“Truth and Consequences: When the Music’s Over?”

I received this query from someone we will call AK via e-mail:

Was wondering if you might be help with a mental exercise I’ve been toying with the last few weeks pertaining to the roll of timeframe of consequences, and whether we will be hit with a shock or slow-burn when gravity finally kicks in.

I’ve had the opportunity to work in a position where I’m able to interface with many different people, for a very large electronics company. Three very distinct themes come to mind when I attempt to summarize my experience thus far;

1) My generation (recently graduated from college or currently enrolled) will be the first generation in American history that will experience a decreased standard of living, when compared to the previous generation.

2) The current investment/return ratio (starting salary, post-graduation) on an undergraduate education for most major Universities has completely fallen apart. A significant portion of my friends are either doing Teach For America, Peace Corps, or making $11/hr. Their parents, with the same level of education 25 years prior, were able to leave and find a job with a $50K starting salary, no sweat.

3) The gutting of the middle class will continue until there’s nothing left.

Obviously, these are some very broad observations to make from a technical sales role, but I feel privileged to have this experience. It has truly opened my eyes to how grossly dysfunctional things are at the ground level. The boomers are particularly breathtaking; the modus operandi is ‘buy first, ask questions later’. I have never encountered or have read about a system in nature in which this type of behavior is sustainable.

This isn’t to say opportunity has left completely. On the contrary, times have never been better for the truly brilliant. A good friend has been the recipient of venture capital funding, and his company has received a few (very) large rounds of Series-C funding. Again though, the truth can be found in the numbers; compared to my one friend who has ‘made it’ vs. those making roughly $11-15/hr., how does this historically compare to my parent’s generation? Not favorably.

The grand unified theory on this, which with more scholarship, I feel woud yield a few Professor Emeritus positions in the few remaining Political Science departments that can still afford such chairs, is that the United States stopped functioning as the country we currently know directly after 1971, when Nixon axed Bretton Woods system of exchange. When we left the gold standard, we abandoned truth, and deferred consequence. The largesse the country had been living off of post-WW2 had vanished, and real wages have been declining ever since. The proliferation of nuclear weapons has boxed us into waging satellite wars over countries with abundant natural resources, in an effort to keep pumping a necropsied heart with epinephrin.

Another lesson I’ve learned is that the Universe over the long run is a perfectly balanced and reflexive system. Which brings me to the question I’ve been pondering for the last few weeks; since humans deal extremely poorly with unknowns and typically chose to defer consequences, should we continue in the attempt to bring the truth of transgressions to the public, or would our efforts be better spent preparing ourselves for the forthcoming panic, and to establish release mechanisms that may alleviate the ‘creative destruction’ that may be wrought (wrongfully) on those who have attempted to enlighten. To be frank, I sometimes worry that innocent parties at the margin might be swept up in the fervor when emotions are finally released.

Although AK’s focus shifts away from the problems of young people, the way the economy is limiting their vistas is really disheartening. I recall one of my Japanese colleagues telling me how the lost decade was “killing the dreams” of young people because so few could find real jobs (many were temps) and even those who were fortunate enough to secure a position were faced with a career of little in the way of pay increases and constrained opportunities. And the poor employment prospects have long term implications: not just in terms of career development and satisfaction, but their finances and mental state.

My response:

I’m a good bit older than you, and I don’t see the end of Bretton Woods as the turning point you do. Johnson lied so often and so badly to the media that the press started using the expression, “credibility gap.” Bretton Woods was abandoned due to stresses that had been building up for years. The root problem was running big deficits in a period of growth; that was due to Vietnam and the space program (hugely costly, people forget about that) and the war against poverty. That set the inflation in motion.

You need to read Jim Hamilton on the gold standard. Contrary to what its fans would lead you to believe, countries cheated on the gold standard all the time. They’d go on and off it and revalue. And the vaunted “stable value of money” was achieved by a great deal of short term changes in the inflation rate, from inflation to deflation, and fairly large changes by modern standards. But it is curious that Nixon chose to go off BW rather than just devalue. This might have been due to the input of Milton Friedman. I haven’t heard a good explanation.

The problem with preparing for social upheaval, I think, is that it tends to involve survivalist retreat. For people who might enjoy going off the grid and being closer to nature, that might have some appeal regardless. But one of my friends argues, “When the hegemon goes down, there is no place to hide.”

I wonder what answers readers can provide to AK’s question: “Should we continue in the attempt to bring the truth of transgressions to the public, or would our efforts be better spent preparing ourselves for the forthcoming panic?” Or are there other options you regard as more fruitful?

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  1. Grateful Reader

    I’d say carry on with the truth for now. Apart from anything else it’s interesting getting a bit more insight into some of the things happening behind the curtain. There’s not too much of that in the mainstream media (and I would even include supposedly intelligent publications like the Guardian in that). I doubt whether Sarah Palin and her friends will be susceptible to such rational analysis though, so it might be best to think of something else to do in a couple of years time. I wish I could figure that out myself, and I do quite like the off grid idea. But you’re right on that too. If Sarah starts on Iran/Beijing/Moscow (take your pick) then the smallholding would need to come with a fairly deep cellar attached.

    1. Doug Terpstra

      “If Sarah starts on Iran/Beijing/Moscow (take your pick) then the smallholding would need to come with a fairly deep cellar attached.” :>)

      Hmmm, the whore of Babylon, the beast, the red dragon, and the bear. A dozen years ago, I recall reading in “Today’s Technology in Bible Prophecy” the general specs for a bomb shelter and provisions required to survive a nuclear WW3 and the ong plague-afflicted tribulation. Living in a region with a nuclear plant and military air base, my immediate thought instead was to live creatively in the present and keep a ladder leaned against the roof.

    2. Stelios Theoharidis

      There are so many topics to discuss here. Sorry that this is long….

      Well I think my generation, because I belong to the same generation as the author has been coddled for some time into believing in a delusion of opportunity that was never really in place. These socio-economic trends are certainly still occurring, I have no doubts about that. I understand that previous generations did not have it perfectly, and you were probably more frugal, but I suspect the prospects for our generation in general may be on the decline, despite the fact that a minority will come out of this situation with immense wealth. But, we have it quite better than much of the world and it is our profligate consumption is the reason for many of the problems in the third world. I have no intention of choosing my countries consumption interests over the suffering of others due to violence and corruption related to heavy resource extraction.

      At the same time this grand narrative that we have as consumers is lacking in any substantive meaning, and for that reason I can understand why competing narratives like religious dogma both Christian and Muslim are on the rise. Some type of end times story about good and evil is much more sexy for an individual that cannot find meaning where there is none in mainstream western media and consumerism.

      However, we remain in a situation where one of the real or perceived criteria for determining human fitness, to the opposite sex, is exactly the same thing that threatens the well-being of both Americans, people in other countries, as well as a considerable amount of animals on this planet, which is conspicuous consumption. Even if it isn’t a genuine criteria, many of us have been convinced as such and begrudgingly choose that path. Even more troublesome is the fact that many emerging countries have bought into that frame of mind and it is increasingly problematic for our common future.

      But, there are a number of countervailing movements in place, supporting sustainable systems of production in urban and rural areas in the first and third world. While I may appreciate peak oil and diminishing returns to social complexity, there are nuances that suggest that just because this social/technological system is having problems it doesn’t mean that we cannot be architects of another social/technological system that cannot resolve these issues. Politics and economics being derived from this social/technological system. We are struggling with both the successes and failures of design.

      Advancing environmental, social, and economic sustainability in this country and abroad, particularly in technologies that mimic the natural systems in order to produce the goods, energy, and services that we need is a competing narrative that I can stand by and I think provides meaning to the otherwise meaningless system of production that we have set up. It also addresses our energy concerns as well as preoccupation with foreign threats. It will be providing positive feedback to that movement, destabilizing entrenched interests, and advancing the meme throughout the world that will be the problematic part.

    3. sgt_doom

      “My generation” ????

      It’s been going on for the last several generations, with some exceptions here and there. Quit swallowing the PopCultureMedia espoused by those 5 corporations which own all the media, for chrissakes!

      Think for yourself, for a change!

  2. Foppe

    Considering the major problem is mercantilism (Chinese and arguably German for the Eurozone, even if I’m far less convinced of the fairness of that assessment) I’m not sure a gold standard would fix that.. Free-floating would do far more good. That aside, I’m guessing I’m of more or less the same age as AK, although I’m still studying, and I’ve also wondered what stance to take vis-a-vis the coming changes, while considering the fact that necessary nation-level changes will be fairly hard to accomplish, considering it is against the interests of the ruling class, who increasingly have to care less about the plight of the rest.
    Having said that, I’m not really in favor of turning away from society altogether, as this just enables them to keep on going; but what I would strenuously advise is to try to change your view on the importance of earning big figures at the expense of having a satisfying social life (not the booze kind).. if the chance that you will earn a high income /if only you invest enough time in your job/ is that low, then why not spend the time you would lose by doing so differently, e.g. by taking a more active public role (writing letters to newspapers or blogs in order to make people understand that sacrificing their personal lives on the off chance they might be accepted as part of the capitalist class is not worth it. This mindset that all gutting of social support is justified in the name of “efficiency”, so that a few more people are motivated to enter the economic way of life, where your coolness is indicated by your contribution to GDP, has to go.

  3. charles 2

    First thing : the space program was as much a military program than a prestige one. It laid the ground for sustained preeminence of the USA in the aerospace sector for 20 years at least. The US is still the undisputed master of airspace and it is a major strategic asset.

    Regarding your reader’s question, I believe that the US will engage into a protectionist/isolationist period that will prove surprisingly favorable for its economy (at least in relative terms). Repatriating production in the US will provide lots of opportunities for the current college generation who, unlike its parents, will not balk at blue collar jobs because that is all they have.

  4. attempter

    The predicament is terminal. Its causes are the end of cheap, easy fossil fuels, and the neo-feudalist strategy the elites have deployed to meet that challenge (going off the gold standard was an effect of this, not a cause of anything; they had to financialize and shift to an expnential debt economy according to the neoliberal battle plan). But even among those who are aware that there’s any problem at all, the two most common kinds of response are dysfunctional.

    At one extreme we have those who think the problems of the system are just normal political problems which can be solved by “reform”, and besides, “technology will save us”.

    The opposite are those who recognize the truth but disdain any cooperative response or despair of the possibility of one, but who instead think they’re going to be able to ride it all out hiding in a hole somewhere. That’s the survivalist mentality in its purest form.

    There are gradations of both of these, and plenty of Peak Oilers who run toward one extreme or the other.

    But the truth is that this system, a terminal kleptocracy and entrenched, congealed oligopoly, cannot be reformed. And no technology is going to replace cheap oil. Energy consumption must resume its normal historcial level.

    And while we don’t yet know how capable the elites will be of imposing fascism and feudalism during the energy descent, we do know their malevolent intent. So to plan to hide and hope they’ll just collapse on their own is folly.

    The only viable course of action is to reclaim the real economy while purging the false, and build a new polity, doing both of these from the soil up. We have to recognize that the only viable human system left would repose all power at the council level, where all the decisions would be made.

    History has proven that the people can manage their own economies and politically rule themselves, and that the elites are without exception both malign and incompetent and have no legitimacy (that includes the elitism of “representative” pseudo-democracy).

    This is the only option which can redeem and maximize our freedom, justice, morality, and dignity.

    Direct democracy, full participatory democracy, is the only option left which can work (all others are now proven failures), and the only option which retains any moral credibility.

    Relocalization is also the only viable practical response to the practical constraints the end of easy oil will impose on our societies.

    Finally, organizing toward this goal is also the only way to defend ourselves against the depredations of the barbarians who afflict us. We need to break free of their top-down constraints, and find bottom up solidarity to fight back at whatever level of resistance is necessary. Hopefully passive resistance and non-violent civil disobedience will be enough.

    So this is what we need to do. To finish by returning to the original question, we must prepare, and part of the preparation is the ongoing public education campaign. But this campaign needs to become better coordinated.

    1. rene

      “But this campaign needs to become better coordinated.”

      Someone needs to put new heart into the blogosphere!

      There should be more co-operation of like minded individuals who show the worker-bees the way. This could be done via a discussion (think The Four Horsemen/Dawkins) of soothsayers like yourself, our host and people like Michael Hudson, William Black and Naomi Klein.

      This would send out the message that our thought-leaders are working together. Very important to be perceived that way.

      Unfortunately, our rulers don’t want harmony and co-operation in finding solutions for our problems which are really only technical in nature (just look at how many brilliant scientist and technicians we have).

      If there is solidarity, education and co-operation on how to get ourselves through this crisis… it can be done!

      There will be some individuals, however, who will do anything to divide. But then again, you knew this already.

    2. Progressive Ed

      Thank you for the excellent post. Linking fascism with the history of feudalism is excellent (neo-feudalism). (Did you see the article online yesterday that the Fed gov will soon be providing local municipalities $$ to buy up foreclosed homes). Of course, the governments are the new landowning lords. In this regard, I noticed the NYT made public today an idea being floated by the Inner Party: sell gov. bonds to continue to fund ALL public employee pensions at the present levels. And yes, the federal treasury would “backstop” any shortfalls.
      You wanted some advice: get a gov job or be relegated to the legions of the Proles.

    3. Chester Genghis

      I also vote for the truth approach.

      There are, after all, some reasons for optimism for a grass roots movement/realignment that may make real change possible:

      1) Many people, across the political spectrum, grasp the notion that we are nearly at or already at bona fide inflection point. Amid all the inarticulate, misplaced rage of the Tea Partiers, there are earnest people who recognize the need for fundamental change.

      2) The is an enormous commonality of interest among the overwhelming majority of people who are divided by social, ethnic, regional, & religious lines. These divisions have been very effectively exploited by the ruling/capitalist/corporate class for decades with phony, invented issues.

      This makes for a potentially momentous alliance if the grip of distraction & current identity labels could ever be broken. This of course would require a leader of sufficient stature & skill to foment the realignment.

      Nobody of that capability appears to be anywhere on the horizon now, but think of someone with recognized conservative credentials, like say Lindsay Graham, breaking with both major parties, firmly admonishing those who try to delve into distraction/identity issues, with enough personal integrity to rebuff smear attempts by the likes of Fox News, etc. focusing on issues that matter (localization, re-industrialization, de-financialization etc.)

      A remote possibility, no doubt. But possible…

      1. goes211

        Lindsay F-ing Graham? Seriously? If you think Lindsay Graham is the solution to anything other than the question “Name a neo-conservative who should be first against the wall when the revolution comes”, you should get your head examined.

  5. psyhohistorian

    AK should not paint all boomers or even any generation as the culprit in this situation. They should more look to individuals attitudes about life, society, sharing across age groups and develop community with folks of like values.

