The Great Reckoning

There have been several so-called “Greats” in American history. Two Great Awakenings that inspired heightened religious fervor through revivals. The first began around 1730 and the second in the early 1800s. Then there was the Great War, later re-named Word War I when the second world war proved the Great War was not great enough to end all wars. And, of course, the Great Depression in the 1930s. That was a doozy. LBJ claimed a great one with his Great Society, which intended a liberal remake of social and economic order in the 1960s. Its greatness fizzled in the shadow of the not-so-great Vietnam War. Most recently, just fourteen years ago, the Great Recession from 2008 to 2010. I admit that one seems like just yesterday, but such is the time-warp that accompanies later-life temporal disorientations. Up next: the Great Reckoning.

Intrinsic to its meaning, great suggests an order of magnitude beyond what we might consider normal. Something unusual; often tumultuous. Sometimes inspirational and at others devastating. To be great is indeed to be extraordinary—for better or worse.

Transitions in American cultural dispositions that occur every couple of decades are a natural evolution from one mindset to the next—from one cyclic phase in our history to the next. Every transition offers the opportunity and/or risk of a great event to occur. Based on my reading of history, we are poised to experience such a cultural transition very soon where politics, economics, and social norms will face a reckoning unlike we have seen in decades—probably since the late 1920s when we moved from the period of idealism (Idealism II: 1915-29) to the crisis of the Great Depression and World War II (Crisis III: 1930-45). This transition will be different, however, inasmuch as we are moving on from a crisis rather than into one. We are moving from the current crisis, which I called the Age of Deceit (Crisis IV: 2003 to present), to a period of objectivism (which always follow crises), the last one being Objectivism III from 1945-62.

Today, we stand at the precipice of Objectivism IV (2023+), which is the second phase in a four-phase cycle pattern of history that has persisted since the founding of our country. The three prior cycles of American history were: Land of the Free (1774-1859), Land of Opportunity (1860-1929), and Superpower (1930-2003). (See Saving America in the Age of Deceit chapters 1-3.) All crises eventually end. The Age of Deceit with its War on Terror, Great Recession, pandemic, domestic terrorism, and pervasive political dysfunction has cost more than a million American lives and has put our representative democracy in peril. It is only natural that we seek stability, predictability, and fairness, which is what periods of objectivism aim to secure.

Let’s face it, bullshit had a helluva run. But, in the long run, truth always prevails. The lies we have told and have been told were only tolerable in a world of high growth and affluence where consequences were limited and, therefore, did not curtail either the quantity or grandiosity of our deceits. The decline of economic growth and attendant affluence, brought on by policies of fiscal necessity associated with the pandemic, and the general collapse of globalism underway due to the rise of authoritarian regimes and Putin’s war, mean that the slack in the system that gave room to accommodate deceit is vanishing quickly. High stubborn inflation, coupled with a global risk rout deflating asset prices by trillions of dollars, and a looming global recession means only truth—often hard truths—will be, or even can be considered in decision-making from governments to boardrooms to household dinner tables. Severe economic downturns are always sobering. The days of magical thinking are coming to an inglorious end.

As we enter the autumn of 2022, the chickens for people like Trump and Putin—icons of the era—are coming home to roost. And, there will be no room for either of them in the henhouse of truth. As Maureen Dowd noted recently in the New York Times, “each created a scrim of lies to justify lunatic personal ambition.” While poetic justice may be the only justice they receive, for them a fate worse than death awaits: irrelevance. Those of us who have been tormented by the greed, cruelty, and dishonesty of people like Trump and Putin can rejoice, but that doesn’t mean the reckoning stops there. There will be pain for all of us, but it will also be worth it. At least we can smile through the pain on our road to liberation from the deceits that began with the Bush administration’s lies about WMD and al-Qaeda in Iraq in 2003, and ended with Trump’s many con-games. To be clear, it wasn’t only politics and government that were a hotbed of deceit; business, religion, education, law enforcement, media, and many other social institutions were guilty of numerous deceit-based schemes. It was the modality of the times.

So, what can we expect as we move through this fourth cycle of American history: the Great Reckoning?

