As the year draws to a close, Editor Justice Litle digs into the reader mailbag one last time. So where is the world headed? Are we on a path towards socialism and world government? At least some Taipan Daily readers think so...
As the year draws to a close, it’s time to delve into (drum roll please) the final reader mailbag. As usual, there were far too many thoughtful responses to print even a fraction of them all. I appreciate every single one.
During Christmas week we’ll be running a “best of” – a look back at some of the top Taipan Daily pieces from 2008. Do you have any favorites that stand out? Let us know and they’ll go into the running: justice@taipandaily.com.
And now, to the mailbag. First, on the subject of spending and saving:
I agree that more Americans are likely to spend less, but save? Those of us who did are the ones losing in the market crash. Had my husband and I bought lots of stuff and taken more trips, we would have enjoyed our money and would have a fully furnished house by now. We would have new cars instead of ten year old ones. We would have more children. But we saved, and our portfolio has suffered. We have little to show for living within our means and even saving for retirement.
I remember years ago when my older sisters started college. My parents (who made very little but lived frugally) were told by financial aid counselors that they should have taken more vacations or gotten a pool for the yard or otherwise spent their money and they would have been eligible for more financial aid. As it was, they were punished for saving their money. (And don't get me started on calling needs-based money "scholarships.")
I haven't given up on saving, but given taxes on savings and other disincentives for saving, I'm not convinced people will save so much as just get out of debt and live within their means.
– TD reader Susanna H.
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You make a good point, Susanna. The credit crisis has been like a twisted version of “the grasshopper and the ant.” In this version of the story, a vicious gale blows away everyone’s shelter, leaving the grasshopper and the ant mutually exposed.
If baby boomers choose not to save at all, though, I wonder how they will retire. Or will this be the first generation not to really retire at all, but to work in large numbers well into old age?
Normally I think you are a splendid analyst with one of the clearest views of what is, could, and might be happening as is to be found.
Right now I think we need to be putting out the fire in the kitchen, distracting the toddler about to stick an ice pick in a wall socket, and noticing that the light in the refrigerator means the electricity is off, not that the bulb is burned out. THAT means that charity AND fiscal responsibility begin at home. We can't stop Bernanke and Sons, but we can be stocking our individual lifeboats. We can fret over BRIC getting more of the goodies later. Right now we had better be worrying about what we'll be eating this time next year. Forget peak oil. Think about peak food.
– TD reader L.T.
Thanks for the kind words, L.T. It’s no doubt distressing how the credit crisis has sucked all the oxygen out of the room, thus putting other long-term issues on the back burner. Many are not familiar with the budding water crisis or topsoil crisis (there’s only so much nutrient-rich soil to go around) that have long-term implications for our grain supply.
The facts on the ground are pretty scary in some instances. But they also provide a chance for opportunistic gain. The nature of what we’ll be facing in 2009 means some industries and companies of a particular problem-solving nature will do very, very well... even as others fade into the sunset.
There is one class of people who don't care about jobs because they have money and know how to invest it. These folks might like to speculate that the population can stop buying and become savers instead. But those other folks that have neither jobs nor money will not be saving. Therefore the concept of moving from a consumer society to a saving society is rather bogus. Without productive jobs, the US will drift into being a third world country, complete with a privileged upper class that live off of investments worldwide, and the masses of dirt poor underemployed. We are looking at the fast transformation of the US into a third world economy because globalization has been allowed to occur without any resistance.
So the bottom line is that a fundamental part of the solution to our economic problem is the need to slow down globalization while simultaneously training the US workforce to be able to hold on to higher paying productive jobs. Only then can we say that there can be savings or spending.
– TD reader Ted R.
Ted, the trouble with “slowing down globalization” is that if too many of the major players buy into it, we wind up with Smoot-Hawley redux.
After the crash of 1929, global trade was made into a scapegoat. Passage of the Smoot-Hawley Tarriff then resulted in a series of escalating “beggar-thy-neighbor” policies that devastated world trade. We saw what came next.
America would have a much harder time slowing global trade now because we’ve borrowed so much from abroad. Our biggest trading partners are our biggest creditors. If we were to say to China, “we don’t want your stuff anymore,” China’s response would be along the lines of: “What should we do with these trillions in treasuries then?”
If the gap between haves and have-nots gets so out of whack as to destroy the social fabric of the United States, my guess is that the government will step in and find more aggressive ways to “spread the wealth” around by force.
I’m not saying this would be a desirable course of action – only that it’s a more likely response to social inequality than a closing of the borders to trade.
Like you, I see nothing wrong with US consuming less, and emerging countries consuming more. I have also often thought that globalization is a “good” thing. Sure it’s painful when your buddies lose their jobs to a call centre in India, but then again, who are we to deprive poor Indian people of a livelihood, when they get paid SO much less than us. Over time, Indian staff will start to unionize, demand better conditions, more pay etc, and then they’ll have to outsource to Ecuador, or somewhere. But the money gets spread around.
