All taxes are put on productive human effort. Whether the tax is income, wage, business, corporate, sales, or even the property tax which is levied on improvements (capital) and very little on land value. This tax system is 180 degrees out of direction because it is against achievement so the non achieving segment of the economy is rewarded.
The value of land is community derived from productive taxpayers who pay for schools, roads, bridges, lock and dams, tunnels, police, jails, sewers, etc. The landlord provides minuscule effort to enhance the value of his land. My contention is we as a citizenry should recapture the value of land and resources prior to penalizing productive human effort.
We should first, shift the tax burden on to land values, not improvements. Tax what is bad in our economy like pollution. Follow the example of Alaska capturing royalties from oil resources. This is a new way of doing business that Right and Left, Green and Capitalist can all agree on. Do this prior to taxing productive human effort.
The typical rebuttal is I'm a Communist. What is ironic is the Land Value Tax or the Tax on Ground Rents was created by the founders of the term "Laissez Faire". They were the Physiocrats from France just prior to the French Revolution. These Physiocrats took under their wings for a while Adam Smith the founder of modern day Capitalism. Smith had high regard for the Physiocrats and agreed the Ground Rent was the best form of taxation because it had no disincentives to an economy. Jefferson, Franklin, and Paine spent time in France during the same period. Our original Articles of Confederation had the Land Value Tax in it. Later when the Revolution was over the Constitution influenced by Land Speculators eliminated it.
The point is this is not a Communist proposal. I am not advocating the Government become the landlord. However, I am against Royal privilege which is what we have now. This mortgage crises originated when land in the USA became legally owned around the 1880s. This is when access to land arrived on scene in the USA. It did not start with Freddie and Fannie.
We have treated the symptoms of Royal Privilege with Welfare, Social Security, Fannie and Freddie, and a host of social welfare programs. We have gone through many bust and boom cycles all oriented to land in one way or another and now we have the mother of all land crises. This is one positive solution to consider.
My cynical belief is that after five or seven years we will emerge.
Re-pricing of assets will allow many people to get rich just as right now many will go poor.
There is no pressure on the government, all the pressure is on the people whom bear
the burden of inflated or deflated currency. Perception of action is doing the job of making
enough feel better for the actual fix to take hold. Liquidation and rationalization of capital
to productive use.Yes the myriad of regulations that exist now hamper some but realism will bend some of them
out of the way.
In the long run things change little, names for things change but the actual
function very little. We
are in the throws of denial before acceptance. People still have hope that means
we have a way to go
till the bottom. Self-reliance is still far from most of the people's minds.
The problems I see right now even looking at myself is that we are still trying
to make money instead of making our lives better, asking the eternal questions
of purpose and self-actualization for the sake of enjoyment of life. The rat
race will not die but there has to be a respite where people question their
motives that is still a bit out there in the future.
If I could change several things right now the first would be to change back
the bankruptcy bill to what it was before so people could go bankrupt and wipe
themselves from the burden instead of being skrewed chewed and spat out by the
system with half their debt intact for the sake of perpetual leashing. Even
student loans should be wipeable. Limiting the budgets of states and municipalities
in some way would help, ergo no more than say 50% of revenue could go to pay
salaries and pensions of employees, so that we don't get something like 70%
revenues spent on their salaries with 50% paid out and 20% borrowed just to
perpetuate their salaries and perks. Yes I understand, teachers, firemen,
cops, but not a legion of accountants, clerks, managers, analysts, etc...
Even cops, firemen, teachers shouldn't get over 200k a year.
A public budget advocate could be elected every few years to monitor and if
need be freeze the budget because everything else doesn't matter controlling
money disbursement does. There is no accountability for money spent right or
wrong at all.
I am not worried about energy nor the environment at the pace we are going
the carbon emissions will be lowered to the 1990 levels without any protocols.
I am worried about people and the greed and anxiousnessnes that bad economic
times set in their minds. Aggressiveness dominates reason and survival ensures
ruthlessness to increase. The most worrysome is the return of the troops
(& contractors) to a contracting economy. Imagine 2-4 million people in the
prime of their life suddenly unemployed. Thats in addition to the layoffs the
defense industry would experience prior to their arrival.
Of all the commentaries I have begun following in recent months, yours has proven the most realistic and the most insightful (in my opinion, at least). That opinion was strengthened as I read your comments of 16 December, and motivated me to (albeit belatedly) make a contribution in support of your continued insight.
I began perusing blogs like yours in an effort to better understand the workings of the financial markets and I believe that I originally discovered your website via a link from Karl Denninger. I have since not only learned a great deal about the functioning of the financial markets, but also the myriad challenges/issues facing us: monetary policy, Peak Oil, climate change, etc., and the social upheavals that are now occuring and will continue to occur. Simply striving to come up with a way to maintain business as usual is no longer a viable option, and I fear that without some decisive action, we are simply moving from the bursting of one bubble to the inflation of another and I think the final bubble will prove to be what I now call the "population/energy bubble." While the implications of the bursting of this bubble are terrifying, simply ignoring it will only make it worse when it occurs. I have just begun my personal journey of preparation, and I am grateful to have the benefit of your commentary, not so much as a guide (one of the biggest reasons that we are in this collective mess is that we have for much too long allowed others to think for us), but as a teacher who causes you to learn by asking the questions that make you think for yourself.
I appreciate your thoughtful and thought-provoking commentary, as well as your sincere efforts to offer some potential solutions or, at the very least, the inspiration to begin a dialogue that must begin immediately, while others, however correct they may be in their analyses, seem to be mired in accusation and offer little in the way of potential solutions. I look forward to continued visits.
