Popping the Fiscal Balloon

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It was one of the most electrifying moments in modern political television... for those who had ears!

"Should we lower the debt or flood the world with trillions of dollars in cash?" asked Fareed Zakaria.

In the red corner, Nobel sanctioned economist Paul Krugman was advocating more money, lots of it, now. In the blue corner, word-merchant historian Niall Ferguson countered for immediately reducing the debt.

In case you missed it... and many did 'miss it' even though they watched it on CNN's GPS, here's the layman's translation.

Imagine your brain sprung a leak to the outside of your skull, you would die if the hole weren't plugged. On the other hand if only one artery developed a bubble inside your skull putting pressure on the surrounding tissue, you would poke a hole in the bubble, relieve the pressure, then strengthen the artery so it wouldn't happen again. That's called an embolism. The rest of the brain would be fine. Embolisms can be fixed.

In economic terms, Ferguson is warning us that rampant debt is a financial leak threatening the entire system.

Krugman, on the other hand, counters that debt is just part of the economy. The real threat is cumulative charges, interest and profit on the debt, an expanding embolism, susceptible to regulatory popping and remedial cauterization.

But Krugman goes farther. Much farther! He calls it the "phantom in the room".

Brrr, feel the chill of fear?

The financial community is loath to talk about this ghost because we ordinary mortals might actually begin to understand. The high priests dare not give it a simple name, like profit, for fear we masses will lose faith.

Like a magician who slips and nearly reveals how a trick is done, Ferguson almost blew it. He euphemized so accurately, so close to the truth, you could almost feel the collective fiduciary scrota shrinking around the globe. Millions of high finance testes running for pubic cover, wincing in anticipation of this catastrophic blow to their semantic groin.

"Fiscal Credibility", Ferguson intoned. "Nasty Fiscal Arithmetic". "Domestic appeasement of local interest (lobby) groups". "Once you find interest rates rising..."

The phantom stirred.

Then Zakaria rescued him. "So what's the solution?"

Caught in his own dangerous rant, Ferguson scrambled for cover. "Radical fiscal reform". "Flat tax". "Cut entitlement programs". Gawd forbid we should reduce our profit. A flurry of semantic transformations to re-bury the deep structures of the daemon he had nearly exposed.

The world's banks must have heaved a huge sigh of relief. Krugman wasn't in the studio at the same time to pounce on the gaff, to expose the lie, to dress the naked emperor.

An embolism of what ... greed? Good grief!

What might Krugman have said?

Except for natural disasters like the recent one in Haiti, countries rarely fail to repay their real debt, the actual amount they initially borrowed. Every other instance of fiscal collapse in the history of the world has stemmed from an inability to keep pace with ballooning compound interest on the debt, not the debt itself.

Insatiable greed.

Krugman had been brutal in anticipation. He whisked so close to naming the beast himself. "Bond Vigilantes" he called them at one point. The viscerally corrupt curia of collusion among the banks and the insurance companies who are siphoning the wealth of humanity into gated backwaters of privilege and impunity.

Of course, there are legitimate costs incurred by those who lend and those who insure us against unforeseen misfortune. They are also entitled to make an income. However, those costs should be calculated transparently based on the true actuarial risk of default or accident. Far from such a fair return, the current banking and insurance industries, no matter how low interest rates appear to be right now, continue make obscene profits from the cumulative effect of compound interest. Interest upon interest, upon interest... ad infinitum.

That is the phantom in the room!

It is the omnipresent and never-to-be named threat, not from the borrowers, not from the actuarial risk of capital default, but from the arbitrary whim of exponential greed that cranks the interest rate up to whatever the market will bear in good times, or simply threatens to do so in bad times.

Krugman's "Phantom in the Room".

Decades of political advocacy and activism haven't a fraction of the power and influence of thirty seconds of reversing an embedded pre-supposition.

Fareed, I dare you. Just one minute a week. Have an impartial and professional semanticist analyze a single utterance from the week's news coverage. Maybe just before your closing soliloquy and book recommendation. You might go down in history as having single handedly rescued democratic dialogue, and governance..

It's time someone stuck a linguistic finger down our throat and induced a little purge to clear the bullcrap.

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"Follow the Money Stupid!"

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Bloated fat cats living in a gated community on the hill, while emaciated hoards struggle in the desiccated, drought-plagued valley below.