Generally, periods of objectivism are where reason, character, and classic conservatism are highly valued over reckless idealism when hubris, certitude and grandeur prevail. During periods of objectivism, terms like unity, reason, inclusion, pragmatism, tolerance, risk aversion, stability, restraint, containment, self-reliance, meritocracy, frugality, humility, redemption, secularity, family, and community are prevalent. In philosophy, objectivism holds that there are certain things, especially moral principles, that are immutable and exist independently of human beliefs or preferences. There is plenty of room for personal agency, but little for delusion. Historically, presidents with military backgrounds like George Washington, Ulysses Grant, and Dwight Eisenhower performed well during periods of objectivism. That’s not to say our next president will be a former military general, but it most certainly will not be a former reality show host and real estate con-man. If it is, we and our representative democracy are doomed.

More specifically, in this period of objectivism, the first thing all of us will feel are those sobering effects of an economic downturn. Conspicuous consumption will fade from favor. Inflation up, growth down, unemployment and taxes both back up. Although many point to our Federal Reserve Bank and central banks around the world to curb inflation while maintaining growth, that magic combination is highly unlikely. Achieving a soft-landing appears to be more fantasy than probability. The only tool central banks have is monetary constraint accomplished primarily by raising the cost of capital. Demand destruction may destroy the economy before inflation subsides. It is akin to chemotherapy for treating cancer: you may kill the patient before you kill the disease. Those economists who twisted themselves inside-out in their attempt to convince us that public debt doesn’t matter will magically disappear from public life soon; perhaps even enter rehab.

Beyond economics is where it gets more interesting. In national and international security issues, adventurism like the American neo-con impulse to remake the world in our own image (like Bush/Cheney), or a dictator’s desire to capture more territory (like Putin or Xi) will suffer serious long-term consequences. On domestic terrorism, which is the principal security threat in America, Americans will demand and receive much more aggressive law enforcement tactics and legal consequences for terrorists who are predominantly young white males with assault rifles. Investment in research and development—both public and private—will also become more essential and more focused. Research and development will be less interested in digital social puffery and more targeted at lowering carbon dioxide. Do we really need to experience fake life through Zuckerberg’s new goggles? Can’t we just fix our real lives? Technology will be seen as a critical element in saving ourselves from many pressing issues, especially climate change. On investment in public goods, education will, once again (as it does in every period of objectivism), rise to the top of the list. Secularity will also rise throughout the objectivism phase as religiosity retreats from the public and political spheres of influence. Finally, social character will, once again, value integrity over vainglorious flamboyance. Honesty, humility, and self-restraint will return as positive differentiators in selecting leaders in all corners of American life. There will simply be no more tolerance for show-ponies and charlatans.

On a more personal level, those who continue to chase wants and desires—who believe the grass is always greener on the other side of the fence—will likely face crushing disappointment. Living on the treadmill of egocentric satisfaction will quickly become unsustainable. It’s time to put your ego into a reality-induced coma. Let your soul—where values and wisdom reside—be your guide. If it feels good, do it? Not so much. If you’ve made a serious strategic error in relationship or economic matters, unwind that mistake as soon as possible. If you don’t, the marketplace of truth will do it for you. Magical thinking is never more dangerous than during periods of reckoning. Penance may not suffice; mercy may be unavailable. Those who refuse moral sobriety may be forced to consider asceticism. Unfortunately for many folks, liberation from the Age of Deceit will only be achieved through suffering. Enlightenment is a much better choice.

This period of reckoning will be painful, but also tremendously beneficial for America and for humankind. Returning to the truth and treating each other with respect is the only way forward. New contemplations of what defines progress and success are being examined by very thoughtful people like technologist Patrick Collison and economist Tyler Cowen. The answers to basic questions like, What is prosperity?, may be very different in the future than the past. The rhetorically popular adage “less is more” may finally be actualized. Fundamental attitudes about what constitutes fulfillment in life will have to change. No longer will our culture be driven by economic, physical/body, and popularity metrics alone. Dignity as a measure of well-being will become a new focus of public policy. Spiritual metrics associated with happiness and psychological well-being will gain stature.