Thanks for your outstanding post today, on triage:
I swear, some of your posts are so damn good that I have
fantasies about using them as scripts for a seminar that I give to
50 million on prime-time TV. Not that anyone would listen, but
at least I could say that I gave it my best shot. Ha.
A have a few comments about one remark you made.
You write: "You don't need to go to the gym; any 6 ft. by 6
ft. space is a gym. Learn yoga, dancercise, marital arts,
etc., ride a bike in seasonable weather, walk a couple miles a
day, dig up a garden with a pickaxe and shovel-- there are
many ways to stay active and therefore fit."
In theory, I agree. I would have said the same thing, up until
What changed? Well, I joined the local YMCA, a little over 2
years ago. Best thing I ever did. I USE it. I get more than
full value from my membership. I love the way everything
is set up for the purpose: all the resistance machines, all
the free weights, the aerobic machines, and so forth. And the
running track -- nicely padded and easy on the joints, and
great for safe sprinting. I use them all, and I love it. Makes
no difference what the weather is like, outdoors; I get a good
workout, nearly every day.
This is very different from past years. I have found that the
6x6 foot space in my basement -- which I intended, for many
years, to serve for weight training -- simply doesn't cut it.
Theoretically, it COULD cut it, and it SHOULD cut it, but in
practice it DOESN'T cut it, for me. I have embarked on many
training programs over the years, and they all peter-out
after about 2-8 weeks. I'm not sure why. Is it the dinginess
of my basement? The very simple, very limited equipment, and
confined space? The fact that it is in my home, where
Why does my Y membership, in contrast, do it for me? Is it
the fact that all kinds of people (I am a people-watcher), not
least scantily clad females, are always there for the viewing? Is
it the fact that my Y happens to be a nice new facility, brightly
lit and well-equipped, and a pleasure to use? Is it the fact
that they give me a fresh towel every time, relieving me of at
least that portion of the burden of post-workout cleanup? Is it
the fact that I learn from watching other people do their
I don't know. But what I DO know is that I go to the Y, I
train hard, and I have kept doing so, 4-6 times per week for well
over two years without a break. This is the longest that any
fitness program of mine has ever lasted. And the results are
very evident. My health and strength have never been better.
This has never happened before. And at 54, it is high time
that it happened.
I still walk and bike, for fun. But my workouts at the gym are
what really make the difference -- bigtime. There is something
about INTENSE near-daily workouts (weights, machines, sprint
practice) that kicks the body into a high-gear reparative and
regenerative mode. Gentle aerobics and "lifestyle" exercise (taking
the stairs rather than the elevator, walking rather than riding), as
good as they may be, do not have this marvelous quality. This
goes to the technical matter of resistance and other hard/anaerobic
training versus lower-intensity training. My take: The weight-trainers
and bodybuilders are on to something important. There's "magic" --
faster and much more visible results -- in the high-intensity style.
Yes, I know, you can train intensely outdoors, without
any gym: sprinting, and fast biking. But here again, the question
is how often you actually DO it, in practice, and that is affected
by things like the weather, and safety considerations, and how
near or far you are from good and safe riding or running. I have
found the convenience of the gym, and the whole gestalt of it,
to be a great aid in getting consistent whole-body workouts
within a reasonable time slot each day. For me, it is sustainable
in a way that home and outdoor training is not.
So, there you have it. Practice trumps theory in my own life.
I still believe that the 6x6 foot space, and the bike, OUGHT
to be enough, for many reasons, not least the environmental
and energetic implications of going to a well-equipped,
well-lighted, climate-controlled gym as opposed to my
basement. OUGHT to be, but is not.
I rationalize that the health benefits must outstrip the
broader energy and resource/environmental costs. Is that a
rationalization, or a real rationale? You tell me. I'm still
thinking it over. I will say this, however: my near-daily
workouts are making me quite the hale, hearty, strong and
healthy guy, even in my mid-50s. At the rate I am going, I
will look 45 at the age of 65 -- better even than our good
blog-master (I am thinking of that buff beach photo at the
lower right on every page). Surely this will reflect inner
health -- relative freedom from coronary artery disease, etc.,
etc. -- not just a cosmetic effect. I don't imagine that I'll
be needing any $100,000 triple-bypass operations, if I keep
this up and maintain a decent diet. And I will surely never
develop diabetes. I may need a $2 million gym, but I don't
need the $2 BILLION medical center, across town.
I agonize over such things because I am a dyed-in-the-wool
ultra-frugal-lifestyle type of guy, typically living on less
than $10K/year. I do this for many reasons, not least that it
is easily the lowest-stress type of life, but also that it is
most consistent with my environmental and resource concerns,
as well as social justice concerns. It is the only way to
live, for all reasons. IMO.
John F. M.D.
If there's one thing that makes me go "Arrgghh!" it's hearing yet again that American medicine does not promote preventative care. It does - but it's like taking patients to water - you can't make all of them drink.
Example - this insane cult belief that thimerosal in vaccines causes autism. Believe me, it doesn't. There have been several WONDERFUL vaccines developed since I started medical school. Hemophilus influenza type B vaccine is one - this prevents THE most difficult to diagnose (and therefore often missed) form of meningitis in babies and toddler. The vaccine has prevented numerous deaths and cases of brain damage. "H. Flu" meningitis is really, really bad chit. I had a baby die on me from the infection. This vaccine is a Godsend.
