"This Is Later"

The Credit Strategist - September 2023

Since the year 2000, the world experienced three seminal events that changed the course of history – the 9/11 attacks, the 2008/9 financial crisis, and the Covid-19 pandemic.  Each of these events unleashed political and policy responses that adversely changed the ways we govern ourselves and reinforced or accelerated negative economic and social trends.  The consequences of those responses include not merely our ruined cities and their broken citizens but a debt-dependent economy and an ungovernable and corrupt political system.  The last twenty years saw America rot from the inside physically and spiritually.  We can pretend that we still have time to reverse our decline but the sad reality is that “This is later.” 

The response to 9-11 intensified and expanded the surveillance state, increased the costs of everyday life, and directly led to the multi-trillion dollar wars in Iraq and Afghanistan that destabilized the Middle East and eroded American hegemony.

The response to the 2008/9 financial crisis unleashed unprecedented monetary and fiscal policy stimulus that expanded public and private sector global debt to unsustainable levels and massively expanded and intensified financial regulation, burdening the financial system and economy with enormous unproductive costs.

The response to the pandemic involved an unnecessary shutdown of the economy and extraordinary fiscal and monetary measures that further boosted the post-financial crisis measures still in place to create the biggest financial bubble in modern history that unleashed an explosion in global inflation that permanently elevated prices.

Looking back over the last twenty years of crisis management, we see the enormous damage wrought by intellectually and morally deficient policy responses that left the United States (and the rest of the world) far too indebted, regulated, and divided.  Just as we were led by “the best and the brightest” into the disaster of the Vietnam War, over the last two decades we were led into sequential economic, military and public policy morasses from which we are unlikely to recover under our current system.  The forces driving these negative conditions are too powerful and too locked-in to reverse. And our system leaves us consigned to repetitive cycles where political and business leaders -  men and women with degrees from the best schools working at the most highly respected financial institutions and government agencies – make decisions that are destroying the world. 

When I titled my 2016 book about some of these errors The Committee to Destroy the World, I was referencing a 1979 Time magazine cover that called Alan Greenspan, Larry Summers and Robert Rubin “The Committee to Save the World” as those three men dealt with earlier financial crises.  My title referred to the world’s central banks but my publisher refused to put the photos of central bankers on the cover (which is among the reasons they won’t be the publishers of any future books I write).  My point about the fecklessness of our central bankers, unfortunately, applies across the spectrum of economic and non-economic policymakers who over the last twenty years presided over the entirely avoidable deterioration of our fiscal, physical and social environment. 

The evidence of these failures is irrefutable and the sooner we start speaking honestly and openly about them the better chance we have of reversing the damage.  But as we watch the incredibly painful process of the next presidential election start to unfold, I don’t see any solution coming from within our present system that can possibly save us.  The answer is going to have to come after we suffer a crisis so severe (much more severe than any we experienced over the last two decades) that the system is forced to change and new leaders unbeholden to our current broken system emerge with the support of enough good and decent people to carry us forward.  There is nobody – nobody – on the political scene today who meets that standard. Anybody who might has the sense not to expose him or herself to the toxicity of the press, self-righteous inhabitants of glass houses passing judgment on others with the goal of destroying them and their families.  Until our society again values high standards of achievement, character and decency, we stand no chance of cleaning up the messes that the people currently governing our country created.

There is no market for truth in America.  Accordingly, there is a total lack of candor regarding the true state of the American and global economy.  Headlines like “Resilient Economy Defies Expectations” that appeared over the byline of Fed whisperer Nick Timiraos in The Wall Streeet Journal on September 2 are eyewash designed to distract the masses from the underlying rot.  Wherever you turn, the media and Wall Street are focused on discussions of topics that only matter if you have the life-span of a dragonfly (4-6 months – yes I had to look that up). The following largely irrelevant questions dominate the financial media these days:

Is the Fed done raising interest rates?

When will the Fed start lowering interest rates?

When will inflation hit the Fed’s two percent target?

Will the Fed raise its inflation target above 2%?

Are stocks expensive? Are they cheap/

Is the dollar overvalued? Is the dollar undervalued/

Are interest rates going higher?  Are they going lower?

Blah, blah, blah….

My response to all of these questions is, “Who cares?”  The question – the only question – that matters to those with the time horizons of humans and who are investing money in a serious manner (i.e., not worrying about meaningless things like beating benchmarks) is how to protect and grow capital as the world spins on its unsustainable debt-fueled course to oblivion.  Who cares what happens over the next six months if everything is going to hell-in-a-handbasket after that? Without question, we are headed into a period of major economic dislocations unless we change how we govern virtually every aspect of our society starting with our economy which determines how we sustain life on earth.  If we think the financial crises, wars and pandemic of the last two decades were tough, wait until we see what the world has in store for us over the next twenty years if we keep mismanaging our people, our environment and our economies.

To be clear - every major government in the world is engaged in a race to the economic bottom and nobody is willing to acknowledge that a race to the bottom only ends in one place – the bottom! 

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