At the onset of Crisis II, the American Civil War, President Abraham Lincoln in his first inaugural address summoned the “better angels of our nature” to strum “the mystic chords of memory” in his hope that Americans of all backgrounds and dispositions would recall and embrace the impetus of unity to preempt the bloody war that followed. His words were heard, but unheeded. Today, we are similarly divided. Unfortunately, crises have proven the only way Americans awaken to correct course to save themselves from themselves. For whatever reason, Americans prefer to do things the hard way. As Winston Churchill (supposedly) once observed, “You can always count on the Americans to do the right thing after they have tried everything else first.”

Periods of change—especially tumultuous change—are never easy. Homo sapiens much prefer homeostasis. Our job now is to realize that resisting reality and its underlying truths is a delusion we can no longer entertain. We deserve what is coming, which may seem harsh. But as every grade school teacher coaxes their reluctant students: “We can do hard things!” The smartest among us will realize the best approach is to quit demonizing each other to claim victimhood and reach for courage rather than indulging cowardice to save ourselves and our country.

That is what winners do.

By |2022-11-20T14:51:37+00:00October 2nd, 2022|General, Recent, The Economy|0 Comments
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The E-Boom of 2022

The bad crazies have dominated America for the last several years; it is time for the good crazies to take the stage.

I expect 2022 will be similar to the entrepreneur-boom (E-Boom) years of 1983 and 1998. Those were years when business—not politics—catapulted the American spirit to new heights. They were years when the most asked question was simply, “Why not?”

George Gilder’s 1984 book, The Spirit of Enterprise captured the energy of the early 80s best as he celebrated the birth of widespread entrepreneurship when he described entrepreneurs as those who “In their own afflicted lives, they discover the hard predicament of all human life, threatened always by the encroachments of jungle and sand. From their knowledge of failure, they forge success. In accepting risk, they achieve security for all. In embracing change, they ensure social and economic stability.” These are the good crazies.

In the late 1990s, it was technology that drove businesses to transform our lives and renew the American spirit. Once again, entrepreneurs provided stewardship of the digitization of everything that drove productivity and economic development to levels unseen in American history. Don Tapscott’s, The Digital Economy (1994) foretold what we have now all experienced: a world in the palm of our hand. First there was fire, then the wheel, then the Gutenberg Press and next the combustion engine and, in the late 90s, a life reduced and (paradoxically) accelerated by 1s and 0s.

A more beautiful insurrection than the bad crazies provided on January 6, 2021is on our doorstep. I am not into numerology, but 2-0-2-2 with three deuces and a one-eyed Jack has to be a good omen. Pick your Jack—the heart or the spade—love or power. Combine it with three deuces and it looks like a good time to go all in. People will be considering decisions that would have never been on their radar a few years ago. No subtlety, no nuance. Big bold moves. A chance to live life on your own terms again, or maybe for the first time? Crises always provide the opportunity to make the world new again. While most sit back licking their wounds or remain imprisoned by their fear and loathing, a few—the entrepreneurs—dive headfirst into the void.

After years of fear and uncertainty, which began with the Trump presidency and ended with COVID-19, we are in transition from a wannabe fascist and a life-threatening pandemic to a rational White House and an endemic annoyance. Home tests, anti-viral drugs and the availability of monoclonal antibodies are game changers. The fundamental shift this allows is removing the threat of the unvaccinated from ending the lives of the vaccinated. Our healthcare system can recover and meet the needs of non-Covid emergencies again. Researchers can take what we’ve learned from the mRNA platform and apply it to other endemic diseases like the common cold and influenzas and, yes, maybe even the eradication of many types of cancer. There are entrepreneurs in the healthcare industry, too.

Our democracy remains under threat and our politicians, who remain trapped in their own shame games and petty grievances are unlikely to save the day by themselves. Addled by anger, which is simply the manifestation of fear, and stuck in a modality of condemnation, which is actually evidence of self-loathing, our well-intentioned politicians may spiral into irrelevance. Especially since most Americans have lost their appetite for listening to their many promises and proclamations. However, an expanding economy driven by non-institutional entrepreneurs has the natural and powerful effect of dispersing power across new centers of influence that are impossible to corral by authoritarianism. Why do you think Xi Jingping is cancelling entrepreneur-cum-tycoons in China like Jack Ma? A broad dispersed economy driven by entrepreneurs is inherently democratic and anti-authoritarian.