Gardasil (human papilloma virus vaccine) is another. It prevents cancer of the cervix and genital warts (which, like herpes, are horrible to have, and uncurable). It is supposed to be given to females from 9-25. There is a huge movement against it, led by the religious right to ban it - because - so their thinking goes - if you make sex safer, more girls will engage in it before marriage. As soon as it came on the market, I bought it for cash and gave it to my ten year old daughter.
TRY, just TRY to get all your friends to eat a diet like yours, and to exercise. I'm sure I have told tens of thousands of people to eat healthy, exercise, stop smoking, and stop drinking - and to use a condom, etc. etc.. Sometimes it feels like banging your head against a wall. OCCASIONALLY a patient follows my advice, and turn their life around - which is enormously gratifying to me.
Yet more proof of preventative care in the U.S.A. - I read this this morning - the American Heart Association says strokes and heart attacks are down 30% from 1999 - and heart and vascular (blood vessel) disease is the number one cause of death in America. There have been NO significant new drugs or treatments for cardiovascular disease released between 1999 and today. This has all been due to lifestyle modification, and using current treatments, usually drugs, more aggressively (yup - STATINS - they WORK!). Yes, statins have rare serious side effects - so does aspirin. In fact, the non-steroidal antiinflammatory drugs - aspirin, ibuprofen, naproxen - all of which are over-the-counter, plus a few which are precription only - are the number one cause of drug related deaths (not due to overdose) in North America!
I am sorry to rant, but this is a pet peeve of mine. If I had a nickle for every patient I've counselled about preventitive measures, well, I could build a nice house out of nickles.
What is the primary problem in delivering preventitive care? Except for giving vaccines, you are generally paid zero, nada, ziparooney. This ought to change. I'd like to see a code from preventitive care counselling. Nevertheless, thousands of American doctors do this kind of thing day after day - it doesn't make headlines, because it isn't "glamorous", like doing bypass surgery (which is basically cleaning up the garbage after disease, most of which is preventable, is already well advanced - i.e. open heart surgeons are 'garbagement", or "Roto-Rooters (we really call them that).
I could rave on and on about this. THE most effective preventitive care tool in my lifetime are the publications by the U.S. Preventitive Care Task Force - a government sponsored entity whose job is to determine what preventitive care measure are truly effective, for each age group. For example, here is an interesting thing I learned - doing a "check up" (physical exam) on patients in their twenties who have NO history of chronic disease, is almost worthless, except for doing Pap smears. What is effective is talking to this group about drinking, unprotected sex, drugs, depression, seat belt use and diet. That's where the "money is" in preventing death, disease and injury in 20 - somethings.
As time has gone by, and attitudes and circumstances have changed, it seems medicine has become more and more a thankless task. There are many docs, nurses, dieticians, respiratory therapists, etc. out there trying to prevent disease and injury. Please give them just a little credit. Public Health Departments too, there's one in every county. Just one example - tracking down sexual contacts of patients who've been diagnosed with gonorrhea is a grinding, thankless task - but it prevents disease.
"The number of readers who will agree with all of these points is essentially
zero because every one gores some sacred ideological cow: Libertarian,
Progressive, Conservative, etc."
Do you have a back of the napkin estimate on how much damage we're all going
to incur to our various sacred cows? do we lose 20% of them each, or 80% of
At some point, our ideologies are our societal seed corn, and if we eat too many
of them, we starve and die off. This, of course, doesn't argue if that's a
good thing or not.
It's been awhile since I've written you, but I've enjoyed your recent posts as always. In today's missive, you wrote:
muddle through/play with the edges of the situation, keep borrowing
trillions/depreciating our currency, and face the eventual collapse of the
entire system--i.e. systemic insolvency-- or perform triage: re-orient the
system's incentives, lower what risks we can cheaply and effectively, and
let go of what's hopelessly unsustainable/unaffordable.
You and I both know that there is a 0% chance of the second option being implemented. Everything out of the Obama transition team has pointed to a continuation of choice #1. That being said, a useful column would be that accepting that our "leaders" will pursue option #1, what can we do individually and collectively to make a positive difference for future? In my opinion, it's neither practical nor useful to even talk about what happens under option #2.
Quick comment on:
"8. Build networks based on reciprocity, generosity and mutual aid.
Since our government cannot provide all that's been promised (based on a much
higher worker-to-retiree ratio), then we have to build alternative support networks
of the traditional types: family ties, church, neighborhood, craft guilds, etc."
I agree 110%.
Such networks were the basis of society during and after communism in the respective countries. However, they took decades to form, through years of wars, famine and other hardship, and many times they formed through an evolutionary process, i.e. people who were not networking-minded perished...
Networks will eventually form in the US as well, but it will take years to undo long-ingrained habits. However, waiting for a decade does not fill the belly today, so people with appropriate mindsets may find it useful to already start seeking others in their geographical proximity. I have an interest in this because I hope to be able to move from Norway back to the US. Norway is unfortunately a place where foreigners are not accepted at all in the social networks of the locals. When you couple this with the long winter, low agricultural production, and a lack of jobs when oil runs out, it makes for quite a bad place for a foreigner to survive the hard times ahead.
The problem with building networks is that people with the appropriate mindset are so few and far in between, a "rara avis". And just "being friends" with random neighbors and meeting every three months for a barbecue does not a network make. The members of the Remnant would greatly benefit from finding each other and trading services, or just helping each other in their daily lifes and having fun together.