    I would encourage AK to help educate his peers about the real world as opposed to the life that the MSM and Madison Avenue would have Americans (and the rest of the world for that matter) live….aside from the wage slave part.

    I am someone who has the skills to live off the grid but choose not to do so because humans are, IMO, social “animals” and need interaction with others as part of their individual meaning. I think that there is no reason our social system should break down completely unless the rich make it so. There can and will be scary dislocations but if reason prevails and the sociopathic behavior we are encountering can be identified publicly for what it is, isolated and prosecuted to maximum extent possible, our society can get beyond our humanistic transgressions and rebuild an E Pluribus Unum republic that is a responsible global citizen.

    AK needs to understand that the human will to make positive changes is not going to come from any one generation but from a cross section of humanity that spans age as well as other boundaries. That is not to say that your generation and the ones following you growing up with the scientific knowledge that race is really a fictitious construct will not potentially spark another Enlightenment period where religion will finally be relegated to the mythological contribution to social policy, where it belongs.

    Turn off your TV and work with others to effect the changes you want in the world. Us old hippies thought there would be enough impetus for change in the 60’s and early 70’s but we were beaten down and co opted as a generation specific group. I would be happy to stand with you and others now and into the future to express effective moral, ethical, just and humanistic societal will.

  6. Grateful Reader

    @Foppe I don’t normally do multiple comments, but just this once…
    Blaming the Chinese for mercantilism is utterly absurd. It’s American CEOs who outsourced production to China so that they could take advantage of slave labour in a (nominally communist ho, ho, ho) totalitarian state. They thought giving the proletariat to someone else to deal with was a brilliant wheeze (which of course it was) but kind of forgot that you still need someone to buy your shit if you’re going to sell it – so they came up with credit de-regulation and real estate ponzi schemes to fund the proles instead of productive paid labor. I’m not trying to defend a Chinese state which farms prisoners for organs – but trying to blame the Chinese for the collapse of the US is exactly the kind of thing which will no doubt spark off the final conflagration.

    1. DownSouth

      I agree.

      The fly in the ointment is not the gold standard or mercantilism, but as attempter notes “neoliberlism.”

      Neoliberalism is implemented because it serves, and rewards, the short-term interests of select economic elites. It is the triumph of the individual over the group, and the sacrifice of group fitness on the altar of individual fitness. It is a short-term strategy, however, because it destroys the glue that holds society together. Once that glue—-the sense of cooperation that makes groups function—-disappears, everyone within the group suffers.

      Neoliberalism is how all “churches” end. It is identical to Christianity in that it began in the 18th century as a highly idealistic, liberating and egalitarian ideology in search of social justice, only to wind up the ideology of the ruling elite. Just like “Christianity” became the religion of the European aristocracy, liberalism has been transformed into the ideology of the ruling elite, having undergone the same perversion of initial intent. What was once the religion of the oppressed has become the religion of the oppressor.

      1. Ming

        As a christian who has some knowledge of history and who actively reads the Bible, and who is not a ‘literalist’, I would say that the ‘church’ has forgotten it’s core mission of compassion, truth, and community sometime in during the medieval period of Europe, when the church became a
        political power and sought to dominate the kingdoms of Europe. The crusades and the Inquisition, the tacit support of the slave trade, are also clear signs that the church has lost it’s way long before the 18th century.

        1. Doug in Chicago

          I think you have to go a lot further back than that. Try the reign of Constantine and the Edict of Milan in the 4th century. That’s when the church discovered real power–and liked it.

    2. Foppe

      Blaming the Chinese alone was not my intention; apologies for that. Yes, the choice to outsource (which has no advantages for anyone except CEOs/shareholders, as prices have not dropped enough to compensate for the loss of wages/income on the part of the consumption side) was made, and made possible, by the Neoliberal belief that profits are indicative of wealth and the health of a society – and because everyone who opposed that stupid notion was laughed off the scene, so that we now have an entire generation that was raised with that belief.
      (Having said that, this problem would be less poignant if the largest supplier of labor did not have an artificially pegged currency.)

    3. AnastasiaBeaverhausen

      This is so right on. To add to your point, Greenspan spoke about how tapping credit actually added to one’s net worth. (Not one person questioned his ridiculous assertion.) Credit is how they kept consumption up as CEOs outsourced jobs forcing wage stagnation, which is exactly how the oligarchs like it.

      Guess who said this:
      “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.”
      Alan Greenspan in 2004 speech

      And yet he is still the economic go-to chump.

  7. Graveltongue

    How do we wean humanity off the teat of certainty? Do we design a society with a robustness that can withstand cataclysm or does our need for stability and control create a brittleness through ever increasing complexity? Maybe a return to a more nomadic hunter gatherer type existence is our only hope?
    I thought I might sell up and buy a boat. Pack it with renewable energy tech and wait for the dust to settle but I have a young family and convincing anyone, especialy my wife, to ‘head for the lifeboats’ is a big ask.
    I couldn’t, for a moment, consider giving up, burying my head in the sand. It’s the greatest show on earth and I want to witness every blood curdling moment in HD and 7.1 surround sound.

  8. Grateful Reader

    Oh dear, and now I can’t help myself. Graveltongue has been reading to much Ayn Rand again and has mistaken his Gucci loafers for a leopardskin.

    1. Graveltongue

      I’m hurt. I don’t own anything with Gucci written on it, let alone a pair of loafers and one day I might even get around to reading a book but there is so much good stuff on TV I don’t really see the point. Anyway, still making up my mind about this and that so I’ll try to avoid making snap assumptions.

  9. purple

    When this sucka goes down, we will all go down unless there are some established alternatives.

    Smart people need to come up with alternatives, and not things like ‘real’ capitalism or ‘real’ communism.

    There’s absolutely no guarantee we won’t have a 500 year Dark Ages again – but globally. Europe had one, and China has had more than a few.

    In the meantime, we dance.

  10. Brick

    There appears to be two slightly different issues here. The first is whether income equality will revert to what it was last century and given a long timeline I am not sure what the real mean is.Typically too high an inequality leads to revolution whether peacfull or not. The second is about the worth of skill and craftsmanship which I think has deviated quite away from the norm.The salesman and marketer will quite often be better rewarded than the guy who developed the product.Speed of information and consumption style changes have played a big part in this, but going forward I can see changes in consumption style which will begin to reverse the process. Consumers will start to ask questions about how long things will last and how effiecient it is, which will change the focus from short term fashion aspects to real properties of goods.
    To answer the question, you have to guess at timelines and my feeling is that things will move very slowly. So you should continue to reveal truths of transgressions to the public which may accellerate any end game and will at least give you a moral boost . At the same time you should make modest preparations for any significant changes in circumstances.Modest meaning you still engage in society, but are better prepared than the next guy.
    I am with Yves on this, that killing the dreams of young people is probably the worst consequence of the current state of society.

    1. DownSouth

      Young people must create their own dreams. They must be radical and innovative, because the liberating methods of their forefathers invariably ossify into the oppressive insruments of the status quo in a new age. Perhaps no one put it better than Thomas Jefferson. This quote of his is engraved upon his memorial in Washington DC:

      I am not an advocate for frequent changes in laws and constitutions, but laws and institutions must go hand in hand with the progress of the human mind as that becomes more developed, more enlightened, as new discoveries are made, new truths discovered and manners and opinions change. With the change of circumstances, institutions must advance also to keep pace with the times. We might as well require a man to wear still the coat which fitted him when a boy as civilized society to remain ever under the regimen of their barbarous ancestors.

    2. Gordon

      The point about whether income inequality will mean-revert and, if so, to what mean is an interesting one.

      My sense is that there are (at least) two means (more if you count pre-industrial societies). The first is that of functional democracies as experienced by the US for most of the 20th Century where inequality is relatively low. The second is that of banana republics where a tight oligopoly monopolises power and wealth and inequality is extreme. Neo-liberalism provides the path that leads from the first to the second.

  11. Neill

    It’s a fair question. For the most part, people are aware transgressions are committed everyday for a variety of motivations. So, the “forthcoming panic” may be a bit hyperbolic, at least up to the point food becomes a scarcity. I was in the same place as this individual 25 years ago, except I wasn’t making 11/hr, but half that as a college grad earning minimum wage. Certainly, a percentage of grads got starting salaries at 50k, but that was a small percentage and one must understand we are in a protracted recession that will require the resources and ingenuity of all to overcome.

    The correct answer is both. Educate and prepare. I’m occasionally reminded of Peter’s exhoratation to the people gathered in Jerusalem on the day of Pentecost,

    “And with many other words he bore witness and continued to exhort them, saying, “Save yourselves from this crooked generation.” (Acts 2:40)

    Ignorance is the enemy and the more educated people are, the better prepared they will be. The real question is, what is truth? And the answer in that regard, God has already told us, is his Word, the Word of Truth.

    Everyone must have a frame of reference outside of themselves in order to learn. When your reference is the standard for truth, then your paths will be set straight. Certainly the paths of this world are not straight. Thankfully, we have the truth available to us, the truth which sets men free. The alternative is darkness and enslavement. Which will you choose?

    “Confess with your mouth that Jesus is Lord and believe in your heart that God raised him from the dead, you will be saved. For with the heart one believes and is justified, and with the mouth one confesses and is saved.” (Romans 10:9-10).

    Saved from what? Saved from the wrath that is to come (Romans 5:9; Ephesians 5:6; Colossians 3:6; 1 Thessalonians 1:10). Whether the end times are upon us or not (Matthew 24:36), it should be readily apparant that there is much that is not right in the world, Thankfully, the truth is available, and we need not be decieved.

    And, since you brought it up, Yves, if we continue down the stimulus path, the situation in Japan will be a precursor to our own, . Wasn’t Geithner supposed to the the student of the Japanese recession, and Bernanke a student of the Depression? After global stimulus fails, and protectionist policies set in, it seems we’ll have the worst of both worlds.

    How bad will it have to get, before the dawn breaks on a new day? I’m reminded of the American national anthem, and the circumstances of Sir Frances Scott Key in penning the lyrics, because our freedom as individuals and as a nation are most certainly under attack. Although, the enemies of state aren’t external, but of our own doing. Since the end of WWII, the national debt has grown in disproportion to the rate of inflation, and we’re on the leading vertical edge of debt accumulation. This rate of spending cannot be sustained. The very fundementals of which the post war economy is based must be examined. Corporate American has routinely purged it’s ranks of less producing members while the public sector has only gotten larger. Society cannot afford everything the Federal Government has promised, with tens of trillions of dollars in unfunded federal entitlements. Every budget hawk has known talk of reducing the deficit is meaningless without addressing entitlements, yet there has been no political will. Will the suffering of millions upon millions be enough to bring about a day of reckoning?

    Public sector spending is crowding out private investment, investment that creates jobs. The longer it takes for the Federal Government to get spending under control, the longer it will be before our economy begins to recover, if ever.

  12. BillH

    Like AK, I have been reflecting on where we are headed, and one thing has become clear to me: Americans are a generous people, but a very large part of this nation has absolutely no interest in creating a just society. They believe in every man for himself, I’ve got mine, Jack, grab yours and let the rest go hang. There are many root causes for this, but I don’t know if it will ever be possible to change this fundamental character trait.

  13. rjs

    “Should we continue in the attempt to bring the truth of transgressions to the public, or would our efforts be better spent preparing ourselves for the forthcoming panic?”

    “we” is universal, & a lot depends on who you are; those like you & russ should of course stay on the vanguard of the soothsayers, but those who are young like AK may better invest their time in learning & preparation…

  14. Jessica

    I think the real driving force behind this is that the economy has reached a point where non-material production (knowledge in a broad sense from technology to Lady Gaga) is the cutting edge. But our social systems are designed for material production.
    So whole fields of profitable investment and good jobs never come into existence or are warped by the constraints of what is monetizable.
    Second, social development and competition between societies is basically about the amount of coordination a society is capable. That coordination can be cooperation or coercion.
    Cooperation is more desirable but big shifts from coercion to cooperation (for example, increased racial and gender freedom since the 60s) often reduce the total coordination and make the society vulnerable.

  15. Grateful Reader


    Have you actually read the Bible, apart from the hellfire bits?

    In particular have you actually read Acts of the Apostles?

    Acts 4, verse 32 “Now the company of those who believed were of one heart and soul and no one said that any of the things which he possessed was his own, but they had everything in common”

    or perhaps more to the point:

    Matthew 6, verse 1 “Beware of practising your piety before men in order to be seen by them, for then you will have no reward from your Father who is in heaven.”

    or even more to the point, Matthew 6, verse 19 “Do not lay up for yourselves treasures on earth, where moth and rust consume and where thieves break in and steal”.

    Or best of all: “Love thy neighbour as thyself”.

    Just how do you reconcile being a purported Christian with being a rightwing nutjob??

    As DownSouth points out, it’s a sad day when good religions get taken over by bigoted elites.

    1. Neill

      I’m curious how my post was holier than thou, or that you would conclude I’m a wing nutter. Other than we have differing opinions. I’ve come to recognize attacks motivated by anger, and I’m thankful for the God-given right of freedom of expression. Apparently though, it doesn’t sit well with you, however, since you conveniently omitted rebuttal to anything I stated, I’ll assume you have none.

      1. Lil'D

        I don’t particularly care one way or the other for the scripture quoting, but you did say:

        Public sector spending is crowding out private investment, investment that creates jobs. The longer it takes for the Federal Government to get spending under control, the longer it will be before our economy begins to recover, if ever.

        which might have been a reasonable concern several years back but just isn’t true right now. Private firms are sitting on just under $1T of cash and not spending/investing it. It’s not because the feds are taking all the good projects… it’s because there aren’t things to invest in. If they all took, say, 10% of their stockpiles and hired, that would be a nice stimulus. But there’s no incentive – the one who spends his cash last wins in this environment.

  16. Ina Deaver

    The hubris of youth! They always seem to think that they are the first to experience anything.

    When I got out of college in 1990, things were fairly good; I still couldn’t find a job. I got one, through patronage, making $5 an hour while I waited for the start date of my graduate school. The very concept that people came straight out of college making $50k is the dumbest thing I have ever heard anyone say. Good corporate starting salaries were $24k back then; of course, AK may have just done a conversion of the purchasing power of that $24k to the present. . . .but I guarantee you that the difference was that his parents’ generation understood that your starting salary was less important than your ability to move UP. Today’s kids appear to want it right off the bat.