Meanwhile, there is plenty of cash in the hands of Americans providing seed capital for startups and funds to support high levels of demand for new products and services. Private and venture capital equity funds are flush. The cost of money will rise but, for now, remains at historic lows. Supply chain issues will be unwinding in the new year. Dispositionally, people are ready to go it alone, away from traditional employment in favor of lifestyle flexibility and abundant generational opportunities to make their own mark on the world. Business startups are already accelerating well above pre-pandemic levels. The IPO market is deal-horny providing a vehicle to realize the economic value created by entrepreneurs and support the long-term capital needs of growth companies.

Finally, breakthrough innovations only occur when entrepreneurship is in full bloom, which is our last hope of dealing with climate change. Our weak-willed politicians and our own selfish intransigence means we will have to rely on transformative innovation in the creation, storage, and distribution of energy. The only other thing that can reverse climate change is catastrophic economic collapse, and nobody wants that. The rebirth of entrepreneurship may prove a just-in-time solution to our greatest existential threat.

As the E-Boom of 2022 approaches, these are my words for my 20- to 40-year-old readers:

  • Avoid complexity. It confuses, confines, and compounds risk.
  • Blow away rules and boundaries.
  • Hitch a ride on a comet—destination unknown.
  • Lose the shackles and throw away the key.
  • Suspend that long search for meaning; let it find you.
  • Those who fail succeed the best.
  • Ask, over and over again, why not?

For my readers 40 to 60 years old:

  • The people at your dinner table should be your principal focus.
  • Balance stability with dynamism; perfect the art of the pivot.
  • Forget about being first, be the best.
  • Segue from accumulation to thoughtful discernment; discard!
  • Be assertive with your hard-won knowledge.
  • Engage with completely new areas of learning.
  • Craft a financial plan to serve you in later life.

For my 60+ readers:

  • Extinguish the fire of anger; avoid the trap of judgement and condemnation.
  • Focus on pace rather than distance; steady now.
  • Seek inspiration in simplicity.
  • Stand ready to lift up those younger than you.
  • Focus on the light of transcendence—rise above the rabble.
  • Allow Nature to define your path.
  • Listen, learn, love; your relevance depends on it.

Sit up tall at the table, folks. Those deuces and that one-eyed Jack are ready to be played.

By |2021-12-05T14:47:30+00:00November 24th, 2021|Leadership, The Economy, The New Realities|0 Comments
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Our Real Economic Problem: The Decapitalization of Wealth

As many economic pundits will tell you today, our current economic crisis was a long time in the making.  Some point to over-consumption, others to the accumulation of debt, and still others point at a broken regulatory system, government spending, and political gridlock.  However, the fundamental issue is none of these things, although each is a symptom of, or a bi-product of, the real issue: the decapitalization of wealth.

The value of capital is the utility that can be realized from it.  Economists generally define utility as the measure of ‘need satisfaction’ realized by a consumer in the consumption of a good or service.  Extending this concept to capital, the utility of capital is the measure of economic goods and services created through its deployment.  Wealth deployed as capital that produces economic goods and services creates healthy economies with low debt, low inflation, and low unemployment.  Unfortunately, much of the wealth created over the last twenty-five years or so has flowed to low capital utility venues.  This process has accelerated over the last decade.

So what are these low capital utility venues?  Wealth deployed for war making is a classic example.  Anyone who has taken an introductory course in economics can probably remember the guns vs. butter analysis.  Money invested in death and destruction is obviously not a creator of economic goods, and the US has spent more than $2 trillion in this manner since 2003.[1]  Financial bailouts also have low utility.  As we have seen, we may have stabilized the financial system with the massive bailout of too-big-to-fail banks, but we have not created economic goods in the process, and the bailout funds are now trapped in the balance sheets of banks; idle dollars producing little to no utility.  Our tax system, which is at least partly to blame for the inordinate concentration of wealth in the top 1% of our citizens, is also responsible for decapitalization.  Wealth concentrated among the few means that capital has flowed to idle reserves – in low risk, low velocity trust funds.  Dusty money is not happy money.  Speculation and financial ‘engineering’ is also responsible for decapitalization.  Currency manipulation, which amounts to more than $3 trillion in transactions per day worldwide, does not produce economic goods.  Nor do the billions of dollars invested in credit default swaps that produce no more capital utility than dollars dropped into slot machines on the Vegas Strip.  Another classic example is government spending and investment.  When the Pentagon spends $6,000 on a coffee pot or the White House blows $500 million on Solyndra, it is clear that government bureaucrats make lousy purchase and investment decisions, regardless of party affiliation.  Debt service payments and sovereign debt bailout funds are other examples.  By now you get the idea: most of the places our money ends up today are venues of decapitalization.  That must change.