There are "survival matchmaking" sites, but those guys are trying to build fortified villages away from civilization (read: in places with no jobs), and they tend to be religious nuts as well. It should be possible to do a mild form of gulching ( https://en.wikipedia.org/wiki/Gulching ), but without moving on adjacent parcels of land (quite complicate and expensive), just by having an informal network within an hour's travel range, inside (sub) urban areas. The web (Yahoo Groups, etc) offers plenty of means to communicate and self-coordinate. What the "virtual villagers" lack, and _you_ (as a Remnant network center) can offer is a way to find each other. Otherwise, if they wanted to find likewise minded folk through Craigslist/etc, they would have to summarize many of your blog postings, and it is far from guaranteed that they would get the right message across...
You are plenty busy, so what's the upside of creating a "village matchmaking" service? If the service is accompanied by a Craigslist-like classifieds posting facility, that provides the opportunity for very focused advertising (and hence high click rates). You are right about advertising not fitting well on literary blogs, where the reader should get into a flow as he is going through the text on the page, but it is spot on and actually useful on a classifieds site. Prepackaged software for classifieds/forums exists, all it takes is a domain name and web space.
Dagmar Van D.
I enjoy reading your comments on the current credit crisis. Today I read your
ideas about the necessary changes to your American way of life. There’s one issue
I would like to add, which is very obvious from a European perspective.
the reasons your medical care is way to expensive is due to the necessity of
doctors to insure themselves against mistakes, accidents or worse, the occasional
stupid action. Here, at least in the Netherlands, we have this attitude that
mistakes happen, we should just try our best to minimize them. This is very
costly, but it is still pretty much affordable.
Lawsuits happen only in case of serious negligence or worse. So barely a need for
high insurance fees, which reduces doctor costs. One visit, simply $30 at most.
Surgery is affordable, albeit expensive. So, try to dump as many lawyers as
possible, in combination with a truely significant reduction in compensation
entitlements, which would also force the lawyers out of business. Drop to idea
of getting back lot of money in the case something goes truely wrong, and accept
this as a fact of life. It’s really much cheaper and will also reduce the fear
for being sued. This will also strengthen the community feeling, since why would
I accept help from somebody if the person can sue me?
Just a thought.
I have a friend who also thinks the economy is going to crash and burn. Despite living in L.A. and not having a job (his wife is a doctor), he thinks he'll come through all this just fine. He puts himself in that class of people with decent educations and useful skills, organized and prudent, so he figures he'll make it if anyone does.
What I tell him is 1) it's not going to be Mad Max territory out there and 2) if it were, his chances of survival are zero.
I had the same reaction reading one of your commentor's posts on knowing how to hunt, and knowing what the land will support. In a general breakdown, he would be competing with all the other hunters, and all the other people who just grab a gun and think they can hunt to feed their families. The wilderness would be stripped to nothing in months. After all, the whole of the U.S. probably can't support more than a few million hunter/gatherers. For 300 million people, you need agriculture, which means (in today's world), industry for equipment, fertilizer, transport of seed and grain, trains, tracks, electricity, etc., etc. We're just not viable anymore as a "frontier" society. Not without a huge die-off of population (like 95%.)
When I read your post today on "Triage", I had basically the same reaction. I was tempted to just dismiss it, the way I tend to do when you get your "back to basics" hat on, but let me make a few points.
First, despite all our trade and budget deficits, it's not as if the U.S. is hollowed out and ready to fall over. It's only a few percent of GDP, after all. We're not going to end up slaves to the Chinese and Japanese. If worse came to worst, we'd just repudiate our debt, or devalue our currency. Our imports would be severely limited, it would cause a huge financial crash, but the basic industries in the U.S. are still there. We can still make lots of things ourselves (nearly everything we use, in fact.) We even still produce 40% of our oil needs. The things we need to import, we will still get. We're such a big part of the market, that for example, the Middle East would have no choice to send us oil in exchange for some kind of export from the U.S. (grain, if nothing else.) After all, what else are they going to do with the oil? Eat it?
Also, our political system is much more stable than China's, our economy is more self-sufficient and our population is younger than Europe's. I'd much rather be living here than practically any other place on Earth. I can certainly envision a huge political reaction to a prolonged depression, but not a complete breakdown in authority. This idea that the U.S. will crash and somehow the Chinese will continue along, smiling at our stupidity, is crazy. If the U.S. goes, so does coastal China, and so does their government. We'd have a depression, but they'd have chaos.
Which leads to my second point -- the government, for better or worse, is going to be trying to fix these problems. There could be sections of the country on relief, but not starvation. You are not going to be depending on home vegetable gardens. That didn't happen in Japan during their "lost decade" and didn't even happen much in Russia during their 90s collapse (and their economy was in much worse shape to start with.)
I could certainly imagine constant government management of "vital" portions of the economy, similar to what happened in the 1930s. I could even see election of a real populist if Obama fails completely to revive things. But I really expect a long, painful slump, exacerbated by the retirement of the boomers, not a crash. I expect more regulation, especially of the financial industry, which combined with the effects of the slump, will make credit even harder to get. It's going to be harder to start and run small companies (not street vendors or mom-and-pop places, but the 100-person companies that really are the backbone of the economy.) It might be impossible to do a high-tech startup, since those depend on financial innovations like stock options, and on the possibility of going public or being bought out.
And finally, when it comes to entitlements, I think you are dreaming. This is still a democracy, and between the old people who vote, and their children (who don't want to support their parents, or pay their medical bills), Social Security and Medicare are not going to be eliminated. I could see means-testing for both, and I think we'll see some kind of de facto national health insurance. But I don't think you'll see "you're over 65, go home and die" limits. Instead we'll take it out of the groups we've demonized like pharmaceutical companies, insurance companies and doctors. As long as people vote their interests, we will strip absolutely everything else out of the budget before SS and Medicare. If you are an average American, given the choice between "station U.S. troops on every continent", "send probes to Mars" and "let Mom die", which are you going to pick?
