At the risk of sounding like a broken record, I preface this essay with
the principle economic theme of the 21st century: The ongoing weakness in the
global economy is the continuation of a world financial crisis that began in
2008 and has only been eased in its corrective intensity by the massive
fabrication of more capital and credit by G7 governments. Since the crisis
was catalyzed by an excess of capital and credit relative to real global
supply and demand, this is an approach that will not only ensure the
continuation of said crisis, but will magnify its long-term destructive
outcomes when the G7 stimulus efforts break down – which they are now showing
clear signs of doing.
There is a uniform absence of leadership in the world at present. G7
governments are concerned only with the ongoing behind-closed-doors
negotiations with major financial institutions where the parameters for the
exact limits of predation by the financial sector on the general public are
set in exchange for financial support during elections, and so at the top of
the political food chain, it is banks, and not elected governments, that call
the shots.
And this is why we have, as our collective global reaction to the
imbalances caused by such excessive credit and capital, more of the same.
Leadership is trapped by its duplicity, the economy is thus under siege
with more capital and credit (which is only available to the top layer of the
economic food chain – not to you and I), and an utterly clueless financial
media dutifully parrots the metaphors and clichés fed to them by the bank’s
PR machine to provide a plausible context within which to conduct our
respective realities.
The collapse of a civilization, historically, does not happen overnight.
The series of collective mis-steps that ultimately result in ancient ruins
being discovered by distant future generations who then ponder on the
mistakes that might have caused such demise while repeating them constitute a
long series of events and leadership decisions. The concept of deficit spending
– financing the present with the GDP of the future – will likely, at some
point, be identified is the critical flaw in the current thinking that began
us on the path to destruction.
I find it laughable and tragic that the extent of our collective response
is to re-elect the architects of this policy, mostly from apathy, while we as
individuals concern ourselves solely with the pursuit of wealth and the
perception of stability and prosperity that comes with it. What we fail to
understand is that being left alone to our own pursuits is dependent on a
world financial stability that supports so much that we take for granted. The
flow of every kind of goods into every corner of the planet cannot continue
without a baseline financial systemic health. Same for the systematic
collection and processing of waste, provision of health care, globally
interconnected transportation systems – all are reliant on a functional
system of value transfer.
When confidence in the dominant system of value transfer begins to wane,
the vitality of the entire financial system that depends on it loses forward
momentum, and it is an inertia that keeps the system apparently moving
forward, even while the engine that drives it has thus commenced
self-destruction. By pouring more oil into the engine, or flooding the
economy with more money and credit, we can maintain forward motion. But at
some point, we’re going to have to take this economic train off the tracks
for a complete rebuild.
That is the point we are heading toward, and absent strong and united
world leadership, the transitional phase between a complete breakdown in the
old system and the establishment of the new system will be characterized by
strife and possibly even warfare.
The Fed has Lost its Credibility
With Ben Bernanke and his Federal Reserve compatriots having undermined their
own credibility by transmitting contradictory, conciliatory, conservative and
aggressive stances simultaneously so far in 2013, he has communicated in no
uncertain terms that he has no ideas, no plan or strategy, and is committed
merely to reacting to market data and media interpretations thereof to
formulate policy going forward.
The British have hired the Canadian former central banker Mark Carney in
an unequivocally bald-faced admission that no leadership exists within its
own borders to lead the country out of its economic malaise. Though my first
emotion, as a Canadian, is pride that we are seen as a source of leadership
to the rest of the world, that pride is countered by a more profound awareness
that our reputation as the world’s best financial shepherds is as much a
result of only 32 million people divided by 10 million square kilometres of
still mostly unexploited natural resource wealth as it is conservative
deficit spending.
The rest of the G7 is in varying states of economic lethargy, and again,
it is the combined capital fabrication of the United States, Japan, the
United Kingdom and the Euro region that makes the illusion of forward
momentum and general economic “recovery” a plausible falsehood. The BRIC
nations are now feeling the insistent swirl of the whirlpool black hole that
is rapidly becoming the world economy, and incrementally, the inflammatory
continuation of the current strategy of putting out the fire with gasoline
will have its inevitable outcome, engulfing concentrically larger regions
thus saturated.