    When I got out of graduate school in 1992, things were genuinely crappy. I’m sure you remember 1992. I took a job with a temp agency, while waiting for a hiring freeze to end in government, and worked as an executive secretary. Yes, with a masters degree, fluent in several languages, I worked as somebody’s secretary because it was what I could get — and they did hire me from the temp agency, because they wanted to keep me. But I seem to remember that job paid $27,000 a year, and I took the permanent position (having told them I couldn’t promise more than 9 months on the job, if something came up in my field). It was just impossible to turn down a salary that high. My husband, lobbying for a nonprofit, was making $17,000. My starting salary (in 1993) in an appropriate job for my degree field was $32k.

    After all this time working, I am not better off than my parents – not by a long shot. A lot of my generation seem to be caught in a bind of being too old to get hired, but too young to retire. It seems to me that it is the kids who want an apartment of their own (??!!), an iphone, an ipad, a flatscreen, organic local $8 a pound apples, etc. etc. that are a little nuts. When I was a young worker, everybody I knew lived like I did: housewares acquired from your mother or a garage sale, group house living arrangement, ramen as a staple. You figured you’d move up.

    So what my life taught me, which AK might consider, is when in doubt, have impeccable phone and correspondence skills and excellent touch typing. Be more than willing to work at what there is available with your eye on where you want to go. Each job you do, think about what skills you are building and what skills you ultimately will want to be able to show to your ideal employer. Live well within your means. Group houses usually mean SOMEBODY got paid this week, and can spot you a beer.

    1. tyaresun

      I accepted my first academic position in March 1990. When I joined the university on August, the first letter of welcome was a 2% paycut. This was before I received my first paycheck.

      When my wife graduated in 1992, there were no jobs for her in the university town. She offered to start working for FREE, got a temp job, and was paid minimum wages for a month. This is for a computer science graduate from a top 20 university. After a couple of months, she got a $30k job offer from the local bank and her employer who was paying her minimum hourly wages immediately matched the offer.

      We have a daughter in college right now. While we worry about her future, we are confident that she will be able to find employment.

      I am an immigrant and have experienced other countries. I had choices when it came to choosing a country to settle down in. Believe me, the USA is still a great country with a good future.

      1. Ina Deaver

        Yes, Tyaresun, 1992 was quite a banner year, wasn’t it? I’m glad that we’re on more solid footing now – for the moment.

        I’ve done my share of working for minimum wage – please give your wife my regards. She was very prescient in her choice of career paths, it just took some time for that line of work to heat up.

  17. jake chase

    This from a perspective of sixty-eight years. For at least the last forty-eight I have been watching the unrolling disaster which now seems to have finally registered with the optimists. The good old days you are mourning were not so good for those who did not soldier ruthlessly inside the corporate day dream on just the right track. For everyone else, they were lucky if they bought a house at the right time in the right neighborhood, married a spouse who carried his or her burden lightly, and produced children that escaped the perils of the entertainment and education systems which themselves pretty much guaranteed the emergence of a drug culture that has made most of the cities and many of the suburbs a living hell.

    There were far more losers than winners, but everyone pretended that the losers had no one to blame but themselves, and even most of the losers bought into that idea. The winners congratulated themselves on their addiction to work, their attention to the financial and real estate markets, and it is only now that these markets have proven to be death traps largely rigged that we have this sudden outpouring of hand wringing and social concern.

    The past isnt coming back. The only thing which has changed is an uptick in the number of losers. Those marketing social solutions have always been charlatans and it is probably not a good idea to trust any of them now. How many otherwise intelligent and educated people fell for Obama? My guess is just about all of you.

    In a dog eat dog world solutions are individual and probably temporary. Give up illusions and face the world as it actually is. Survivors will be debt free and will have developed skills they can trade for what they need. Think small. Do not actively court social unrest. The history of revolutions is not encouraging and the country teems with people who will happily gun you down in exchange for three hots and a cot.

    1. doggett

      “Give up illusions and face the world as it actually is. Survivors will be debt free and will have developed skills they can trade for what they need. Think small. Do not actively court social unrest. The history of revolutions is not encouraging and the country teems with people who will happily gun you down in exchange for three hots and a cot.”


  18. Richfam

    He went to college and now he has to take a job as a clerk? Oh no, end of the world he didnt get his VC financing. Give me a break.

    Things aren’t given to most people in this world and now that there’s more poeple competing in the globally maybe its a little harder.

    Buck up, take the clerk job, maybe work some overtime and move up through hard work, politics and luck. Welcome to the real world.

    You have to create your opportunities not wait for them to be given to you.

    1. Chris

      THIS!! I have to think that its every generations predicament that starting off in the real world is not a cake walk. Nor should it be. I can understand how after 17 years of education having to prove you can work smart and hard is a shock, because I’ve lived it. I graduated 10 years ago and every single one of my friends started out at 10 dollars an hour or less, and every one of them wanted to burn their degree.

      Employment and wages have gotten a lot better for every single one of them.

  19. ds

    AK pinpointed the event, just maybe for the wrong reasons.

    The closing of the gold window allowed foreign nations to run trade surpluses against us without fear of a balance of payments crisis that such imbalances would have triggered under Bretton-Woods. Although China is now the biggest culprit, many nations around the globe have adopted mercantilist policies designed to promote their domestic manufacturing sectors and cater products to the very large and stable US consumer market. These industrial policies have decimated demand for manufacturing employment in the US, which historically formed the base for lower and middle class wage growth. The trade deficit has kept wages in check even in times of high growth and employment, and led to the dramatic decoupling of wage and productivity growth, and the historically high inequality of income characteristic of our economy of today.

    The abandonment of Bretton Woods eliminated the last financial barrier to effective fiscal policy. Because our currency freely floats and is non convertible, government, free of all financial constraints, can always provide the demand necessary to maintain full employment. The problem is that the closing of the gold window took place during a time of exceptionally high capacity utilization, and was followed coincidentally by the oil shocks of the 1970s. Economists interpreted the stagflation of the 1970s as a failure of demand management policies. As a result of this paradigm shift, the majority of mainstream economists now place primary importance on monetary policy and pay little attention if any at all to fiscal policy.

    So the world did change substantially after the gold window was closed. It created the space for the large trade deficits which have flat-lined middle class wages. And although it is true that, via fiscal policy, government has full-authority to remedy the situation, our leaders choose not to exercise such authority out of deference to a mis-guided economics establishment still stuck in the 1970s.

    1. Altoid

      ds, maybe I’m missing something. When Bretton Woods was set up, one explicit geo-political goal of that regime was to build up industry in Germany and Japan by opening the US domestic market for them. (Even before that, we followed a policy of considering Canadian manufacturers to be “domestic” for purposes of defense contracting.) So encouraging imports wasn’t a casualty of going off BW, it was one of the points of BW and associated institutions. And we also exported capital on quite a big scale then, though mainly I think in search of a consumer market.

      We also exported a hell of a lot or goods, mainly because we had the only civilian industrial plant left standing and our ag production was untouched. But we also financed a great deal of that by making loans to the buyers, in dollars. The loans meant we further encouraged imports so they could earn the dollars to pay them back.

      To reassure the countries that were going to hold dollars, BW set up the dollar-gold equivalency. It was for them, really, not us. And it encouraged them to export to us, which would bring in dollars, which gave them reserves on which they could expand their own currencies in a way they couldn’t if they stayed on gold themselves. To grow, they needed to export to us. That was the logic of BW and the institutions set up around it, it seems to me.

      Encouraging all this seemed to follow from what mainstream politico-economic thought said was responsible for all the horrors of WWII, namely Smoot-Hawley and protectionism. Didn’t want that again.

      Our biggest problem in that sphere, to me, has always been the way we’d spun around and done a 180 on trade after WWII– historically we’d really been protectionist, aside maybe from Jefferson– but all we ever heard from about 1947 on was “free trade good, protection bad.” Free trade became some kind of bedrock truth that could never be questioned, rather than the policy decision it was.

      So we’re the only major trading nation I can think of that’s been stupid enough to abandon strategic mercantilism across the board (though we’re protectionist enough in some segments). Under that cover, capital has been free to flee the country and tell us it was doing the right, rational thing. And if imports are cheaper, well, why worry about your neighbors’ jobs?

      Not so bad in the 50s and into the 60s, but by the late 60s the Europeans decided Servan-Schreiber was right and began to create a protectionist zone under the umbrella of free trade (though it was free among themselves only). Japan’s exports to the US became increasingly high-quality and accelerated, while they protected their domestic market. Later the Asian Tigers (remember them?) followed the same plan. Most of the rest of the world, it seems to me, has been developing clever protectionist patterns, while we refuse even to consider the possibility because free trade has become an Eternal Truth.

      And we, in the meantime, have been busy exporting capital (while a lot of our own productive assets have been bought up by non-US investors; I wonder what they see that we don’t?), which the capital exporters can always justify on the sacred grounds of free trade. Importers, of course, say the same thing.

      We’re out in the cold, but I think basically we took a long slow walk out there ourselves.

  20. fiscalliberal

    One of the reasons I read NC first in the day is it has a high probability of rational thought along with readers of the same ilk. Regarding off grid – as finance continues to dominate and manufacturing and the labor content of agriculture continues to diminish, we are going to continue loosing middle class and people will have to go off the grid. It is happening in rural america today.

    However, I hope Yves starts to discuss Monetary policy and trade issue more. Watching Geitner yesterday testifying to congress, I get the impression that he is a light weight. Talking tough regarding China, but no action. Like George Bush he is all hat and no cattle.

    Yesterday the WSJ had a article about how Auto is surprised and worried about China wanting technical secrets and said all joint ventures will have China companies in control. How could Auto not see that comming. Furhermore, real product development goes to those companies doing their own manufacturing. Since we choose to not manufacture any more the edge will shift to China.

    So – in the end, the Yves sense of realism is what is refreshing

  21. Snore


    Silly, silly, silly. Who outsourced production to China and why? (Clue: it certainly wasn’t the Chinese, although clearly Mr Mau *was* quite good friends with Tricky Dicky & co.)

  22. koshem Bos

    AK’s concluding questions are logically unrelated to his post’s body.

    should we continue in the attempt to bring the truth of transgressions to the public, or would our efforts be better spent preparing ourselves for the forthcoming panic

    Just because we have two parasitic administrations in a row who fed the extremely rich and neglected production, the poor and the middle class does not imply a forthcoming panic.

    AK also implicitly assumes that college graduates are entitled to high salaries just of of the blocks. We do have many major problems, and 10% unemployment is tragic, but that situation is not axiomatic. With a less dysfunction presidents the figure would have been much lower.

    America is no. 1, as the crude statement has it, is a transient situation. Britain was no. 1 and is now hardly number 5, still, the Brits have a decent middle class and less poor poor. I don’t see a “forthcoming” anything. It depends on our choices.

  23. Tom Crowl

    Keep trying to wake people up. But it’s going to be tough and success is not assured.

    As for ‘preparing for the panic’…

    I’m finding some interesting ideas in P2P Theory (Peer to Peer) regarding sustainable economic models:

    The Political Economy of Peer Production

    P.S. They’ve recently re-posted one of my short pieces (link below) and have asked for me to submit a series on the Commons-dedicated Account concept so I’m naturally biased:

    On Creating Communities

  24. The Philosopher

    For AK — every generation faces its share of disappointing wakeup calls. Imagine the graduating classes in the 1960’s that faced a choice between going to Vietnam or breaking the law. Imagine the class of 1940 staring into the maw of world war.

    From the perspective of someone who watched politics since Nixon bugged the Watergate, Obama administration is winning the good fight where they can, and cleverly positioning forces for change in the places where the pigs hold too much power. Have patience youngster. Life gets better.

  25. BS

    “parents, with the same level of education 25 years prior, were able to leave and find a job with a $50K starting salary, no sweat.”

    What universe was this in?

    1. Pelle Schultz

      Indeed. Twenty years ago, I remember spending 6 months looking for a job after graduation (and this with a degree in science from an Ivy league school). Best offer, to work as a research tech? $23K. Grad school quickly became the best option.

  26. Keating Willcox

    1. People have to live with the choices they make. For most of history, you went to where the jobs were, and you took a drone job to get a paycheck. I don’t see long lines of unemployed engineers, especially oil and coal engineers.

    2. Where did the manufacturing jobs go? Same place the farming jobs went. Manufacturing did not go away, our companies, including car companies are far more efficient, and need far fewer employees.

    3. There is so much waste in the federal government that a courageous government could solve almost all our debts by kicking people off useless gov’t jobs, and by using private pricing and private services to compete for medical dollars, as they do in Germany and Switzerland.

    4. When we negotiated with China on trade, we gave away the store. All future economic negotiations need to be USA first and fair.

    5. We could easily cut back a third of our military an maintain excellent defense.

    6. Solution to our woes is obvious. The depression of 1920, quite severe, was solved by shrinking the govt, reducing taxes, and bailing out no one. We should be doing exactly that.

    7.Internet based education will be the new social mobility. Folks with no money but good work ethic will advance by taking inexpensive Internet based courses and provide the new leadership.

    8. Folks wanting to come to the US should be welcomed to ease our demographic problems. Only folks with a legit HS diploma allowed in, or those who are willing to earn one quickly. No entry for folks who are unwilling to work hard.

      1. Deus-DJ

        The only problem with this is that you need growth…and policies put in place to encourage growth of industries without soaking the consumer is something else that should be added to your list, but then it would be considerably longer than 9 words or whatever.

    1. gargun

      Medicare for all = DEBT for all!
      End the wars = A GREAT idea!
      Soak the rich = Socialism at it’s worst!

      The answer is always more LIBERTY, not more SOCIALISM!

      Here are my 9 words:

      Balance the Budget!
      Repeal the 16th!

  27. robby

    All of our problems are political

    I’ll go against my nature an be an optimist.

    For most of human history (and even now for most human beings) our primary constraints were practical problems like getting enough food. All of our problems now are political.

    We have the technology to deal with peak oil, water shortages and probably even global warming, if we act quickly enough. Science and the achievements of the scientists have taken us to this point.

    From here the social scientists need to carry the torch. The economists, the foolish, bumbling idiot economists, rushing now to explain a disaster they created but still could not predict—this is where the work and big ideas need to happen. We need to invent new ways to organize ourselves.

    What was the last, great social invention? Communism? In this country we still haven’t made good on the promise of All men created equal. Our political and economic system was designed for the rural, agrarian economy and culture we had 200 years ago. The amazing thing is that it works as well as it does.

    So, in the cyclic story of human history, a new frontier is opening, again. We desperately need to engineer new forms of government and even more urgently, new economic structures. These are exciting times. A new Rousseau is coming of age somewhere.

  28. Neill

    @Grateful, sorry to offend, but I’m curious how my post was holier than thou, or that you would conclude I’m a wing nutter. Other than we have differing opinions. I’ve come to recognize attacks motivated by anger, and I’m thankful for the God-given right of freedom of expression. Apparently though, it doesn’t sit well with you, however, since you conveniently omitted rebuttal to anything I stated, I’ll assume you have none.