You forgot one important item. Swift termination (Death) to those who steal others old age security, like the the wahoo that stole or lost 50,Billion Dollars. what is the point of people being responsible, and saving for their old age, if crooks are not delt with.
The thing I would add is all humans do manual physical labor every day. No one wants to work, If I ruled the world, the CEO would spend one hour per day engaged in manual labor on the company docks unloading materials. Everyone in America is a lazy aristocrat.
Today I read a missive you posed from a reader that suggested you should offer solutions. This brings to mind a great essay by H.L. Mencken--the cult of hope. I strongly recomend it. Its been part and parcel of the american scene born from the nind cure movemtn of the late 1890s to be positive. Social approbium heaped upon those who critiqued society or instituions. You could only offer citique on if you could offer a solution. Well, that is a insipid way to limit discourse. Part of mental and social health is admiting problems. Its a great thing to find flaws and admit problems. Its health. While I decry the costs of stupidity, corruption, aging, death and vanity I have no solutions. Frankly, a lot of the issues chronicled in your essays are insoluable and have been for thousands of years. The real, real problem is that politicians and marketers have tapped into this and exploit us to our limits by offering "solutions" to problems that have well--no solutions. The current bubble and collapse are the result of the government and elites offering us all something for nothing---how about that one. So, Charles keep on pointing out the problems we have and in so clarifying our thinking about the challenges ahead. You don;t have to offer solutions. By just pointing out the nature of our problems people become more aware and thus face their lives more realistically--i.e. you burst the bubble of fantasy and propaganda. Placing people on a fair footing with reality is service enough. Please don;t feel obliged to provide solutions, just help improve awareness and a sense of reality.......
One of the ideas that I wanted to explore in my book was the long wave of personality shift. Unfortunately, I lacked the background and the resources for the research, but here’s the idea. Sometime in the sixties, our left brained, Taylorist personality wore out and our previously inferior personality, our right brained relativist Einsteinian personality emerged. This emergence shifted our culture from doing to intuiting, from extroversion to introversion, from following to questioning, from managing to facilitating, from fundamentally knowing to not-knowing anything with assurance. It also shifted us from collective adulthood to collective childhood. My father’s generation looked at this shift with horror – especially as it impacted our school system but they could only stand by as the Hippie-freak wave washed over our culture and changed it forever. From my perch in Michigan, I have observed some of the impacts of this shift.
1) The ancestors of the Big 3 founders have fled the industry. They have collectively lost the urge to make things. After the accountants took over in the 60’s they were slowly replaced by the marketers and the product planners, not the engineers. This is the real reason why Asia caught up and passed us. They didn’t surrender to the right brain.
2) Young people don’t want to work in the Big 3. My children would rather go to Mars than work in a factory – something I actually wanted to do and did in the 70’s and 80’s. Along with Generation X and the Boomer Echoes generations, they are following their right brain bearings to information technology, the arts, consulting, etc.
3) The unions are the dinosaurs of the left brain (your image of the 2000 page contract is a great data point in this regard) and that is why our right brain leaders are working overtime to kill them.
4) For decades the Democrats have carried the torches of the left brain culture – programmatic, legalistic responses to every need in society. It has been the Republicans that captured the right brained, flexible, intuitive energy – witness their lack of data based decisions in Iraq and in this economic collapse. A couple of year ago, I made this argument to our local Democratic party and they were insulted by my claim that the Republicans were actually the intuitive leaders.
In conclusion, I suspect that the shift you forecast, the one to a risk averse, hunter gatherer culture is really the start of the next personality wave and it will force us to relearn how to use our left brain, in particular our senses and our weakened capacity to make and enforce rigid moral boundaries. In short, it’s back to the farm and the forest.
I want to discuss the inverse relationship between health care cost and
Rochester, Minnesota has some of the lowest Medicare reimbursements in
the United States. One can argue that it also offers health care
quality that is in the upper 99% percentile for quality.
Miami, Florida has one of the highest Medicare reimbursements levels in
the United States. One can argue that even though the costs are more
than twice that of Rochester, Minnesota the quality is significantly lower.
The following word picture offers some insight into why that might be.
Nearly all doctors around Rochester, Minnesota are "plugged into" Mayo.
Suppose a patient visits his/her family doctor in Rochester Minnesota
to address a complaint of stomach pain.
The doctor looks at a print-out and observes, "I see that you recently
visited the cardiologist and he advised you to take an aspirin tablet
daily. Are you doing that?"
"Yes I am." says the patient.
"What kind of aspirin are you taking?" asks the doctor.
"Oh, you know. The regular white ones." says the patient.
"That is probably the problem. You need to take the 81mg low-dose
aspirin. I want you to take enteric coated coated low-dose aspirin. If
your stomach still bothers you after a week, I want you to try taking
one low-dose tablet every other day. Aspirin binds with your blood
proteins and you really don't need to take it every day. Come back in a
month if you still have stomach pain." says the doctor.
Cost to society: An over-the-counter drug that cost the patient
$2/month more and costs the insurance company nothing.
The same patient in Miami would be scheduled for a visit to a GI
specialist, a upper GI and a lower GI and blood work. The primary
doctor would also prescribe the latest, on-patent proton pump inhibitor
Cost to society: Each procedure exposes the patient to a cost of
increased risk and discomfort and lost work time. Cost to the insurance
company is probably north of $10,000
Domestic Big Three Automaker legacy costs are now recognized as code for
"retiree health care costs."