In a recent article by the Washington Bureau Chief of The New York Times, David Leonhardt, argued that our current crisis might actually prove to be worse than the Great Depression due to one central difference: during the Depression, invention, production, and investment in public infrastructure continued at high levels.  Leonhardt suggests, “The most worrisome aspect about our current slump is that it combines obvious short-term problems—from the financial crisis—with less obvious long-term problems.  Those long-term problems include a decade-long slowdown in new-business formation, the stagnation of educational gains and rapid growth of industries with mixed blessings, including finance and health care.”[2]  “Mixed blessings” here means finance and health care are relatively low capital utility investments.  When we see job growth in these private, and almost any public sector categories, we must refrain from patting ourselves on the back.  They produce little more than single-round economic effects.

Correcting this problem is not easy, but it is doable.  As you can see from the above list, one may even argue that decapitalization accelerates in an insidious manner, spawning more and larger venues of low utility.  We need look no further than our own economic history to see that many of these venues, except war making, are relatively new developments in our economic system.  Fiscal policy and, to a lesser extent and effect, monetary policy should both be oriented to direct wealth away from these venues.  Financial system regulations and tax policy can also be changed to affect this.  Education, research and development, small business development, and yes, liberal trade and immigration policies can also help stem the tide of decapitalization.

Creating wealth requires a relentless focus on capital utility.  When capital works, it produces economic goods; when idled or addled, it leads to dire economic effects.  Decapitalization is the overarching problem.  Until we recognize this we have little hope of pulling our economy out of the ditch.

[1] This excludes the $600 to $700 billion the US spends annually as a baseline expenditure for national defense.
[2] David Leonhardt, “The Depression: If Only Things Were That Good,” October 8, 2011, The New York Times, www.nytimes.com.
By |2017-05-27T18:24:53+00:00November 11th, 2011|The Economy|0 Comments
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Steding’s Unverified Theory of Strategic Inversion

In August 2008, I made a presentation to a money management firm in Dallas to attempt an explanation at what I then saw as an impending upheaval in the financial markets that would bring to question the very models of investment strategy that had existed since (at least) the Great Depression.  One month later, Lehman Brothers collapsed, and by the end of October 2008 trillions of dollars in wealth had evaporated from the balance sheets of the world.  (If you want an entertaining telling of that calamity see HBO’s Too Big to Fail, based on Andrew Ross Sorkin’s book of the same title.)  What I saw, and what is now evident not only in financial systems, but in political systems around the world (particularly in the Middle East), is the danger of employing old thinking and models of risk management in a world where complexity compounds thereby exacerbating disequilibria created by fraud and oppression.

My argument was posed as Steding’s Unverified Theory of Strategic Inversion (SUTSI). SUTSI argues that as complexity compounds, enabled by technology and as manifested in globalism, the distribution of data points—of actual results—represented by the bell curve flattens. Rather than complexity validating regression toward the mean—the center axis of the bell—it produces a greater number of outliers; those events nearer the rim of the bell such that the principle of regression is moot. In the investment world, I argued further, old portfolio allocations and holding periods might be ineffective, and Federal tax policy may need to be flipped.  For example, investment strategies that target the 0 to 20% returns (‘long’ positions—the area immediately to the right of the center axis of the bell) or the 0 to -20% returns (‘short’ positions—the area immediately to the left of the center axis of the bell) actually accept greater risk due to a relatively smaller number of results within that range.  The better strategy is to play the edges, which now include a greater number of data points, taking both long and short positions, not so much as a hedge, but in pursuit of absolute gains.  Nassim Nicholas Taleb has most forcefully made this argument in his book, The Black Swan: the Impact of the Highly Improbable.