Creative destruction is an incredibly important part of this whole picture. After all, creative destruction is precisely what allowed humans to come into existence: when the dinosaurs were destroyed by the meteor, mammals evolved out of the new opportunities. Thus it is today – we just have to use some intelligence to get “there” from “here”.
– TD reader Andrea W.
Thanks Andrea – that’s another very good point, re, globalization, that people often miss.
Globalization is scary for the western world because the common perception is that of jobs lost. Those afraid of it are transfixed by a wave of new competition on the horizon. But they forget that the new competitors quickly adjust to a new balance too. Costs and wages can rise in India and China, just like anywhere else... as does demand for goods and services the U.S. still provides.
Three billion new capitalists with money in their pocket mean three billion new customers for U.S. companies – the best in the world at much of what they do – to take a crack at. Creative destruction makes old opportunities go away – a hard thing – but replaces them with new ones.
As for the [Thoughts on Capitalism II] comparison [of banks to] utilities - here is an industry that has effectively created a series of mandated monopolies, been subsidized via corporate welfare, and pays it's executives massive incomes and bonus regardless of real performance. Utilities make token infrastructure investments only when the taxpayers pay for them, routinely make unintelligent resource allocation decisions, and then invariably stick it to the captive customers. For hard data - come on out here to Vegas where Sierra Power is building 3 coal=fired plants that almost everyone opposes, while it generates 99% of it's electric capacity via expensive natural gas, was and is still completely unhedged to natural gas price increases, lost a bundle via Enron that the ratepayers covered via rate increases, and has just submitted yet another 15% rate increase. (Rates have tripled in 5 years!).
IMO this makes AIG and Greenburg look like the good guys!
If that is the future of the USA, I'm headed for China ASAP. Plus, the soup is better.
– TD reader DJ C.
Yikes, thank for that DJ. I get a Sierra Power (now NV Energy) bill in my mailbox every month. I had no idea they were that poorly run.
In comparing banks to utilities, I think Taleb’s idea (and the part I agreed with) was to point out how banks will be extremely staid and boring in future. They won’t make headlines for doing things way out of line, and instead simply provide cash when required like water from a faucet.
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Your points are well taken though, and speak to the dangers of the heavy hand of government. Perhaps the ideal would be a return to the culture of the pre-1930s banks, when sobriety was more the order of the day.
Because no one had FDIC insurance in the days before FDR, banks competed for deposits on the basis of their iron-clad reputations. Safety was an asset rather than a liability; banks worked hard to show the world how conservative they were, rather than how creative they could be in finding ways to juice earnings.
As the elite have a need to create this Socialism, they first create a "crisis", and then propose the "solution", which is always more government control. Isn't it obvious that the very people who caused this crisis are the ones with the solutions?
What's ahead in their agenda? A World-Wide interlocked central banking system, which will eventually control the entire economy, for the good of the people, of course. Every large asset worth owning will fall under their control. This will necessitate a World-Wide interlocked government to distribute the wealth equitably, and keep the peace. Who gains? Only the elite insiders who may lose some of their personal wealth, but will control a government which will control all the wealth. The Soviets had a grand experiment, but their problem was that they didn't keep the peons happy. They ruled with terror, when they could have done much better with spreading just a little of the wealth around, at least enough to convince the peons that they were really happy. When the largest and strongest of the opposition (America and Europe) are brought down, Socialism will thrive again in Russia, and here - for a time, at least.
– TD reader Bob D.
Wow. I hope you don’t mind my saying, Bob, that I hope you’re wrong in this call. The main reason I’m skeptical of the world government scenario is because of how incredibly hard it would be getting that many leaders to agree on any single agenda. There are just too many rivalries, too many moving parts.
I can’t dispute, though, that the U.S. and the world are moving in the direction of socialism at the moment. We are following in the tradition of “bold and persistent experimentation” that FDR boasted of, and we are doing it willingly. Where this leads is hard to say.
Since we’re strolling down such a cheery path today, I’ll leave you with a thought-provoking quote from Aldous Huxley, the author of Brave New World. Keep in mind these words were penned more than sixty years ago:
There is, of course, no reason why the new totalitarians should resemble the old. Government by clubs and firing squads, by artificial famine, mass imprisonment and mass deportation, is not only inhumane (nobody cares much about that nowadays), it is demonstrably inefficient and in an age of advanced technology, inefficiency is the sin against the Holy Ghost. A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude. To make them love it is the task assigned, in present-day totalitarian states, to ministries of propaganda, news-paper editors and schoolteachers… The most important Manhattan projects of the future will be vast government-sponsored enquiries into what the politicians and the participating scientists will call "the problem of happiness"—in other words, the problem of making people love their servitude.
Three cheers for freedom, in thought and word and deed. They can’t take it away if we don’t let them.
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