A substantial number of conservatives and libertarians believe that
since the UAW and the Big Three chose actions that resulted in the mess,
then they should be adults and accept the consequences.
I want to offer another perspective.
The Big Three, GM in particular, are an advance preview of the United
States demographics circa 2025. All the problems that the Big Three
currently face are problems that will bedevil the US economy in fifteen
years. We can use the Big Three's crisis as a trial run, a test bed to
evaluate potential solutions. Or we can deny any ownership and let them
solely deal with the consequences in an ad hoc manner. The first
choice will likely result in a road map for 2025. The second choice
will force us to wing-it in 2025 when it effects 300 million people
rather than 1-to-3 million people.
Let me throw some numbers into cyberspace to frame my argument and
My numbers will be specific to GM because I have more information about
GM and because GM used to be the most integrated of the Big Three. GM's
spin-off of non-core operations resulted in the highest ratio of
retirees (employees who retired from (pre-Delphi) Delco are GM retirees)
to employees. That is the crux of the 2025 dilemma, too many retirees
living on the productivity of too few actively employed. GM makes a
good experiment because it is an extreme case. That extremeness will
amplify what does, and does not, work. That extremeness will help snap
the landscape into focus.
It has been stated that each active working GM employee supports three
retirees. The ratio will increase before the next contract. In the GM
Local where I work, 1600 of our remaining 3600 employees will be able
to retire under the existing contract by September 2011. Statistically,
75% of the factory workers can be expected to retire the first year they
are able to retire. Other GM sites are likely to have similar demographics.
The current national contract allows GM to backfill those newly retired
with employees making base wages that are comparable to non-union shops.
However,that does nothing to address the legacy costs...the costs that
led the Republicans in the United States Senate to torpedo the $14B loan
The Republicans tried to hold the UAW's feet to the fire and get them to
abrogate the national contract in regard to the health care negotiated
for the retirees.
I want to drive a stake into the no-man's land between the Republican's
demand and the UAW's refusal to tear up the contract.
I propose that a target funding level be established per enrollee. I
propose that the funding level be based on the average Total Medicare
Reimbursements per enrollee (Part A and B) for Rochester, Minnesota
(home of Mayo clinic) and Lansing, Michigan (home of UAW Local 602 and
652) as documented by the Dartmouth Atlas of Health Care.
The following 2005 numbers are provided for the sake of comparison to
convince the reader that I am not being too easy on the UAW:
Miami, Florida: $15,128
Pontiac, Mi: $9408
Flint, Mi: $9045
Dearborn, Mi: $9044
Lansing, Mi: $7615
Rochester, Mn: $6910
I propose that a VEBA be funded to cover the health care costs of those
retirees who do not qualify for Medicare. I propose that the coverage be
limited to the time frame from January 2009 until September 2011. I
propose that the level of funding be sufficient to meet the target
funding levels defined above.
Further, I propose that the population of retirees be divided up into
four pools so various mechanisms be evaluated for effectiveness. The
population should be divided by some entirely random means like
alphabetically by second letter of their last name.
- 25% of the population should be administered by the UAW
- 25% of the population should be administered by private sector health
- 25% of the population should be administered by the current Medicare
- 25% of the population should be administered via commercially
available catastrophic (high deductible/co-pay) insurance and pre-tax
health-care spending accounts.
I believe the proposed "experiment", or an experiment similar to the
proposal, will provide a soft landing for the US economy in 2009-2011 as
well as provide valuable information for the impending Baby Bust years.
I really liked today's post.
Risk, False Productivity and the Ecology of Starvation
(December 15, 2008)
I've been reading your blog at work every morning for a few months - it's usually the first thing I read when I get to work (and should be working).
Today's post really hit the nail on the head. I've read Darwin's "Origin of Species," and have thought about the current situation of humanity on similar lines. As you state, ALL species tend to overpopulate and push their ecosystems to collapse.... and then those populations collapse. Some species go extinct. Well, most species go extinct.
I believe that humanity COULD choose to live differently, that is within our means. It's a possible choice for individuals and for communities and nations. Because of the mental laziness and lack of imagination of most people, however, that is unlikely to happen. Leaders and politicians take advantage of the desire of the individual to avoid painful choices, and make the matter worse.
Do you think that we as a society will be able to make the painful choices now, and avoid calamitous social disorder? I have a 2 year old son now, so I'm more worried about the future than I would be as a single guy. I have one good friend who understands what's going on, and we're trying to come up with some preparations. (He also reads your blog).
The problem in preparing is that the majority in any community seem likely to remain in denial for too long. Is it best to go the survivalist route? That does not appeal to me. I am considering trying to form a local community group of like minded people, to start planning for community gardens, develop networks of people with needed skills, etc. I think the communitarian approach makes sense.
Regardless, keep up the good work. If you ever come through Minneapolis, Minnesota, let me know, and I'll cook you a good meal... Feel free to print my email as a comment to your article.
We belong to a local CSA, the mirror opposite of corporate capitalism and its commodity-farm model. As our farmer (Jeff Poppin of Long Hungry Creek Farm) says, he isn’t making a fortune, he’s making friends. I offer this as first example in the transition to the informal market that will form from the ash of corporate America. Perhaps there will always be a Wal-Mart but first we will have our friends and social networks to maintain our less affluent lives. Get ready for a gardening revolution and chicken houses in the suburbs!
excellent observations and some astute comments from your readers.