    Surviving this crisis is going to take more than arm chair whining. Incumbents are going to lose big this year. So, we go into lame duck, and the battle will be for the Presidency in 2012. That is, if martial law hasn’t been declared and we even have elections. We should take the opportunity, before another crisis hits, to consider how to pay for the tens of trillions of dollars of unfunded federal entitlements, or whether it would be best to write it off, and put everyone on needs based social security and medicaid. Why someone who served the public should have a better retirement than the constituency they serve is a symptom of the high mindedness of which Grateful Reader accused me. But without this kind of pragmatic approach to solving the public sector spending problems, the end will come suddenly. Twenty years is not a long horizon, and no one is projecting the current system will last any longer than that. There are those who will prosper regardless, but I would rather stand on principle and lose, than win at any cost, including making spurious personal attacks with no basis whatsoever in fact. The next 26 months before the November 2012 elections are going to very interesting. Let’s see if you left wingers can come up with anything better than lamentations over the failed 70 years of deficit spending. I have nothing against social programs, provided they meet cost/benefit criteria and aren’t paid for with borrowed money. Unfortunately, too many if not all government spending fails to meet either criteria. One could say the writing is the wall, and it remains to be seen how the voter will react and how we respond as a nation. One thing is for sure, the status quo is untenable with high public sector spending and high unemployment. As much as I hate to say it, more public sector spending is not the answer.

    1. eric anderson


      I appreciate your comments. I wonder how many here agree with them, understand that we must have a proper template and grounding in Truth to interpret the world around us, but are afraid to speak plainly as you have done.

      Your response models the adage, “Brevity is the soul of wit.” Of course we Christians do not oppose aid to the elderly, sick, poor, if those programs meet practical common sense (oh dear, a Palin phrase) standards of efficiency, effectiveness, and ability to afford. It is moral to give of one’s own substance to help another in need today. It is immoral to spend a future generation’s substance to perpetuate subsistence of a permanent underclass, or permanent dependence of a huge percentage of the populace.

      These are all moral issues. We must be compassionate, but also use a little intelligence about cause and effect, a little prescience to see the future consequences of the current irresponsibility and corruption of government.

      Without an underlying moral revolution and change of values, no political revolution at the ballot box can ultimately succeed.

      1. nobody

        @ eric anderson


        Come, ye blessed of my Father, inherit the kingdom prepared for you from the foundation of the world:

        For I was an hungred, and ye found the standards of practical common sense, standards of efficiency, effectiveness, and ability to afford sufficient to support giving me meat: I was thirsty, and ye found the standards of practical common sense, standards of efficiency, effectiveness, and ability to afford sufficient to support giving me drink: I was a stranger, and ye found the standards of practical common sense, standards of efficiency, effectiveness, and ability to afford sufficient to take me in:

        Naked, and the standards of practical common sense, standards of efficiency, effectiveness, and ability to afford sufficient to clothe me: I was sick, and ye found the standards of practical common sense, standards of efficiency, effectiveness, and ability to afford sufficient to visit me: I was in prison, and ye deemed it meet and in keeping with practical common sense, standards of efficiency, effectiveness, and ability to afford to come unto me.

        Then shall the righteous answer him, saying, Lord, when saw we thee an hungred, and fed thee? or thirsty, and gave thee drink?

        When saw we thee a stranger, and took thee in? or naked, and clothed thee?

        Or when saw we thee sick, or in prison, and came unto thee?

        And the King shall answer and say unto them, Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren in such cases as comport with practical common sense, standards of efficiency, effectiveness, and ability to afford, ye have done it unto me.

        1. Skippy

          A mighty marsupial BOING! BOING! BOING! around the paddock.

          Energy_starts_within the suns core, it does not lament its state. Humanity on the other hand decides / chooses the distribution of energy, regardless to the state of its mass, and by laws (cough ancient theory) yet to stand up under scrutiny (starting w/ Thomas Hobbes and his critique of Moses authorship).

          Skippy…lament, lament, lament, trillions of debt backed exchange notes loom above, a trillion odd years and the lights go out in the universe (fuel runs out), we lament_our_own_absurdity…sigh.

  29. The humanity

    The struggle between denial and truth is as old as civilization. They both bear heavy consequences – especially to those who lack power. One is the path of the coward, and the other the path of courage. The choice is yours.

    1. Ming

      The search for Truth, the dissemination of the truth, and the debate and defense if truth are noble and extremely vital for the health of the individual, the family, and society at large. Without truth, there is
      no understanding of the situation or the problem, and without understanding, you cannot take proper action to address the roots of the problem, nor to act with compassion upon the groups involved.

      Untruths, Lies and deceptions only have
      power if they are believed, and acted
      upon. When they are discovered, people will stop acting in accordance with them . the truth has a life of it’s own. whether or not one knows the truth, consequences will still flow out it.
      I am confident that this is true whether it be a social or physical system or relationship, although it is most evident in a physical system. I. e. if your car has a problem due to a bad part, and you replace the wrong part, your car will still have a problem afterwards. Communism is based on the idealistic assumptions about human nature, hence it has never been successfully implented (from materialistic stand point) in any country that has adopted it.

      It is unfortunate that many of the political, financial, and the corporate elite believe that a persons perception is their  reality, that the truth is relative, hence they act ( sometimes with good intentions), shape people’s perceptions via lies, deceptions, and distortions of the truth. In the short term, this can cause people to act in the desired manner.  But if the actions advocatedby the elites do not address the root/ truth of the problem, the consequences will still continue or perhaps get worse,
      leading to a bigger problem, more
      damage, and much wasted effort.

      Knowing the truth also helps prevent panic… when people know the situation they can take proper action instead of being governed by excessive and irrational fears which is what leads to scapegoating and excessively harsh actions.

      So keep up the great work Yves… if only you could get your ideas to a broader base of people, so that they can lend political support to a true alternative. May you be blessed to see
      your ideas come to Fruition.  

  30. Dan

    My attempt at an answer: This is not an either or proposition.

    Continue to challenge convention and seek truths that will inform the public and assist in making better decisions than the current generation has made. You will be rewarded. By the time you’re my age you’ll be amazed that the things you saw as a youngster that older folks could not will have become “conventional wisdom.” But I warn you, be prepared. There will be younger people who will know better than you coming along. That’s the nature of social and economic evolution.

    As for preparing for the panic. My advice is always prepare for the worst, and you’ll always be pleasantly surprised when it doesn’t come. But if by preparing for the panic you mean abandoning society, I recommend against it. If you absolutely must remove yourself from the rough and tumble of life, move to Washington DC (the suburbs, not the actual city). It’s as removed from reality and as economically insulated as you can get. But don’t stay too long, or you’ll forget what it means to be human.

  31. Thomas Williams

    re: truth & consequences

    I’m pleasantly surprised to find one so youthful with as good a grasp as he has. Yes, he can be corrected on particulars but he’s got a good grip on the big picture.

    I agree on his choice of ‘when things changed’. That was roughly when the Democrats created and launched the Mexican Invasion which is running strong.

    In that and many other arenas we seemed to uncouple actions from consequences.

    To answer his final question. I’d say do both but with a strong orientation to survival both globally and indivually. Globally the worst is yet to come in all arenas and will not abate for @100 years, after human population has collapsed to a sustainable rate.

    The next 15 years (or so) will be the BEST he will see, after that we hit the wall.

    Trust me, I’m not a ‘survivalist’ or hysterical on most issues. However, this one is real. The question is “How much do we want so save for this young man and his children?”

  32. ron tough

    The cause of our problems, most simply put, are two fold. There are other contributing causes but these are the two major ones.

    1) unfettered access to credit. basically anyone could borrow as much money as they wanted for any reason over the last 20 years and it’s caused some serious misallocations in society. We had the housing bubble, the student loan bubble, small businesses with $1,000,000 SBA loans, credit card debt in the billions. NOw that the credit tap has been shut off, it’s causing disruptions which will eventually repair themselves. Yes you complain that the rich have gotten richer, but what do you think was the natural consequence of our society trading it’s future earning power for a 50″ flat screen TV? the rich are the beneficiaries of that transaction.

    2) disruption of society in numerous ways. we have so so so many children born out of wedlock. being a single mother/father practically dooms most people to a lower-middle class existence. Instead of just one household for three people, there are two households for three people, and that costs significantly more money. Then the state has to come in a pick up the slack. credit cards: so many people lived the dream during the bubble, they lived way beyond their means. and now they have to pay the piper. sure, blame the evil banks and corporations.

    or blame your trip to cabo, your brand new car, your $100,000 HELOC, or your room & board furniture, and your private catholic schools for your children. you paid for it all on credit and now it’s time to pay the piper. Yes your sold your future for the present and now that the future has arrived, what did you think it was going to be like?

    Now that we’ve addressed some of the root causes of these problems, we can address solutions.

  33. Grateful Reader

    @Grateful. Also sorry to offend – please don’t take it personally as I don’t actually know you, all I can see is what you’re writing.
    However, apology aside:
    I know how you’ll react as a nation. You’ll elect Sarah Palin and then the “fun” will really start. I always used to think the Swiss were a bit bonkers insisting every house be built with a nuclear bunker. Now it just seems prescient. But unfortunately there’s no way I could afford to live there. (I think you have to prove you’ve got $15 million or so in the bank for Swiss citizenship). I wonder how many in the GOP have got second homes there? By the way, I wouldn’t describe myself as a left winger (the terms left and right have become utterly meaningless) nor have I ever worked for the public sector and nor would I want to. That said, I think the whole planet is becoming rather afraid of “rightwing” American fundamentalist fruitcakes. (And when I say fundamentalist I don’t intend to imply that the term has anything to do with what is espoused in the New Testament. Most American “fundamentalists” don’t seem to have got much beyond the Book of Genesis).

  34. Avg John

    We need a realignment of interests.

    I think that there is too much power and money concentrated in too few hands, and that has led to too much corruption. At the same time, I believe in free markets and rewarding innovation, hard work and perseverance.

    I think ESOP’s are one possible solution. Real support for small domestic businesses, with widely distributed ownership, an economic and political support network for “intra-esop” cooperation and coordination (pooled purchasing power), and generous tax breaks for domestic operations (yes, I’m a protectionist and proud of it).

    Instead of economic policy directed to protecting the investors of too big too fail financial institutions, investment firms and multi-national behemoths, develop economic policy directed to encourage and support those companies that engage directly in productive activities and services that provide jobs for my fellow Americans and place their interests first and foremost(tempered with common sense).

    The federal resources used to bail out Wall Street should have been used to bail out Main Street, instead. With generous targeted tax breaks for businesses based on their onshore labor base, ownership distribution, and domestic capital investments, and with tariffs on imported goods and components, at least until our trade deficits are reasonable and the U.S. is back on her feet. I realize that it will take some time for companies to plan, restructure, and prepare for such policies. I would encourage many larger companies to spin off much of their organization into smaller components to take advantage of ESOP’s, however I would insist on independent, widely distributed ownership with rules disqualifying interlocking ownership and control strategies.

    I wouldn’t be opposed to say 30 % of the capital being available for ownership through a special class of stock available to publicly regulated markets, coupled with very attractive tax rates and tax credit flow-throughs in order to publicly underwrite some of the risk and channel investment funds to these these small domestic businesses. Maybe mutual funds that specialized in investments of these types would spring up.

    I could see a grass roots oriented political party, that used technology to canvass and communicate heavily with their base, abandon support for the big global business model, and support small business that rewarded the entrepreneurs, rewarded the hardest workers and most profitable companies, yet promoted the welfare of all of the participants via profit sharing.

    If you are so greedy and intent on grabbing 99.9% of the real wealth that society produces, while the rest of your fellow Americans continue to slide into poverty, get the hell out of my country. I don’t want you here anyway because you are the problem and more than likely you are a crook as well. But if you want to succeed by lifting up America and your fellow citizens, by all means I want public policy and resources devoted to doing everything possible to make sure YOU succeed and are well rewarded. After all, it’s in the best interests of all of us as well.

    The executive management could optionally form their own ESOP’s, and contract their services out to other ESOP’s on a 1 to 3 year contracts (you know, kind of like the temp services you are so fond of), but ownership of the company belongs to the all of the employees (at least 70%) and the minority public investors ( 30%). Only companies that meet these requirements can avail themselves of these publicly supported services and tax breaks. I would like a similar model available to every country in the world and think it would go along way to restoring the economic health of other countries as well, but I am an American with a single vote, so what other countries decide to do is none of my business, but I could see global cooperation between networks of national ESOP’s with growing grass roots influence on shared common issues and public policy.

    Public policy directed to supporting that sector of our economy that is off-shoring our jobs, lobbying and corrupting our political processes, crashing our economy and impoverishing most of us, is simply insane.Its time we stop whining and take back America.

    Our interests are now aligned.

  35. lambert strether

    I think as long as the MOTU (Masters Of The Universe) don’t panic and turn on each other, slow collapse is the most likely scenario.

    Since the elites the MOTU are more or less completely insulated from the rest of us — given that there are now no institutions at the national level that are either electorally responsive or not rent-seeking oligopolies — nothing that we do will cause, or not cause, elite panic. It’s like trying to predict tomorrow’s weather.

    Therefore, I would say, “Carry on!”

    1. NotTimothyGeithner

      Its their nature to turn on each other. The rich have never worked together. Countries like France and England only emerged from the Dark Ages when the King started to be more of a statesman instead of merely the wealthiest lord and started to make common cause with the masses versus the elite. Wal-Mart and Wellpoint can’t both win. We almost had an utter collapse two years ago. Massive government intervention stopped the collapse, but as soon as someone isn’t able to pay (a major pension fund), the thing will collapse. This time there won’t be the political will to do it.

      I think the only reason the managed the last time was because most of the country internalized Obama as the next President or at least his approval of the actions, so they were able to do a lot of the bailouts.

  36. laughlinlvr

    The doomsayers need to account for the following in their hand wringing: professional sports and mass entertainment. They’ll provide plenty of distraction from economic hard times for the masses. I would like to see some sociologist comment on the huge popularity of talent shows. The subliminal message is that you go through trial to redemption and are then given your reward. This is not the regime previous generations were taught with the Horatio Alger metaphor.
    Also, I think a lot of the hand wringing comes from the privileged who see prospects darkening. They need to look at life on Indian Reservations, rural America and rust-belt cities. Even before the great recession prospects dimmed there significantly. What makes urban professionals immune to the same fate?
    It may not be nice, but Jim Crow with its “kick-down” regime was both stable and long-lasting. It also resulted in a formerly defeated southern planter class regaining their hegemony as a ruling elite. Why do the hand-wringers think it will be any different for them under the American investment class?