Anything wrong with this picture? It defies gravity, right? Must be a vacuum pump somewhere pushing water uphill?

Does that scenario remind you of the current financial markets?

It leaves me wondering whether there might not be some sort of jolt available to shock the entire financial matrix back into equilibrum?

I'm lucky you see, I don't know enough about economics to not ask such a question.

I do remember in 1972, when the US was in a threatening debt situation, Nixon sent everyone home at 1700 hrs one Friday, devalued the dollar by a whopping 10% over the ensuing long week-end, and reopened for business at 0800 hrs Tuesday while thumbing his nose at the creditors.

Now, I understand that in order to pull off such a stunt, the devaluing country must be able to withstand the backlash. To devalue one currency in the absence of a neutral standard, such as gold was back then, means that all other currencies appreciate relatively. But that was an eon ago when 'globalization' didn't even apply to the World Cup yet, let alone the World Economy.

I mention it now only as an example of a time when we dared shake up the world's extortive shakedown system. What wild, out-of-box, shock could we use today to reset the very meaning of 'money' itself to some kind of start-from-scratch tabula rasa. What tactic of global economic policy would be the equivalent of turning off the aforementioned pump, even temporarily?

Individual sectors of the world economy are rife with local and hemispheric collusion, of course, but these are only mini-tycoons on local hillsides. What about the planetary petro-pharma-agri-banco-insurance 'cartel'? It doesn't even act like a cartel anymore. That word implies a gathering of at least several actors. These buggers act as one highly integrated central vaccuum.

Their insidious gleaning machine permeates from the marrow of our bones to the farthest reaches of our economic vascular system, into the very meat of the Earthly being itself. It vacuums our taxes, profits and bonuses through a venous capillary system that sucks us dry to feed a single narrowly held capital escrow.

Make no mistake about it, the process is indeed venous, not arterial. The net traffic is 'return', toward the center. It was designed from the start to feed that gated and privileged reservoir at the top of the food chain.

That is why the main symptom of this current economic disease is not edema (swelling from excess fluid at the periphery), but ischemia (lack of circulation and oxygen in the economic muscles that move us.)

This isn't the first time it has happened. Each of history's great revolutions has posed the same question to petrified privilege. Has the time come to sabotage the pump? Are the hoardes determined to see the water flow back downhill for a while until nature and cyclical evaporation can restore regular rainfall to the valley again?

The difference, despite the broad availability of small arms, is that we, the valley riff-raff, are unlikely to launch any sort of guerilla revolt this time thanks to the pharmacopeial and misinformation-induced stupor into which we have fallen.

Instead, the pump that is sustaining the uphill flow of wealth and privilege is about to fail all on its own. It is running dry naturally and, once it has, the diaphragm will perforate and the shrinking gaskets will fail to seal the valves that currently ensure a one way flow.

That flow, on which the accumulation of plutocratic power and priviledge depend is called 'interest' in the case of banks and 'premium' in the case of the insurance companies. They are wealth-diverting and concentrating strategies that no longer bear any relation at all to the actual costs of managing currency or actuarial risk.

Only a very few prophetic voices among us seem able to step off the consumerist presuppositional treadmill long enough to even notice what is happening and, predictably, we dismiss them as platitude-spouting old socialists from a bygone era. There is no Twenty-First Century Deep Throat willing to blow the whistle.

Nobody wants to hear a prophet whine.

instead, a necessary seismic upheaval is on the way that will not be of our deliberate chosing or design, not this time. We are functionally incapable of a well-crafted deliberate change of direction. There will be no brilliant, game-changing Obama-led end-run around the debt markets some Monday morning to shock them and draw the planet away from the brink.

Crisis averted? Water flowing with gravity again? Not a chance. Not with the whole shamozzle compounded by the percentage of the world economy that is off-book, a narco-criminal 'black market' and informal economy that runs parallel to and increasingly unconnected to the 'legal' (i.e. taxable) economy.

Instead, in the absence of a deliberate act of human will and communal planetary sanity, Mother Earth herself is going to take over and teach us a bitter lesson. Our behaviour as a species on this planet is unsustainable. We are stark raving mad. BP and Grecian fiscal policy are only tips of the melting iceberg.

And where I live, fellow drones, that iceberg is no friggin' cliché!

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