(End of Work, End of Affluence I: Cascading Job Losses
(December 8, 2008)
My feels are as follows:
No one at this site - including yourself and myself - is hurting at the moment.
If anyone were destitute, the last thing they would pay for is the Internet - shelter, food, water and medicine outrank the convivial exchange of ideas.
The standard of living for 80% of Americans is going down at least 20% and may stay so lowered for a long time.
You need to write about the up-coming barter system:
MacDonald's is the second largest processor of creditcard transactions in the USA. When people have to charge a Big Mac, and with creditcard companies about to curtail $2 Trillion worth of credit over the next 11 months, those facts confirm that mainstream America does not have any cash and will not have any credit.
So, I come to you and say this:
I want one of your pies - nominal value $5.00.
I will move 1,000 pounds of material for you (say firewood) 100 feet - I did not say stack.
You say ok.
I do the job in 30 minutes and get "paid" $10.00 an hour. But, I take your pie, in lie of cash payment, and leave. Good deal for both.
This will not be an isolated incident - this will become the norm.
That is what desperate people do to survive and avoid government taxation and scrutiny.
All of us - including myself - live in relative comfort and security. That may change. Despair means this:
No cable tv.
No cell phone.
Heating your house at 50 degrees max - forget A/C.
One car or zero cars - and two bicycles.
Boarders renting rooms and the basement and possibly the garage.
A pistol under your pillow and a heavy locks on everything.
The nausea of perpetual fear of the unknown.
Excessive use of alcohol and/or drugs.
No savings. No job. Total dependence on the government for existence.
That is a Depression. Everything else is musing from a soft couch.
Charles, your article today included some insightful arguments and ones that have
been made before. I would like to highlight your last sentence, “That would be
one product the U.S. could export in quantity and at great profit.” From reading
your article, it seems to suggest that this export would be only for recreational
or medicinal uses. There is another market for Cannabis and that is in the form
of hemp. We in the United States have been a fairly big user of that product and
even our forefathers made it one of our biggest cash crops. See here:
Now, we have to import it from Canada which is “reaping”, (sorry I couldn’t resist),
profits we should be getting here at home.
the US politicians who have been corrupted by the influential money from
businesses and agencies that assume higher profitability or budgets from
cannabis’ continued illegal status will be exposed so we can finally have
sensible policy in this area once again.
It is my belief that the war on drugs was started by Nixon to stop the growing
anti-war movement’s LSD use. I cannot find any supporting documentation on this as I think I got it from a TV show on the history or drug use in America. I know the Harrison Marijuana Tax Stamp Act got this ball rolling in 1937 for pot but the truly egregious crimes committed by the US government on the American people started with Nixon.
Finally, check out this
article I stumbled upon. It really supports your arguments and has some interesting factoids as well.
It has come to my mind that much of the underlying effects of this Recession/Depression are being overlooked by many writing on the subject and I wondered what opinion you may have to the pending circumstances.
1) With the wealth of the "Baby Boomers" being diminished (401k's ) it would seem reasonable to assume their retirement plans, (out of necessity) will be extended.
2) The extended employment will continue contributions to the "Social Security Program" thereby, reversing some of deficits previously predicted. (however, unemployment will probably negate any gains)
3) Under this thesis, movement to new housing by the 'Boomers" will be curtailed leaving more housing inventory on the market than otherwise may have been expected.
3) In order to regain any major position in world markets, we must out of necessity, engage in producing goods nationally and reduce our dependency on foreign imports. Some may consider this as "Isolationism" however, using the transfer of paper as a means of wealth is fallacy, when the formula, Labor+product creates wealth has always served our nation well in the past and we must come full circle or face the disastrous consequences.
Re: today's article, "End of Work, End of Affluence IV: Crime and Prohibition " - given that the present administration, in accord with its free-market ideology, is migrating to private (for-profit) prisons, two things come to mind.
1) Prisons must be kept full of inmates (in order to maximize profit).
2) If you were running a prison, and trying to minimize costs (again in order to maximize profit), would you rather the prison be full of marijuana offenders or violent criminals?
I share your attitude about drugs. I don't use them - except for booze - but I have no problem with others using the drugs of their choice.
The parallels between the "drug war" and prohibition are stunning - so much so that it's impossible that the powers-that-be don't see them also.
Therefore, I can only conclude that there's some advantage to maintaining the
drug war, such as:
* Power and money to the government ensuing from drug enforcement
* Covert funding for intelligence agencies trafficking in narcotics
* The for-profit prison-industrial gulag which needs bodies
* The legal drug manufacturers - alcohol, cigarettes, pharmaceuticals -
don't want competition
* The illicit drug producers don't want it legalized because that would
destroy their profit margins
It's so obvious to me - and apparently you too - that legalizing drugs would be
hugely beneficial to society. Sadly, it's not likely to happen.
I have an acquaintance who is an assistant warden in a Canadian federal prison --
a medium-security facility. Canada practices what is called "cascading". Serious
prisoners, even murderers, go from super max to max to medium to minimum facilities
as long as they are well-behaved as their sentence progresses.
He told me that if an inmate is caught with marijuana, it is confiscated with no
further punishment but if an inmate is caught with alcohol (home brew), he is
immediately transferred to a higher security prison and gets some time in solitary
confinement. People smoking grass get mellow and go to sleep; drinkers start fights.
Perhaps all prisons should allow the inmates to buy the dreaded weed to keep peace
in the facility.
Obviously, the prison official is turning a blind eye to existing law, but I have
talked to an ex-con who confirms the story.