  37. apachecadillac

    When first required to fend for themselves, the Children of Privilege frequently remember a past Golden Age that they’ve been cheated out of through the passage of time. After the American Civil War for several generations white Southerners were fondly nostalgic for an antebellum world of plantation balls and happy darkies singing in the fields. The children of those slaves generally had their heads screwed on a bit better.

    My two pieces of advice to your correspondent are: firs,try to develop clearer habits of thought or communication. Even (especially?) graduates of elite universities can confuse. There is either a moral dimension to your plaint (‘wrongful’ victims of creative destruction?), or entitlement denied aspect to it (why can’t I have the future Dad had in 1975?), and before responding it would be helpful to have a clear idea of which. Second, try to find a new set of friends. Sounds like you’ve fallen in with a cohort that is addicted to the glass half empty perspective. Not that there’s anything wrong with critical intelligence, but nobody can build much of a life on foundations of defeatism, despair and resentment.

    I suppose children of the professoriate find working as a Creative at the local Apple Store less than satisfying. But it’s worth remembering that among their parents’ generation, for every graceful swan gliding from prestigous post-doc to tenure track at a Top 20 University there were always a couple of grunting ABDs eking out livings doing adjunct gigs at gritty community colleges.

    Finally, whatever else is said about those aging baby boomers, the mess they left behind in this country is nothing compared to the world made by the slaveowners of the old South. And in much of the world outside the United States, these are wonderful times to be young. So have at it.

  38. tom bodden

    Money isn’t everything. Life is rewarding without it as the third world shows us every day. Because the world events favored us from 1940 to the 2000 we experienced a fantastic period of growth. But times and conditions change. Moral fiber weakens. Special interest power grows, mostly to our deetriment. Strong and purposeful leaders become few, while self seekers and rent seekers abound. We become a stiff necked people.

    What are the options? Cry out to heaven, go to a different country, work hard for change. One thing I noticed about the recent election was the huge amount of money contributed by small givers. Buying hope or “change” they thought. Their candidate was successful even if they weren’t. The lesson is to seek organizations and individuals who are working to change the political infrastructure. If you want change, make it. Seek them out, support them, contribute to them, and let others know about them. Personally, I think the “Club for Growth” is one such group that supports candidates with many desirable characteristics, as does “Mish” Shedlock.

    good luck to you

    1. Doug Terpstra

      Hmmm, your first option, “cry out to heaven”, might have merit, but not so much the “Club for Growth” —which “…promotes a High Growth Economy through Limited Government and Economic Freedom.” Notables: Stephen Moore/WSJ, Cato Institute, Heritage Foundation, Kudlow, et al.

      Can’t follow you there, tom. To the CFG, money is everything. Theirs is the neoliberal, neoclassical economics of infinite growth, damn the environment, deregulation ideology that drove us into the ditch and IMO, wants to drag us over a cliff.

      CFG has more than 9,000 members, dominated by Wall Street financiers and executives. Ex-president and founder Steve Moore has called for closing several government departments, including Education, Commerce, Labor and Agriculture. Quotes from founder, Moore:

      “Reagan’s third term has arrived.”
      –Stephen Moore on President George W. Bush

      “I can say this because I’m not an elected official: the most selfish group in America today is senior citizens. Their demands on Washington are: ‘Give us more and more and more.’ They have become the new welfare state, and given the size and political clout of this constituency, it’s very dangerous. One of the biggest myths in politics today is this idea that grandparents care about their grandkids. What they really care about is that that Social Security check and those Medicare payments are made on a timely basis.”

      * http://www.rightwingwatch.org/content/club-growth

      Recent fright wing candidate support: Sharron Angle, Sue Lowden (pay your doctor with chickens), Rand Paul, etc.

      See also: “Humanity’s Defining Moment––join us Mish”

  39. Siggy

    Some interesting and some not so interesting stuff here.

    There are no good answers to the questions posed by AK. That is, there are several very good answers but they embody the acceptance of the fact that coming generatioons will be burdened by a worthless currency and an unserviceable level of debt, public and private.

    Want a cure, look to the currency, it is the core of the problem. It may well be that August 1971 was not the critical point in time. It was, nonetheless, the inflection point from which the acceleration of decline was initiated.

    When you see rapid increases in home prices, just what is in progress? Is it that the demand for homes has outstripped supply? Or, is that the purchasing power of your currency has been evaporated away in a maelstrom of irredeemable fiat money? Could it be that it is the result of both of the foregoing? Consider all the credit money that was created just for the purpose of buying a home. Consider all the fraud and chicanery that motivated all those moon shot price increases.

    AK, adapt to the low wages. Demand the truth and prosecution of fraud. Vote for representation that will be fiscally and monetarily sound. There is no easy fix. If that still leaves you dissatisfied, vote with your feet. New Zeeland, Australia and Canada are really pretty nice places.

  40. jaymaster

    I have to agree with the other posters that AK is way off base on how things were 25years ago. I graduated with a BSEE from a top ranked school in 1987. After 3 months of searching, I found a job at a Fortune 100 electronics company, at $27k per year. And EE’s were among the highest starting salaries that year. Oh yeah, no heath insurance for the first year either.

    And I had a “fast track” highly successful career there, where I earned multiple patents within 3 years. And I didn’t pass $50k until about 1995!

    If anyone made $50k out of school 25 years ago, they likely got their job through political patronage or some other form of corruption. And those are the very folks who sowed the seeds of destruction which resulted in our current environment.

    My advice: Get out of whatever echo chamber you are currently living in, and do some wider reading. You have obviously been mislead about the past, and without a true understanding of how things were, you will never be prepared for how things might be in the future.

    1. Siggy

      I made $50,000 a year forty years ago. I didn’t have a degree but I was well read and willing to hustle. I was a registered representative. I learned the finance business from the ground up and I learned it by reading and paying attention in the due diligence meetings. My clientale was almost entirely institutional and I earned my orders by obtaining good executions for relatively large blocks of securities.

      I never said I was a college graduate, nonetheless, my clients considered me a peer in that I had a very good grasp of the economics and the trend of the economy.

      It was my judgement forty years ago that we would come a time when our national reliance on credit would bring us to grief. That we would see the export of assembly and certain manufacturing jobs to places where the standard of living was substantially lower than here in the US. Why, it’s a labor cost arbitrage.

      As to the value of a degree, now that I have one no one cares, everyone has one. Tada, increase the supply and the price tends to decline. So just what should a degree give you? A career, or perhaps something else. The something else is the genuine value of education. It is the adaptability that is possible for the educated as opposed to lack of choices available to the uneducated. Being stupid is a fault of inability. Being ignorant is a fault of being lazy.

      1. jaymaster

        Sorry. I didn’t mean to imply that SOME people weren’t making $50k honestly 25 years ago. Just that for folks right out of college, that certainly wasn’t the norm.

  41. ron tough

    You all sound like a bunch of elitists. I just returned from a trip to child support court where my client’s baby momma is an illiterate illegal immigrant, with four children from three men, living off public aid, no job and no child support. She’s hereby practically doomed herself and her children and the fathers of her children to lower class existence. Meanwhile the state is paying food stamps, medical care, education, and eventually incarceration.

    This is a large part of our society today. You university educated liberals have idea what the ‘real world’ is like. Fix these problems and the economic will take care of themselves. These people are a drag on growth, a drag on society, a drag on government, a drag on those around them, they are net losers. And we’re all paying for it one way or another.

    These are the barbarians at the gates of rome. They’re ransacking our state’s finances and coffers, taking only what they believe to be valuable i.e. medical care and food stamps, and laying waste to the educational system and neighborhoods where they live. Debate all you want about a globalist system but these people aren’t responsible enough to handle a middle class wage, they would squander it all..

    1. chad

      My wife is a teacher at a low income HS here in Dallas. She came home literally bawling day before yesterday, her senior valedictorian is pregnant. The father already has two kids with other students. The girl is actually proud of her pregnancy, teen pregnancy is becoming a status symbol, and has no idea what she has done to herself and her prospects for a good life. At my wife’s HS the teen pregnancy rate is around 20%.

      Just my $0.02 anecdote.

    2. lambert strether

      That’s rational decision-making. Maybe those kids will take care of her when she dies a premature death because of her poverty and working conditions — because, er, people like you would rather she just go die.

      1. michael

        And people like you take pride in morally elevating themselves (or so they think) by attacking the messenger instead of proposing solutions.

  42. Dave Petersen

    Manage expectations: I was in the work force 25 years ago. Entry level jobs at $20K were good jobs. $40K was the pay grade for a software developer with five years experience in an era when software developers where in short supply and got a good premium.

    I’m not suggesting that it isn’t tough or even commenting on the arguement. Just noting that the baseline data is wrong, which makes the whole thing suspect.

    1. Anonymous

      $20K/year in 1975 dollars comes out to about $80K/year inflation-adjusted to 2010 dollars… Most of my peers (college-educated, mid-to-late 20’s) would be delighted with _half_ that, since it’s still way better than being part of either U3 or U6.

      1. Chicken Little

        Oh, snark possibilities. 25 years ago was 1985, not 1975. If you were better at math, maybe you would…oh, just kidding…

        But seriously, investigate the history of inflation and you will find that your 10 year error is abnormally significant!

  43. Namazu

    I would say to your young reader: knowledge is its own reward, and seeking “the truth” will help mentally free you to take care of yourself, your loved ones, and your fellow man. Don’t be dogmatic in insisting there’s only one way to organize the causal links of history. Take on board as broad a set on influences as you can. Don’t let your politics make you stupid. Don’t expect miracles: our current predicament is function of deeply-entrenched interests, widely-held beliefs, and the cruel maths of debt, demographics, and resource scarcity. To your question: policy-makers are in the thrall of the economists and their flawed metric, while the country’s frayed social fabric is at risk of shredding. Save the world if you must, but don’t let that pursuit preclude small acts of kindness and community. All the best!

  44. Disappointed

    AK’s email disappoints me. I’m always disappointed to hear of unmet expectations, and my disappointment only deepens when these let downs are not met with resilience and renewed determination. But I’m also disappointed when college graduates, who should have learned the importance of research and of fact-checking, are willing to build their view of the world based on little more than personal impression.
    AK is concerned about truth-telling at a level of generality that yields truth rarely while gliding over the details that can be checked. Is it true that college graduates in 1985 “were able to leave and find a job with a $50K starting salary, no sweat”? I graduated from an elite universty at that time. I recall my friends with engineering degrees struggling to find good jobs, and I personally struggled to find work, eventually landing a job as a paralegal–in the days before you needed a special certificate to be a paralegal. So, I can’t agree that good jobs were available, no sweat. But that’s just my recollection, and I don’t have the time to find reliable data that might support my generalizing my experience and recollection.
    I can, however, find reasonably reliable data on AK’s claims that entry level salaries in 1985 were $50K. Here’s a link to a 1985 BLS report on Professional pay in 1985 – http://www.bls.gov/ncs/ocs/patc_1985.pdf. Mean and median pay for entry level positions are mostly in the high teens to low twenties.
    In part stimulated by Ms. Smith’s screed against the neo-classical synthesis in economics, I’m reading an early (1958) edition of Samuelson’s “Economics”. He opens the text with a general description of the US economy. In the chapter on “Individual and Family Income”, he says:

    “In the absence of statistical knowledge, it is understandable that one should form an impression of the American standard of living from the full-page magazine advertisements portraying a jolly American family in an air-conditioned home with a Buick and a station-wagon and all the other good things that make up a comfortable living. Actually, of course, this sort of life is still beyond the grasp of 95 per cent of the American public and even beyond most families from which the selected group of college student comes.”
    Perhaps I should not be disappointed that the attitudes and opinions of a college graduate today are not more firmly rooted in the statistical knowledge readily available to us all, but I am. I expected more.

  45. El Snarko

    This is wayyy over the top too negative, and is,in fact unrealistic. Cultures in stress do give occasion for bizarre behavior (NPR had a great report on suicide bombers in this regard a few years back) and apocalyptic thought but that is knee jerk egoism. Poor me !! Poor us. Poor US…A.

    Neither Buenos Aires or Moscow have been abandoned and returned to feral Mad Maxing bands no matter how video game romantic that seems, and those cities have been repeatedly through far worse than I believe we will.Eastern Europe still finctions and Brazil is coming on strong.There are five crusial realizations that have to be internalized.
    1. The benefits from WWII are over. The rest of the world is now industrialized. Like our basketball team learned (several years ago) we can no longer win simply by showing up. 2. Purely technical advances will not be a huge elp because they awill be sold abroad and rapidly diffuse. 3. Based on the internalization of capital the ability of the nation state to chart its own economic course is no longer a self contained as it once was. A reassertion of the concept of “national capital” may be necessary. $.4. The EU nations have coped with the type of dislocations that loom here far better than we have. Since many of our forbears are from there it is illogical to believe that the merely interposing an ocean changes the nature of the beast. We WILL become somewhat more European in social safety net matters, although slowly, over too long a time, and in our own inimitable way.5.We will all have a bit less or else be ruled M’Lords and M’Lady by an aristocracy. If it please your gentle souls this “service economy” is crap. There is a reason anoutright mercantilist enterprise like China is after manufacturing jobs. Mao was wrong. Political power does NOT grow out of the barrell of a gun, but out of a smoke stack….or maybe the water treatment plant of a chip manufacturer. As I look around Ohio and Indiana the proliferation of “entreunership” evidenced by cell phone stores, furniture rental stores, lawn trimming businesses,real estate magnates with hosts of sub 20k properties, jewelry recycling extravaganzas I am wholly unimpressed. Financial innovation has trupmed competance and know how and we will pay for this for a decade. But not forever.

  46. Richard

    From my observations, declining living standards are due to nothing more than decreased competitiveness in the global market. There’s no intrinsic reason why the US should have such a high standard of living compared to the rest of the world. Foreign workers, if they work harder, should earn more. It’s more of an injustice that someone doing the same work can earn 10x the wage in NYC as compared to Quito, more than can be explained by cost of living. Clearly, there is much more labour arbitrage to go.

    In engineering graduate school, most of the PhD students are from China and India. When American students are asked about engineering, they consider it too hard or too nerdy a field. What does that say about their willingness to work hard? Other people are willing to sacrifice family, country, and social life for productivity, so why shouldn’t they be rewarded for it under a market system?

  47. Hugh

    It was going so well until the subject of gold was brought up? I was writing a quick overview of the history of our economic problems just yesterday. Basically, it was Carter and Volcker who made it fashionable to suppress wage growth in the name of fighting inflation. Reagan expanded the fight against labor but under the guise of supply-side economices, aka trickle down (one of the dumbest, lamest, and hence politically most successful flim flams ever devised), won tax cuts for the wealthy, beginning a 30 Years War of the rich against the middle class. This resulted in the hollowing out of the middle class and the substitution of fairly benign wage-related inflation with the vastly more destructive bubbles, frauds, and financial rigging of the paper economy. All this was facilitated by the buying up of our elites and the buying out of our political process by the rich.