In this investment strategy scenario I suggested that perhaps a strategic inversion is warranted:

  •       Rather than a portfolio allocation of 50% equities, 30% bonds and 20% cash, maybe one should have 50% cash, 30% bonds, and 20% in equities.
  •       Rather than holding investments for the long term—the traditional investor strategy—one should look at short term investments, more of a guerrilla investment strategy.
  •       Rather than being highly diversified one should have fewer positions, mitigating risk by having only 20% of wealth ‘exposed’ in equities (and much less leverage but more due diligence).
  •       Rather than having a tax policy that penalizes short-term gains at high tax rates (35%) maybe we should swap them with long-term rates (15%) as a better way to support the creation of wealth?

These suggestions fell on polite but mostly deaf ears in August 2008.  Today, you can find many investment strategists arguing for variations of these suggestions.  Since 2008 we have witnessed a bumper crop of Taleb’s so-called black swans, not only in financial markets, but also in political systems.  (Although politicians are even slower slow to catch up than financial managers.)

In the May/June issue of Foreign Affairs, Taleb, together with Mark Blyth, Professor of International Political Economy at Brown University, apply these same notions of complexity and risk in “The Black Swan of Cairo: How Suppressing Volatility Makes the World Less Predictable and More Dangerous.”  Taleb and Blyth argue “both the recent financial crisis and the current political crisis in the Middle East are grounded in the rise of complexity, interdependence, and unpredictability” where linear models and a preference for stability—what I have called “staring at the mean”—may actually be the most, not least, risky (p. 34).  What may be called for in foreign policy may mirror the strategic inversion we have witnessed in investment strategy.  The “illusion of control and action bias” that are traditional hallmarks of US foreign policy, may in fact produce greater instability and reduced security (p. 39).  The US may be much better off playing less often, and at the margins, where the black swans live.

Three years after penning my theory and making my presentation about the prospect of strategic inversions to the investment world, it seems at least one thing is clear: compounding complexity requires new modalities of inquiry that reject the linear traps inherent in conventional thinking. While I am not ready to strip “unverified theory” from the title, changing it to Steding’s Rule of Strategic Inversion (SRSI), I am getting closer every day.

By |2017-05-23T20:08:14+00:00May 24th, 2011|General, The Economy|0 Comments
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Crisis & Liberation: Toward a New Prosperity

British economist John Maynard Keynes warned in his thesis of the “Paradox of Thrift” that if everyone started to save more during an economic recession, a commensurate drop in aggregate demand would actually result in a drop in aggregate savings making everyone worse off.  But his thesis doesn’t consider the social and political effects of crisis—of the psychosocial dynamics that also offer the prospect of liberation.  His thesis, like those of today’s economic gurus who proclaim econometric prescience may fall victim to an aggregate yawn.  Regardless of whether we save more or less, or if the economy rebounds quickly or slowly—or at all—we may all be better off if we embrace the opportunity crises provide: liberation.

If crises accomplish nothing else, they bring to question all the givens—the assumptions that prevailed pre-crisis.  They offer an opportunity to cleanse us of beliefs and behavioral norms that rose to prominence not on the backs of principle, but on the exhilaration of deception.  The promise of a benevolent technocracy that would assure everyone a piece of the American dream, and the continued benign and covetous admiration of the world are over. The no-money-down McMansions are an artifact that will make cultural anthropologists giggle for many years to come.  Our challenge is to find and exploit the silver lining of crisis and affect our liberation; to stop praying at the altar of spending. To step off the treadmill of consumerism and pursue dreams that mean something. To thumb our nose at Mr. Keynes and move on.

This anti-consumerism notion, blasphemous though it may be, could be just what America needs.  We may actually win our future back.  On the domestic side, we might learn to enjoy the experiences of life, rather than worship the banality of false prosperity.  While GDP and taxes would fall, it may finally reign-in our useless elected leaders who continue to spend money we don’t have while lining their pockets with lobbyist’s ‘appreciations.’  Families may have to take care of their own, rather than point their finger at the government.  We may have to participate in the education of our children, while schools return their focus to core subjects and away from stylized babysitting programs.  We may have to banish our sense of entitlement and replace it with the principles of equity.  In short, we may have to become stronger individuals, closer families, and more effective communities.