I also remember visiting a friend with a severely broken leg in an orthopedic
section of a state-run hospital in New Zealand. I asked why visitors were required
to leave earlier than the regular visiting hours. She told me that a dealer came
through every evening selling joints for pain relief and the hospital didn't want
publicity about the practice.
Outstanding, if not controversial, post.
End of Work, End of Affluence IV: Crime and Prohibition
(December 11, 2008)
First and foremost, the Constitution does not have any provision that
empowers government to tell us what we can and cannot put into our
bodies. Governments do not run themselves particularly well, let alone
businesses or our lives. This is why the initial powers given to
federal government by the Constitution were minimal.
As I have mentioned before alcohol is the only drug that has the
potential to cause DT's upon withdrawal. DT's are potentially deadly.
The WOD is laughable in the context that a friend of mine operating in
South America in the 1980's devised a tactic that had dropped cocaine
production to a crawl. It was so effective they were told to stop --
by the government.
The double standard of the legality and use of alcohol over other
recreational drugs is irrational. It is based on ideology, ignorance
and fear rather than science and the cold hard statistics pointed out
The WOD has been a complete failure.
But this goes back to why government was initially given only the
power it needed.
John F. M.D.
Well, I read your column six days a week now. I know you are not a big fan of medicine - I'll agree, our current system in the U.S. is a falling apart disaster - but it isn't all bad. I actually saw a 17 year old boy whose life was saved by an MRI scan, but that's for another day.
As we prepare for old age, and hard times, there's something I think you haven't mentioned - the crucial importance of maintaining our health. This is being hammered home to me as I see more and more patients without health insurance - primarily due to job loss.
I've always thought a lot of illness and injury was caused by lifestyle. Since the '80's we've been turning into McPeople, living in McMansions. With over 50% of Americans overweight or obese, we are looking like walking big Macs - a little muscle with a ton of fat.
Look at old TV shows from the 60's or 70's - the people look positively anorexic. And with obesity comes another epidemic - deconditioning - the loss of ability to perform physical tasks. How many adult Americans can run a mile today, at any pace? How about walking five miles to the FEMA depot to get pure water, and walking back with a full five gallon container - they're HEAVY. Living in a hurricane zone, I think about things like that.
Good health and fitness is THE number one priority in surviving hard times. Money, homes, cars, etc. can all be lost, if one is fit and healthy, it's probably possible to get by and rebuild.
The Internet is a wonderful tool for finding information about exercise, diet, and healthy living. Exercise can be done with virtually no cost - maybe a pair of running shoes.
I belong to a gym because it motivates me. In fact, my wife and daughter both belong. Our year's family membership is about 1/10th. the deductible on our health insurance - we're both self-employed, like you.
I could go on forever - quitting smoking, cutting down on drinking, getting off drugs ( a ton of Americans are now hooked on prescription narcotics, anti-anxiety agents, etc.),
keeping up with vaccinations (had a tetanus shot in the last 10 years? - most adult American's haven't - when the disaster hits want to wait five days to be seen at the local ER and get one? How about a flu shot? A pneumonia vaccine? - they work, you know).
I'm sure you get the idea. Americans just seem to have given up on living healthy, just like they've given up on controlling their borrowing.
Until yesterday, I'd never responded to a blog, and here I go again.
Your column today hit a hot button with me, so needless to say that I 100% agree
with what you've written. However I have a suggestion for a future column tying
into the war on drugs that you might consider taking on in the way that only you
can capture with words.
You've doubtlessly noticed the tidal wave of crime and
criminal justice programming on TV--I'd like to suggest that our culture has
become addicted to criminal justice as a form of entertainment. This would
indicate that not only has the population bought into the official line on the
drug war (as well as all things criminal justice), but more significantly it
is immersing itself into it. Unfortunately it does not bode well for the prospect
of ending the war on drugs or of short ciruiting the trend toward a police state.
The public loves this stuff--I'll speculate--because the sense of one's own
goodness is enhanced by the uncovering and prosecuting of the misdeeds of others.
That seems to be a poorly understood but deep seeded human drive of some sort.
"Let he among you who is without sin, let him cast the first stone" was quite
possibly the most counterintuitive statement ever issued to the human race,
evidenced by the fact that it's still considered worthy of being ignored
2000 years later.
You've written in the past about 'bread and circuses' in the Roman Empire, which
I remember well from college, and how it's seeping into our culture, which is
incredibly astute on your part. But the current fascination with criminal
justice as entertainment has to make one wonder if another ressurected Roman
idea is soon to be added to the circuses in the form of public torture and execution.
Last year one of the networks was asking for the rights to broadcast an execution;
it was denied but it has to make you wonder how far away it is anymore.
When I was
young, crime shows were crime dramas, like Hawaii Five-O, complete fictions that
were as popular for their cool factor as they were for their story line. Today
we're awash in reality programs like COPS, Real Stories of the Highway Patrol
and Cellblock H. I find it very disturbing that they've become so popular
especially on top of the already abundant list of psuedo reality crime shows
like the many incantations of CSI. The public, is seems, can't get enough of
Could you write about this at some time in the future? I agree with all that
you've writtin in regard to the war on drugs, but I believe that war is part
of a much bigger issue which few can grasp intelligently.
As an aside, we recently had a former prosecutor conduct a seminar at the local
high school on how the law relates to minors here in GA, and what he said about
how drugs have a passifying affect on behavior in contrast with alcohol was
totally consistent with what you wrote today.
Thank you, readers, for such thoughtful contributions.
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