    We now face an unregenerate and unreformable unholy triad of the rich, our elites, and the corps. What will happen from this is easy to predict. It will not be Japanification, some equilibrium state of misery and stagnation. The greed and stupidity of those who rule us show no signs of abating or even easing. We will have collapse and depression. This will be followed by either revolution and dictatorship, or just dictatorship. For those who think such outcomes look extreme, just look around. Bush, Obama, a series of corrupt Congresses, and a radically conservative (and highly “activist”) Supreme Court have shredded most of our Constitutional protections. They have presided over and directed the looting of the country, the government, and us. And they have constructed a surveillance state where all of our communications are registered, and our data gathered and data mined. Look at the “elections” we will have in less than two months, corporatist Republicans facing off against corporatist Democrats where the outsiders and insurgents are Tea Party candidates, i.e. Koch brothers’ sockpuppets.

    1. Doug Terpstra

      Thanks for the clear-eyed pessimism.

      Your thoughts remind me of DownSouth’s (way back) about how the New Deal catapulted the US, while Germany took a very different path—to fascism. DS’s Niebuhr quote seems to presage the new American Tea Party and ‘Churchian’ fascism:

      “…If we may regard Germany, where all the social and political forces of modern civilization have reached their most advanced form, as a criterion, none of the disinherited middle classes express themselves politically in proletarian terms. On the contrary they turn to fascism, which combines enough radicalism, to give the poorer middle classes some hope of better things to come, with the political strategy of anti-Marxian and nationalism, by which it gains the support of the economic overlords, who are afraid of the rising tide of labor. That the middle classes can be drawn into a party in which the wealthiest and the poorest ostensibly make common cause, is the measure of their political intelligence. Whatever may be the logic of their position in economic terms, they would rather express their resentments in a nationalistic spirit, and in minimum demands for the elimination of financial abuses, than in thoroughgoing economic changes. They will never be reduced to proletarian terms politically (even though they are reduced to those terms economically) until they have lost their cultural as well as their economic inheritance. Unlike the proletarian, they do not stand outside, but thoroughly inside, the national culture”. ––Reinhold Niebuhr, “Moral Man and Immoral Society”

  48. mistere

    The standard of living may be lower but undergraduates were not making $50k out of school 25 years ago. I graduated in 1988 with a BS, took the CPA exam and got job offers from 7 of the Big 8 the best was $29k. My engineering friends had salaries higher but the highest was in the high 30s.

    The return on college has also been impacted by the HUGE increase in costs driven by new facilities, higher salaries for faculty and multiple new program offerings with out thought about potential pool of candidates.

  49. Tao Jonesing

    I found AK’s email disheartening for two reasons.

    First, all too many recent college graduates these days seem to be having a hard time envisioning a future in their chosen field (or at all). While I understand that the problem is being exacerbated by the current economy, there is something fundamentally wrong, something that is making the educational experience and the job market fundamentally different from the era in which people like jaymaster and I graduated from undergraduate school. In April of this year I had two recent science PhDs (including a fellow MIT alum) seek my advice about getting out of science (and one hadn’t even started yet).

    Second, it seems that AK has been infected by the Austrian strain of neoliberalism, at least with respect to his economics. (Veiled references to Rothbard and Schumpeter are always a dead giveaway, although Schumpeter was not a neoliberal, they like to claim him because he was Austrian). One would think that the Austrian School (zero intervention) and the Chicago School (monetarism), which both grew up and around neoliberalism’s founders, would have a difficult time finding common cause on anything. The only way it makes any sense is if the Chicago School’s ponzinomics were to be used, as it has been, to claw back all the post-WWII earning power accumulated by the middle class, and the Austrian School’s feudalnomics were to be used to make that situation permanent.

    According to Milton Friedman’s biography, he actually recommended going off the gold standard three years before Nixon did so, although he may have been talking to Nixon in 1971, as well. According to a transcript of some of Nixon’s White House tapes, it was Paul Volcker as undersecretrary of Treasury who was the most vocal and insistent on abandoning BW.

  50. cindy biscoe

    Being a religious person I believe only in the truth, and while I feel that
    people do have to be prepared for the truth, since sometimes it can be so shocking that it can lead some people into insanity – I propose that we are now living in a period of mass insanity and are being led by people whose only agenda is their own power. All people have to
    have the responsibility to not waste the resources we all have, including we cannot keep spending good money from hard working people to fund children going to school and learning nothing. No one should be allowed to drop out of school – everyone has to be required to develop the skills to be a productive person for themselves and society, otherwise we’re just going to a new period of slavery (where the real ‘workers’ are slaves for the non-workers). Nevertheless its still the US going back to the delusion of mass insanity.

  51. tjmc

    I have to join other commenters above – people did not graduate from college 25 years ago and walk into $50,000/yr jobs “no sweat” That’s nuts.

    The refran that this generation will be the first not to live better than that from which it sprang is also nuts. That was a common refrain in the early – mid 80’s – didn’t seem to work out that way.

    Many other nuts comments in there too.

    The answer: Get out, get a job and figure it out. Work hard at the job. Keep improving our education. Take opportunities. Remove head from clouds and live.

  52. crazynutjob

    Focus on discovering the truth and you will avoid much panic. As you point out, preparing for the great panic might require a survivalist withdrawal. But throughout human history, participation, communication, and most important, empathy, have reduced the severity of panics. If we search for the truth, we have a possibility of prosecuting those responsible under a system of law that avoids angry mobs seeking “justice.” If we abandon that search, we effectively hand society over to the angry mob.

    I am a cynic, so I don’t believe we will actually prosecute those responsible. I also believe that in a system as complex as ours, we’ll find that the blame spreads around quite a bit. Nobody was necessarily the great mastermind (though I think a few crossed the threshold to where they should be prosecuted, voted out of office, fired, etc.). Nobody was completely clean.

    I hope the search for truth generates empathy between those who recognize their own dirty hands. The search for truth doesn’t explicitly require finger-pointing as much as it requires recognizing the true state of affairs and everyone’s mutual participation. The search for truth generates empathy between the truth-seekers and the audience they gather. I envision a much better future when we have audiences gather around the truth-seekers than the demagogues.

    There’s an additional reason to focus on searching for the truth: preparing for the worst helps bring about the worst. There are a lot of resources that need to be allocated to individual survival. There’s an awful lot of wasteful duplication if that becomes the focus. But mis-allocation of scarce resources is the reason we’re in this mess to begin with. If we hope to avoid a great panic, those resources will need to be allocated toward more productive uses. That requires entrepreneurs, not survivalists (though the entrepreneur survivalist is always welcome — I could use an REI in Santa Barbara).

  53. Strega


    The 2010 AVERAGE starting salary for a BS Chem Eng is about $65k (in the Great Recession no less). The downside is that you have to work hard and the subject is boring. AK should understand that India and China are full of people that are willing to work hard and study boring subjects to get ahead. The US middle class is “gutting” itself.

  54. Rick Halsen

    Many, the majority actually, have drunk from the passed-around Kool Aid cup. Most continued to drink until they went into convulsions and mouth foaming. Too bad for them. So it has been with our society. The entitlements, the money for nothing mentality. Yea, the Jim Jones Society is coming to an end.

    We got lulled into thinking that drink being offered to sate our thirst was safe. Now we find out it was poisoned a bit too much, too late. Well, for many of us it is. The one’s that have and will survive now know better to drink anything offered without extreme due dilligence. They have two eyes. They see it. That’s survival. Cognizant realization of dissonance. You preferrably learn from watching other’s make mistakes and not experience them firsthand for yourself unless well, you don’t give a damn or flat have given up fighting the wheel. You will perish though with that deal.

    This is now the age of the rugged individualist. The non-crowd follower. The Marlboro Man and the Annie Oakley as it were. Tough as pioneer nails. At least in appearance which in of itself is at least good practice and a good start. History repeats itself. Carve your own swath. You have no choice if you want to survive. Because if you don’t no one else is going to do it for you.

    This is reality. And it’s not as easy to deal with it as it used to be for the last oh, concentratedKool Aid abetted twenty years. This ain’t your grandpa’s generation, brother. Hell no. It’s worse. They had a picnic in comparison. WW II? Piece of cake. The one’s that’ll survive this one will be true, tough, mofo’s indeed.

    We’re in for a Bataan march like no other.

    Got it?


    Now go forth and rugged-individualist.

    For the sake of you. For others.

    Maybe I’ll see you there.

    If not, well we tried at least.

  55. recaldo

    Hunkering down is, among other things, tantamount to admitting defeat, and also requires one to live defensively.

    Exposing the truth, or at the very least demanding transparency, is the first step to righting wrongs. After all, we as a people can not demand change if we do not know change is needed(e.g. that something went wrong, which requires examination of the facts). In this crisis, we could have easily accepted the dogma that ‘financial crises’ are a natural part of capitalism, or that as lay people we are unable to understand how the economic system is supposed to work to our benefit, so ‘trust us’. But because of the efforts of Yves, we are better able to repel these claims through her information. Thus, change is that much more attainable because we know that things indeed go bad and rules were broken.

    When we expose the truth in this context, we are exposing the truth of the actions of those who govern us or significantly influence our world. We are exposing the truth about the authorities. If we are interested in creating new structures, policies, or ethics, for our society we are required to come into contact with the authorities in some way, at the very least by pursuing the information behind their actions, failures, and policies. Otherwise we risk being ruled instead of governed.

    Revealing the truth is a necessary step to enacting change because we need it to know change is needed. It is also a sufficient method of directly addressing the authorities, which is necessary to enact change . If you are interested in change, you have to be interested in the truth.

  56. ep3

    First, AK can choose to run and hide from the apocalypse. But what happens when he prepares for an apocalypse today and the things he’s prepared to survive against no longer apply? For instance, if he thought, living in the 1970s, that he should prepare his bunker yet things didn’t crash until 20 years later, would he have enough prepared to deal with computers and the internet? I doubt it.
    Listen AK, you can keep living scared and think you are preparing for the worst. But no one can see the future. Live life now and if things go down, no amount of planning is gonna help make that living hell better. Think about the terminator movies. How would you prepare to battle robot machines? Do you think us common people knew that the gov’t had built machines like that? And when they started taking over, it happened so fast, no one could prepare for it.

    Tell AK to follow the money if he’s looking for answers. With BW he did start to. But he’s got to keep looking. Who benefited from BW? He needs to look at the world from an elite person’s perspective.

    1. charcad

      He needs to look at the world from an elite person’s perspective.

      Does Richard Cheney qualify as such a person? If so, buy a survivalist cabin, guns, a generator and start digging a fall-out shelter. That’s what Dick did a long time ago.

  57. charcad

    “roll of timeframe of consequences, and whether we will be hit with a shock or slow-burn when gravity finally kicks in.

    This depends entirely on what happens to acceptance of the US dollar overseas. If it depreciates slowly we get a slow-burn. If it collapses in a cataclysmic crisis we’ll get a shock.

    I think AK has pinpointed the decade of the 1970s correctly as when things went wrong. This despite going off the gold standard was not the First Cause.

    At the top of my list is the passive acceptance of permanent external oil dependence. The “trade deficit” created by the import of about 12 million barrels daily is far worse than the imbalances with China, as bad as those are. This was a completely bipartisan policy repeatedly ratified by Democratic and Republican Presidents and Congresses alike.

    In position 1a was meekly abandoning the drive to continue lowering the cost of energy. It is trivially easy to demonstrate that “wealth” is inversely correlated to the price of energy.

    If I was in charge of setting objectives for Recovery those two goals are the ones I’d place at the head of the agenda. Personally I think we enjoy far too much “diversity” at this point to set unified “national” goals like that. At best our fate will be Yugoslavia’s once sufficient economic stress appears.

    An excellent read by Yegor Gaidar:

    “The Soviet Collapse: Grain and Oil”.

    The USA occupies the opposite side of the grain/oil equation. We have a surplus of grain and a deficit of oil. And it may be our collapse will be all the faster because of that.

  58. Hugh

    In our koyaanisqatsi world, 1% own 1/3 of the country and 10% own 2/3 of it. It is amazing to me that anyone can accept that this represents the “natural” order of things. In such a world, merit has no place. If you manage to get ahead in such an environment, it is because you were born ahead or had a great deal of luck and good connections. There may actually be 3 or 4 people in the country who were successful due to their merit and hard work. Personally, I have never met one. It is a very human trait to rebel against our own insignificance, to bolster our egos with social Darwinist claptrap, that social mobility is possible, that Horatio Alger still lives, but the truth is the system is completely and utterly rigged for the benefit of 10% at the expense of the other 90%. Do the math and then tell me how it was all “hard work”.

  59. Steven

    Interesting perspectives in these comments.

    My $.02 (also Gen-X) is be prepared to out think, out maneuver, and sometimes out-class everyone else. Be the hardest working volunteer and I guarantee a job quickly. Notice that didn’t include education, knowing the right people, or thinking opportunity will come to you… as soon as you accept that the latter aren’t the only ways to success you are ahead of all of Gen-Y at this point.

    Second, in the poker game of life, money makes the world go around, but it also reveals the cards everyone else is holding where you literally can’t lose. Approach every situation, crisis, or opportunity through the financial lens and the world of perspective opens up to you — be prepared to be mad and depressed.

    I’ll tell you from my experience of going through college working a full time job, a part time, AND two start-ups, it is brains, guts and often generosity no one else has that will seed [many] opportunities. You may eat cardboard, but that’s why there’s hot sauce until the right opportunity comes along.

    As soon as you put ivy league education, success of others, or other people’s money on a pedestal you’ve already lost first place.
    I’ve spanked literally everyone with the silver spoon and grew up in poverty in the 80’s, came from a broken home, yadda yadda boo hoo, so I can personally attest the path to success lies within, not outside of you.

    Also, stand up for what is right, moral, and just– ESPECIALLY when the contrary is the most profitable. Most think investments with money pay the highest rewards. That is a never-ending sucker trap, don’t fall for it. The best rewards are found where money is not — and in abundance!

    Overall, the best advice I can give that had the biggest dividends for me personally is to always build up others; in doing so they will lift you up (do all the heavy lifting) — the money will come on it’s own, most likely when you aren’t expecting it.

    My wife and I are now blessed to be VC’s behind other people’s business dreams, but it started because I was the only employee willing to flip burgers AND clean the restrooms at the local Hardees with mop and smile.