On the global front, can you imagine the hue and cry from countries like China if the American consumer found greater happiness in less stuff?  Can you imagine a world where Americans consume less fossil fuel? We would stop funding our enemies, while improving both our environment and health. Do we really believe that the rest of the world would stop adopting (and/or pirating) our inventions?  What if we brought our troops home and decided to reduce our global military footprint?  Would we be worth hating anymore?

It’s time to pursue liberation—to question the givens and turn those away who leverage our future with a kaleidoscope of deceptions. To honor our capitalist heritage and allow creative destruction room to work. Isn’t it about time we freed ourselves to apply our unique skills and make something new—something truly great?  Crisis and liberation allow us to craft a new perspective and a new, more resilient, identity that just might make us stronger, happier, and yes, even more powerful. Let’s not let this opportunity pass.

By |2017-05-25T22:55:24+00:00January 6th, 2010|General, The Economy|0 Comments
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The Spending Myth

In George Cooper’s The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy, he credits a relatively prolific Norwegian-American economist, Thorstein Veblen, for coining the term “conspicuous consumption.”  Veblen studied the “leisure class” at the turn of the 20th century and used the term to identify markets where demand actually increased as price increased for the same amount and quality of goods—suggesting that markets were, perhaps, far from perfect.  He was one of the first to suggest that the tidy models of economic behavior were false; they ignored man’s capacity to make irrational choices—an appetite of irrationality that would prove insatiable and cause Federal Reserve Bank Chairman Alan Greenspan (many years later) to, reluctantly, warn of “irrational exuberance.”  Of course, this irrationality was largely contained in Veblen’s day by the small number of people who had the financial capacity to behave irrationally, ergo the “leisure class”—a pleasing term for those with more money than sense.  But that would change.

As the 20th century unfolded and American power expanded after each of the first two World Wars, the numbers of those reaching a level of affluence rose steadily together with a hubristic claim to perception of value defined more frequently than not by price. More people had more money and, therefore, the capacity to make irrational assessments of price and value.  We segued from “conspicuous consumption” to “Keeping up with the Joneses,” a phrase originated by Arthur R. “Pop” Momand in a comic strip of the same name in the latter years of World War I.  The expansion of the “leisure class” meant our answer to the question, “What is wealth?” would be defined not by savings or investment—by Robber Barons’ tally of track miles or oil wells—rather, by consumption.

Cultural anthropologists must salivate about where we are today.  They have more than one hundred years’ evidence of our ingenuity and stupidity.  A perfect storm of brilliance and madness, frequently quelled by theological innovations replacing Calvinist notions of sacrifice with televangelist’s promotion of prosperity as the new benchmark of piety.  We traded the Sermon on the Mount (Matthew 5) for Luke’s prescription to enjoy the fattened calf (Luke 15:23).  Let the feast begin!  We embraced consumption—how much we spend—as the definitive yardstick of wealth. No money?  No problem; just charge it.  In doing so we placed our future in the hands of those who find value not in price, but in our debt.  We tethered the future of our children and grandchildren to a pirate ship.  We are betting on mercy where ingenuity and innovation once stood. We have succumbed to our perversion of price and value.

This is the unique, albeit shameful legacy of my generation, of those who rose to the challenge of Sputnik; found freedom at Woodstock; and embraced the alchemy of Reagan, swagger of Clinton, and hubris of Bush. Our masterpiece of contrivance was papering the world with ether-backed credit default swaps—vapor paper—trillions of dollars of securitized myth that makes Bernie Madoff look like rounding error.  Our current prescription?  Spend more!  We continue to measure our prowess by total spending rather than savings and investment.  Our military is presumed to be most powerful because we outspend the rest of the world, combined.  Yet, suicide bombers and improvised explosive devices bring us to our knees.  We believe we have the greatest healthcare and education systems because we spend more than anyone else, while forty-plus million go without care and our high school rankings in math and science plummet. Every data point we stare at to forecast an economic recovery is fathered by spending. As the economy sputters, we contemplate more “stimulus.”  After all, it got us where we are and that can’t be all bad, right?  Wrong.

It is time to straighten the irons.  It is time to change the discourse of wealth.  It is time to return consumption to the altar of avarice and rebuild America. It is time to save, invest, and yes, sacrifice.  Wealth enables spending; spending does not create wealth.

 

By |2017-05-27T16:50:05+00:00September 8th, 2009|General, The Economy|0 Comments
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