  60. perplexed

    I’m a middle aged guy (in mid-40’s) with familial obligations so it’s little late to change my current path. But if I were a young man (I can only wish), knowing what I know now, I would take the following path.

    I believe opportunities for the young will be very limited in this country (maybe even decades?). So where are the opportunities? BRIC countries of course. In a globalized world, why limit your future to one place. Learn a new language … Chinese, Portuguese, Russian, Hindi(even if they speak English there) and just go there. You’ll be surprised what you’ll find once there. Being young is about finding possibilities and taking risks.

    Stop looking at the world as America only and look at the whole world as your oyster. Good luck and go grab the world by the horn!

    PS With internet and learning softwares, the agony of learning another language is negligible compared to my youthful days of cassette tapes and textbooks. :)

  61. LAS

    Such things were said for my generation, too, which is an older generation. It isn’t necessarily true.

    Charlie Brown’s friend, Lucy Van Pelt, used to fulminate: “I don’t want ups and downs. I want only ups!” but she was yelling in vain.

    Life tests EVERY generation and how you respond to challenge is generally always the making of you. Opportunities are not going to appear in the guise you’ve been led to expect, but they will appear.

    Imagination is going to be much more important in your life than you know. You still have a few blind spots to work out.

    Kindly take the time to sift each individual you meet regardless of their generation. You’ll find all kinds of examples in every generation. Keep looking, listening and learning from all the people you meet. I guarantee you this is not a generational war but a class war.

    Above all persevere. What are a few bad years when you have so many years ahead?

  62. Jim


    When I was your age I was quite sure I knew the truth or was close to knowing it.

    I made a series of choices based on my then “grand unifying theory” and suffered complete defeat.

    I was lucky and survived and was then forced to gradually re-evaluate all of my fundamental assumptions about myself, about power and about knowledge.

    One thing I discovered about myself was that I love constructing grand unifying theories.

    Another thing I discovered about myself was that much of my anger and bravado was fear and that much of what I viewed as selfless behavior was actually meglomania.

    All of us who condemn this present system of power have its logic internalized within us. If we are to defeat it we cannot duplicate its logic.

    Fortunately, for all of us, the real knowing emerges from the doing.

    1. traderjoe

      Jim, I liked your comments. Quite honestly I wished I could have parsed them a little bit better. I’m not sure what “truth” you discovered early – and might have been proved wrong on.

      Moving tangentially…I’m trying to be wary of being wrong, being right and not having it matter, or being right and far too early, but I tend to agree with Michael below – I believe we are in store for a Fourth Turning. An upending of everything we know and believe in.

      I do not believe the system is fixable from within. It is too complex, too corrupt, and yes, too many people are too complacent. iPads and reality shows are the new bread and circus. It would not be a matter of tweaking a few things here are there. It would be ending the privately held Fed, eliminating lobbyists, etc., etc.

      But I also worry that I am too pessimistic. Doom and gloom has lasted for awhile. Am I really that much ‘smarter’ than those that came before me? Or will the system last for 10-20-30 years longer, and I’ll miss out on the party?

      Tough questions raised by the poster, and it seems to have engendered a good discussion. p.s. I didn’t take the $50k starting salary literally. I read it as being inflation-adjusted…

  63. Jorge

    If you find the American conditions bad, imagine those in Spain, where youth unemployment is brutal: Your options are calling for family favors, temporary contracts from the country with the most temp workers in Europe, or leaving the country altogether. Over 50% of your typical graduating classes in some universities leave the state, because regional employment differences are so wide.Meanwhile, industry groups ask for subsidies, because they claim that there are not enough workers available to do technical jobs that require a college education and pay under a thousand euros a month.

    Compared to that, in the US we have things very easy.

  64. michael

    Hi AK,
    I’m a very late baby boomer. And about 1985 I started and over time slowly increased being disgusted with the irresponsibility and short term thinking around me. But I was pretty alone with that view.
    Only now, after years of watching, reading books, and analyzing on my own, I came to the conclusions you seem to have reached a lot quicker :-)
    You are right about Nixon defaulting on our debt, by axing BW, being a major landmark in the slow grind of descent. (But don’t forget these debts were built up over time, with JFK and LBJ playing a major role.) And even Yves uses a diversionary tactic in her response: “… countries cheated on the gold standard all the time.” But she is missing the point: without a gold standard, governments can cheat and deceive a lot longer before the truth comes into the open!
    Other posters bring up the usual suspects: loss of religion, peak oil/water/food, whatever. They are missing the point as well: society is going down because of lack of long-term responsibility by the majority of the people. It’s not just the elite and politicians, and it’s not just the small people either.
    Read “The Fourth Turning”, and it becomes clear we are inevitably moving towards a great crisis, caused by the point mentioned above. It will be a ongoing slow grind ’til then. Good news is that in 5 to 10 years or so something new will emerge from the coming great crisis, and it will continue to grow. Bad news is we have no idea how the great crisis will play out, and it isn’t *guaranteed* the US will play a major role in the new world order.

    As they say “You can lead a horse to water, but…”, so tell the truth to the people who are willing to listen, but don’t be too depressed if most don’t want to hear it.
    Preparing yourself is a more important task, physically, mentally, financially. Think outside the box: not just stocking up on medications, water, food, get and learn how use a gun, put something in the range 10-30% of your net worth in physical gold – although all this is important! How about planning about which country you would want to move to (AU,NZ,CH,CA?) if things get really out of whack here – or start learning Cantonese?
    Keep holding on to the principles you determined yourself to be universally true!

  65. Give Sympathize Control

    As the child of parents who were born during the Great Depression, with its despair and deprivation, and grew up during both it and World War II, with its destruction and depravity, let me say that it was quite doubtful at the time that they would inherit a higher standard of living than the previous generation, and yet somehow, they managed.

    Secondly, when you consider our (American) standard of living, how much higher do this young college graduates want to go? How much square footage per person do you want in a house, condo, or apartment? How many cars? How many calories per day? How many gallons of water per day? How many iGadgets? How many closets of clothes? How many pills to pop every time you fart sideways? When you consider what even our poorest have compared to the standard of living their counterparts in most of the rest of the world have, it gives one pause. Maybe, if this generation does indeed experience a lower standard of living than its predecessor, it’s because the previous generation’s standard of living was either unsustainable and/or an illusion.

    As far as jobs out of school goes, I graduated high school in 1993 and college in 1997; neither was exactly a stellar job market. Indeed, for most of my lifetime it’s been mostly recessions and fraud scandals and outsourcing/off-shoring, with brief sprinklings of Bubble Bull Stock Markets. The Reagan Bull Market ended with a spectacular crash. The Clinton Super Bull also came to an end. Even if it wasn’t obvious that the Housing Bubble was in fact a bubble and the (feeling of) wealth it seemed to create was merely illusory, it should have been obvious from these previous examples from our not-so-distant past good times can and do come to an end. Again, AK’s generation is not the first to be entering the job market in a time of economic malaise.

    I don’t know what these kids expected or want now. For the bubble to have continued long enough for them to grab a big $$$ financial sector job and a share of the loot? For a quick, painless solution to a problem that they think goes back 30 some years (and that I believe goes back many more decades than that)? Did they really think that amassing a huge student loan debt to acquire a “fun” degree that gives them little or no skills and knowledge would be a good idea? I doubt they even really know what they want out of life, given that so many of them are and always have been puppets of the Consumerism Cult.

    If they want to get through this, I suggest they meditate on this passage:

    “The seriousness, indeed dangerousness, of the problem of individuation cannot be denied in an age in which the destructive effects of mass-mindedness are so clearly apparent, for individuation is the great alternative that faces our Western civilization. It is a fact that in a dictator State the individual is robbed of his freedom, and that we too are threatened by this political development and are not at all sure of the right means of defense. Hence the question arises in all urgency: are we going to let ourselves be robbed of our individual freedom, and what can we do to stop it?

    “Anxiously we look round for collective measures, thereby reinforcing the very mass-mindedness we want to fight against. There is only one remedy for the levelling effect of all collective measures, and that is to emphasize and increase the value of the individual. A fundamental change of attitude (metanoia) is required, a real recognition of the whole man. This can only be the business of the individual and it must begin with the individual in order to be real…. Large political and social organizations must not be ends in themselves, but merely temporary expedients. Just as it was felt necessary in America to break up the great Trusts, so the destruction of huge organizations will eventually prove to be a necessity because, like a cancerous growth, they eat away man’s nature as soon as they become ends in themselves and attain autonomy. From that moment they grow beyond man and escape his control. He becomes their victim and is sacrificed to the madness of an idea that knows no master. All great organizations in which the individual no longer counts are exposed to this danger. There seems to be only one way of countering this threat to our lives, and that is the ‘revaluation’ of the individual.

    “So vitally important a measure cannot, however, be put into effect at will, that is, by planning and insight, because the individual human being is too small and weak…. To the constantly reiterated question ‘What can I do?’ I know no other answer except ‘Become what you have always been,’ namely, the wholeness which we have lost in the midst of our civilized, conscious existence, a wholeness which we always were without knowing it…. He will also understand why, despite the fact that his question, ‘What on earth can I do in the present threatening world situation, with my feeble powers?’ seems so important to him, it were better for him to do nothing and leave things as they are. To worship collective ideals and work with the big organizations is spectacularly meritorious, but the nevertheless dig a grave for the individual. A group is always of less value than the average run of its members, and when the group consists in the main of shirkers and good-for-nothings, what then? Then the ideals it preaches count for nothing too. Also, the right means in the hands of the wrong man work the wrong way, as a Chinese proverb informs us.” [Carl Jung, “Flying Saucers: A Modern Myth of Things Seen in the Skies,” 1958]

    1. ginnie nyc

      Bravo! The despair and plaints of AK’s generation, esp. their ire against “Boomers”, is only possible because of their apparent ignorance of anything that occurred before they were born, and their belief that most people have living standard’s like their profligate parents. AK should expand his social circle and begin reading some history.

  66. Jim


    My earlier “grand unifying theory” dismissed as unimportant and reactionary any concern with the values and historical traditions of our country.

    My earlier “grand unifying theory” assumed that I personally had transcended the “petty everyday concerns” of most Americans.

    My earlier “grand unifying theory” ignored the depth to which my supposed “radicalism” was simply duplicating the hubris of the structure of power and the elites I was fighting against.

    My earlier “grand unifying theory” had more to do with a hope for complete redemption and personal immortality.

    Now that these impulses are on the table I’m on to grand unifying theory II!

  67. Bernard

    seems colleges are just producing “products” rather than people able to think. which is what i thought education was supposed to do. obviously, anyone who expects the world on a silver platter comes from the “system.”

    for a long time, since Nixon, we have been spoon fed by the Right/Republicans how bad “government” was and how society is “bad.” the same constant drumbeat has been going on for a long long time. The PR campaigns of the Republicans have conditioned a lot of “zombies” into following that “isolationist” train of thought. Ayn Rand, Alan Greenspan, Milton Friedman,St. Ronnie, et al are the “heroes” of this “i’ve got mine, go Eff yourself” individualism espoused by the Elites, in order to allow the theft we now see.

    this was a well planned concerted effort to win and keep control of the MONEY. these are/were smart people. and Americans have been raised to “want” more and more. Madison Ave’s PR campaign worked.

    that society would be designed to fall apart is not something my Depression Era parents bought or believed in. They never believed in credit, paid cash.

    and they weren’t dumbed down by Television. they knew when they felt something was awry. Crooks are still crooks, just their methods are different.

    it really amazes me to see people here and elsewhere glorify the Power of Money over Humanity. Where do these people think their Riches come from?
    a Vacuum? the Destruction of American Society was not by accident, the Ponzi scheme that the Republicans/Free markets will balance itself stupidity sold to Americans was part of the “planned Obsolence” production thinking engineered by Business to create more Wealth.

    the anger of the Dumb Right wingers is real and i bet they still haven’t got a clue as to why or what happened.

    Education is one key that the Elite destroyed to help keep control of the Ignorant America via Television, NFL sport/organized sports. the comparisons to the Roman Empire are there for the looking.

    the social contract must be renewed or America will make Honduras look like a 1st world country. lol.

    as Pogo said, we have met the enemy and he is US!!!

    1. traderjoe

      It amazes me that people, especially ones that believe in the elites, still find a distinction between republicans and democrats. The two party system is part and parcel of keeping the sheeple distracted (and believing they have a choice) while the banksters/military-industrial/etc. corporate complexes (with the privately held Fed in the lead) steal the country blind…

  68. brazza

    I note once again that the richest discussions escape economics to explore the deeper issues of philosophy and values. AK assumes that today’s is no ordinary crisis, and therefore his generation’s predicament is uniquely grave. Some of longer tooth seem to agree, while many draw parallels to similar hard times in their past and urge a more positive attitude.

    Personally I think AK’s fears are well-founded, although I wonder whether the choice he perceives as critical (escapism or proselitism) plumbs the depth of his concern, or whether it is intellectual sugar-coating, camouflaging nascent waves of the very panic he projects on the masses …

    Someone rightly suggested that there will be nowhere to hide if we are indeed headed for a multi-dimensional (environment, energy, financial) show-down. Someone else harked back to a time when facing a similar wall s/he chose to focus on ‘living in the present moment’ rather than give in to fear. And I feel this latter is truly sound advise. Perhaps the rarest resource of all, as ever, will be those who remain coherent, cool-headed, and warm-hearted. The value of people who display those qualities, as in all crises will be … priceless. It may be a good idea to start practicing now. A wise man once told me that if I found myself in a panic, I should look for something, anything … to be thankful for, and focus on that, long enough to feel the actual gratitude. In that moment, fear recedes. And in that moment the suspicion arises, then a hope … a tentative possibility that … this crisis may actually force humanity to become wiser. Good luck AK!

  69. mclaren

    A.K. nails the time frame. From graphs of inflation-adjusted wages, 1973 represents the tipping point. Starting in 1973, inflation-adjusted single-earner wages for the middle class began to decline and haven’t come back.

    “…real wages for the middle class peaked in 1973… (..) During the 17 years after 1973, real wages declined to 86 percent in 1995 and recovered to only 92 percent of real wages in 2000 during the `economic boom’ of the late 1990s.”

    “Free Trade Costs Thousands of Jobs,” Thomas Roeser, Chicago Sun-Times, 19 September 2003.

    Also see the graph here: median male real inflation-adjusted income declined 7.5% between 1977 and 2004:

    Family incomes rose after 1973 adjusted for inflation because wives entered the workforce.

    The gold bug nonsense has nothing to do with it, but the time frame is clearly correct. There doesn’t seem to be any one cause for declining inflation-adjusted middle class wages since 1973.

    One factor is clearly global wage arbitrage. This is now extending into high-wage high-skill white collar jobs, courtesy of data mining and computer programs. See “Europe: The Big Squeeze,” Newsweek International Edition,

    Another reason for declining inflation-adjusted middle class wages since 1973: automation. Martin Ford has written about this extensively. See:

    Martin Ford: “The Economists Just Don’t Get It”

    Martin Ford: “The Coming Structural Unemployment Crisis”

    Robots replacing people sounds far-fetched until you realize that robots now perform prostate surgery better and faster than humans. Machines now use neural nets and optical sensors to pick out cancerous tumors on X-rays at lower error rates than human doctors. Algorithms now do high-speed trading and make more money than human traders. This process will continue. Genetic algorithms in which random designs are mutated and then put through a process of artificial selection now produce antenna designs and airplane fuselage designs and car engine designs that look like nothing a human would have produced, and outperform the human-designed versions. This kind of technology is going to become more pervasive and it’s going to get better over time, replacing millions of human workers from clerks and cashiers (replaced by RFIDs, automated supermarket checkout systems, and robots that replace stockboys) to fast food workers and receptionists (replaced by computer systems and robots). So even if we did stop offshoring and brought back manufacturing to America, it wouldn’t help — today’s factories typically have two humans on the factory floor, and everything else gets done by robots.

    One last cause of collapsing wages and rising unemployment is clearly that the world as a whole is pushing up against global limits on resources. Scientists estimate that the world’s oceans will be fished out of sea life by 2050:

    We’re running out of iridium (crucial for solar cells), helium (needed for low-temperature sensors and superconductors), and many other rare earths. Peak Oil is either near at hand or already upon us.


    As resources run out, costs skyrocket and profits plummet. Industries become uneconomic and workers get shed. This happened at the start of the 20th century with the American whalng industry; now it’s happening to the American automobile industry. American industrial farming requires enormous amounts of energy to grow crops, and that energy will soon become unaffordably expensive, so soon the same process will hit the U.S. agribusiness industry as well as the American ranchers. It currently takes 16,000 liters of water to produce one kilogram of beef. Not sustainable in the face of global warming.


    1. Skippy

      Mass consumes energy at exponential rates, to bad about the gravity thing, pulling at every one willing or not.

      Skippy…*white* dwarf?????…roflmao.

      PS. full / global employment is an ELE of our own making, is it not obvious[?], time to rethink the premise of humanity…eh…god and jobs don’t seem to be cutting it now, does it.

  70. Deus-DJ

    The last time a crisis like this happened(Great Depression, which was worse) everyone agreed more regulation was needed. Now you have pathetic maggots who keep calling for less government as if government caused this problem….
    And thus, inequality will continue.

    The simple fact of the matter is that the key to solving this problem has everything to do with inequality….and that can be tackled through many fronts. First, turn over every aspect of society and find areas where regular consumers(many of those which will be in the middle to lower income tax bracket) get ripped off. When we realize that the social inertia that completely prevents society from advancing is based on the dominant social classes trying to maintain their special privileges in society will we realize how to tackle this problem.

    AK, the situation of our generation(I just turned 25, probably the same age as you) can be turned around just as the situations of those that faced similar strides faced long ago. In fact, by many accounts their situation was worse. We live in a technological society that aggravates but also alleviates the social situation that we are faced with today. Nobody is out there dieing on the streets because of hunger…for this we should breathe a sigh of relief. To hit this problem, we have to do it with a moral righteousness and with a passion to solve our problem. Class warfare is the answer…but this requires labor to act as much as it does we intellectuals looking at their situation(which only they can truly understand) from above. The best thing we can do at the current moment is have super strong consumer protection rules which prevents the egoistic, predatory interests from continuing to rape and pillage the average consumer.

    I don’t accept your dichotomy of telling the truth or preparing for the collapse, but I will say that we have to tell the truth…because nobody is doing it with enough conviction…there isn’t one elected leader who has a full handle on the situation and knows to hit the right people(Yes, even Alan Grayson).

    Look at what I’m telling you AK. If you want to solve this problem, hit the mother fuckers straight in the gut…and don’t give in an inch if anyone brings up “class warfare”….because think about it, who more than the higher classes wants a lasting peace inside this country? Yes, better to make no noise at all so they continue doing what they want to do.

  71. Liah

    This is a very important subject – to all peoples.

    I wish it had more attention – not the tinfoil version, the practicable one – from more venues. One of the more painful aspects of MSM control is the forced lack of preparedness of the majority of those (middle class homeowners with children in college/highschool/gradeschool) who are completely unaware that a paradigm shift COULD take place.

    Just the subject being broached is enough for me today.

  72. Scott

    I slightly disagree with Yves sentiments on why preparing for social upheaval is counter productive only because we all know now that fat tails exist. I prefer Taleb’s prescription of betting a little to make a lot. Accept the possibility exists. For this reason, if you can, prepare without harming your day to day life.

    The problem occurs when you lose valuable time worrying about possible, but unlikely events. I’ve read every Mish, Ritholtz, CR, Yves, … blog post for over three years now and sometimes I’m just like WTF am I sitting here wasting my time on this S for? The earth’s still turning and my life is passing by. So, in the end I do this because I love it and my job allows me to do it on their clock, not because I’m worried and paralyzed. That’s a recent change though, because I did waste some time worrying and not thinking about future opportunities. If you are not at that point then forget the noise, give it up, and work and don’t let the hype cost you your life due to inaction.

  73. Tom HIckey

    Check out Ravi Batra, The New Golden Age: The Coming Revolution Against Political Corruption and Economic Chaos (Palgrave, 2007).

  74. Debra

    I think this question is important, and outside of the problem of “assigning blame” which will not take us very far at this point, there are a number of areas that it opens up.
    Are we “telling truth” or ranting on the blogs ?
    This brings us back to the SOCIAL FUNCTION of prophecy (which organized religion taps into to keep it going, and channel it…).
    The Bible is instructive on the function of prophecy in the Old Testament. It is carried out by a vocal minority (one person, often) in order to steer a wayward society, often political power, BACK ONTO COURSE.
    You know by now that I do not believe in “the truth”. Which nuances the way I approach ranting/hellfire and brimstone prophecy.
    I think that ranting is a common human response to perceived INJUSTICE.
    Why not ?
    But it becomes a problem when it is our EXCLUSIVE response to injustice.
    The ideology that underlies our modern governments is declining. It is.. decadent. Tired out.
    It doesn’t excite US the way that it excited our ancestors whose necks were STILL chafing from the collar of the monarchy.
    Inevitable. Shakespeare has Gratiano (a consummate cynic..) say in “The Merchant of Venice” , “who rises from a feast with that keen appetite that he sits down ?” (II,vi)
    We are ideologically in need of something new…
    I think that one of the greatest… weaknesses of our current ideology is its basic assumption that the cause of our ills… is obligatorily OUTSIDE us as individuals.
    By affirming that.. we reduce OUR OWN FREEDOM as individuals, and radically change our attitudes towards the purpose of government and the social body.
    The Christian IDEOLOGY and its assumptions about human nature was not so.. definitive in attaching BLAME to forces OUTSIDE the individual himself.
    Recognizing that the poor and the rich will always be with us, it managed to find.. INGENIOUS WAYS of according value to POVERTY, something that, in our idolatry of money, we cannot do.
    And we have supremely disqualified the importance of.. what the world APPEARS TO BE to us, while setting up an idol to what we can only IMAGINE that it is…
    Very intellectually limiting.
    That said… I think it is very very important to find ways to GIVE HOPE to people who are reading the blogs.
    Hope gives energy… We will get nowhere unless WE believe IN something, and we have hope.
    And spending too much time ranting (or even OVERreporting negative info) will not give us the energy we need to bring about change.
    Personally… I believe in belief systems that foster INDIVIDUAL change, through a change in attitude as being the BASE upon which we can hope to bring about relatively long term social change. Which, in any case, will NOT be a solution that is a one time for all one.
    The world has to be recommenced every morning…

    1. Yves Smith Post author

      I do not believe in giving readers hope when there is little reason to be hopeful.

      The Stoics did not believe in hope, they believed in duty, meaning social responsibility. Rome was built on Stoic virtues, its decay was marked by its citizens only giving lip service to Stoic principles.

      We all age and die, the nature of human existence is either denial or finding a way, as the Buddhists do, to reconcile oneself to suffering, or to live in the moment and not focus unduly on what the future may hold.

      Some readings of the story of Pandora’s box take the view that Hope coming out last was not a blessing after all the afflictions that preceded it, but the final curse. False hope is far more dangerous that realism.

      1. brazza

        False hope is premature escapism – the result of avoiding facing a tough predicament. I concur that false hope is being used to manipulate people into maintaining faith in a broken mechanism, fanning at all costs the ebbing winds of confidence. But once one finds the fortitude to look into our shared future, you do need true hope in order not to buckle under the magnitude of the task ahead.

      2. Lidia

        I just finished reading “A Guide to the Good Life: The Ancient Art of Stoic Joy” by Wm. Irvine, a modern Stoic “proselytizer”, as it were. A good introduction to this sort of philosophy.

  75. skippy

    HOPE is an emotinal imaginative. A road started, based on belief (projection based on individual future out comes w/ little or no reality attached), cough…I want a pony.

    Hope is the psychopaths friend, it allows them to lead others with endorphin based relief / anguish, used to set up programed high and lows. Repetitive crushing of hope leads to apathy, in this environment the psychopath reins supreme, free to act with impunity (see Wall st / DC).

    So if you wish to battle the psychopath leave hope at the door. Instead steel your self with observable empirical fact, deconstruct their arguments, and shine that light light in to every corner of their construct, leave no lie or fallacy unchallenged no matter how small or seemingly insignificant.

    A psychopaths greatest glee is in their ability to shine you on, make you believe their machinations, attach a string to your emotions and tug it at will, and to their desire. Remove / shield that part of your self that they would use against your self and use you against others. With all that said there are levels of psychopathy, we all have some degree within us, this is the first battle field, our selves, win that battle and you might stand a chance against the higher order psychopath.

    The fight will never end, prepare your self for that, there is no success, no victory, till humanity as a hole stops fighting over the individual size of the pie on_their_plates.

    Skippy…funny how the Romanov’s the wealthiest family maybe the world ever knew fell victim to their own psychopathy, only to be replaced with the same but, in a different guise. All aided and abetted by people with good intent (cough tea party / moral / biblical conservatives) aka sharing the pie in a more equitable way…repetitive aint it…sigh.

  76. ChrisPacific

    I joined the workforce for the first time, and had my first experience of investing, in the technology sector in the late 90s, just in time for tbe bubble and subsequent crash.

    It made a couple of strong impressions on me. Firstly, I learned firsthand how irrational people can be in making investment decisions, how unfounded optimism clouds our judgement, and how it can become contagious and lead to bubbles and the inevitable crash. I learned to watch constantly for that part of myself that wants to believe and follows the crowd, recognize it, and adjust for it. I consider this an advantage.

    I also (largely) lost that passion and sense of self-belief that leads successful entrepreneurs to defy the odds and impose their vision on the world. I learned to count the odds carefully and discount emotion. I learned that even if you do everything right, odds are that you will fail anyway. I learned to play it safe. I consider this a disadvantage.

    I worry that we may end up moving from an excess of irrational exuberance (the bubble era) to an excess of cynicism and risk aversion. While this may arguably be better for long term stability and overall wellbeing, it doesn’t capture the imagination or inspire in the same way, and we may ultimately end up collectively less happy as a result.

  77. ChrisPacific

    On rereading that I realize that I didn’t actually answer the question posed. I shouldn’t post comments after drinking half a bottle of wine.

    Count me on the side of the truth. I am still enough of an idealist to believe that people are smarter than they are generally given credit for, that if we make the facts and information available to them that they will find it, and that if all of the above fails, it’s still never wrong to make the attempt. I can also say that this blog and other similar ones have been very beneficial to me personally and have enabled me to make some smart decisions over the last few years that have left me in a much better position than I would otherwise have been. So it’s had a positive impact on me, and I’m sure I’m not the only one.

    As for hope, I think people make their own, but a solid grasp of the facts is necessary if it’s to be genuine.

  78. Lidia

    I strongly agree with “attempter’s” summation of the situation (near the top).

    After reading “Reinventing Collapse” (Orlov) and “The Long Descent” J.M. Greer, I have been trying to accumulate useful tangible items (a sturdy bicycle, canning equipment) and trying to wean myself of certain foolish consumption habits.

    I only came across this site a few days ago, and have not gone through all of it, but it looks encouraging:


    Hosted by Greer, it is an invitation to adopt, learn, and pass on skills that modern society has largely abandoned, but which will be useful in a post-industrial world. I like his tone of relative optimism as he tries to guide the formation of tomorrow’s necessarily smaller, less-complex and more-self-sustaining communities.

    What is important is to view the collapse of unsustainable systems as -on some level- a blessing and a release.. because really there are so many wasted resources and so much energy (both physical and psychic) going into propping up ill-conceived, ugly, inefficient, destructive, distorted and broken concepts that it’s just not funny any more.

    Capitalism only appears to work as a system in an economy that is expanding because of increased resources from somewhere else OUTSIDE the system (fossil fuel expansion or conquest). But looking at the world as a whole, there is no “outside the system” from which to get this expected, regular, increase. Our entire political and economic underpinning and assumptions are based on this sleight-of-hand, this fraud.

    A fantastic Italian book called “Denaro: Sterco del Demonio” (Money: the Demon’s Excrement) reads like J.K.Galbraith’s “Money: Whence it came; Where it Went” on steroids. One observation of the author, Massimo Fini, is that money actually ceased to effectively circulate in periods of the Middle/Dark Ages. Roman civilization (with its conquest and expansion) needed money (which then collapsed as did the expansion). When expansion and conquest started up again in a serious way (Venice, Holland, the India companies) then money and banking staged a raging comeback. Not only capitalism as we know it, but any form of money only works in an expanding system; a steady-state system has no need of money as we understand it, because such a system neither expects nor attempts to create regular surpluses, which money would be the expression of.

    Money creation and expansion seem to be the direct mirror of real wealth extraction, surplus, and waste. What makes a bad situation worse it that it is the function OF the money creation that is the engine that drives the extraction, waste, and overproduction. Just as the securitization process (a source of money creation) CONJURED UP.. called forth.. the creation of bad loans to back itself up.

    We can see TPTB attempting to rectify the problems “money” poses, by cooking up this Special Drawing Rights deal now.. which, as a non-finance person just smells to me like a global currency. No one seems to have thought of a solution for the day when that currency itself runs out of steam.

  79. Lidia

    I would also recommend some of the writings of Ivan Illich, such as “Tools for Conviviality”, dealing with counter-productivity, radical monopolies, employment, energy use, de-schooling…

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