Food For Thought

"Labor unions would have us believe that they transfer income from rich capitalists to poor workers. In fact, they mostly transfer income from the large number of non-union workers to a small number of relatively well-off union workers." - Robert E. Anderson

Tuesday, April 19, 2011

And the Band Played On

[Editorial Notes: What you're about to read is scary. It's meant to be. It's not a movie, its real life. This is happening and some of the outcomes are inevitable. If you're scared at the end of this piece, good. Do something about it. Get involved and tell your representatives to start building lifeboats.]

On Monday, the financial world (cue the eye-rolling "not again" reactions) was stunned by the announcement from ratings giant Standard and Poor's that it has downgraded the financial outlook of the United States.
Most people on the street metaphorically shrugged their shoulders and said, "So?" I'm going to answer that question by continuing an allegory that I'm using with the people I meet.

Last November, I likened the U.S. economy to the Titanic. I spoke about the QE2, "Quantitative Easing", as being akin to applying full power to the economic ship while headed straight for the iceberg. Extending that metaphor, yesterday's announcement was that we've not only hit the iceberg, but, as Titanic's builder Thomas Andrews told Captain Smith, "We have about two hours," -- the ship of the United States is sinking and the outcome is a foregone conclusion.

You see, what this means is the Wall Street -- Thomas Andrews -- is finally acknowledging what analysts -- Frederick Fleet, the lookout -- have been warning of for years: there's an iceberg looming and we're going to hit it. In fact, we have hit it. And now we're "down by the bow."

For years, Captain Smith (successive administrations) and J. Bruce Ismay (Congress) have been blithely ignoring the ice warnings issued by numerous other ships (Greece, Spain, Portugal and the E.U.) have issued and have instead confidently sailed directly into ice fields with "full steam ahead." And yet, as I noted above, they are "stunned" when the ship hits an iceberg.

In the case of the Titanic, Captain Smith was, by many reports, so distraught and unbelieving that he was almost, at times, catatonic and paralyzed into inaction. And our leaders, and Wall Street, are now having the exact same reaction.

On the Titanic, Captain Smith told his officers not to "panic the passengers" by telling them to muster on the boat decks. In the United States, the Obama administration and a compliant media is focusing on so-called "recovery stories" and partisan wrangling.

But they're not the only ones. In our own state of Wisconsin, which like the Federal Government, is bankrupt (yes, that's right, both have no money - literally, not figuratively), the Unions and state workers are scrambling over each other to scream about their "rights". As the ships of state sink out from under their feet, they're only concern is, like those first class ladies on the doomed Titanic, that they are "properly dressed for the occasion."

In hindsight, its easy to see the series of miscalculations, mistakes and accidents that lead to the sinking of the grand ship. Its easy for us to shake our heads and make the judgement, "Couldn't they see they didn't have enough lifeboats? How stupid!" And yet our governments have done the exact same thing.

The British Board of Trade regulations in 1912 required only that one have lifeboats according to the tonnage of the ship, regardless of the number of actual passengers. It was an outdated and outmoded way of thinking with disasterous consequences.

Likewise, our governments have been following the Keynesian model of economics which prescribes that governments spend money to stimulate the economy. It is an outdated and outmoded way of thinking with disasterous consequences.

Even China, often touted as the superpower of this century that will eclipse the United States, has subscribed to this discredited economic theory and is soon to face its own massive financial crisis.

On the evening of April 12, 1912, there were no ships (save the Californian, whose radio was off) close enough to Titanic to affect a rescue. Likewise, given the current state of affairs in Europe and the impending Chinese meltdown, there is no one to save the United States. Its up to the passengers, each and every citizen, to make the officers, our legislators, take immediate action to save as many as possible.

Ladies and gentlemen, we have hit the iceberg. We are sinking. The builder Mr. Andrews has admitted that we are going down. The question now isn't "how do we save the ship", the question is, will we have enough lifeboats for everyone. And given that our government plans as well as J. Bruce Ismay, the answer isn't encouraging.
It is up to each of us, regardless if First Class or Steerage, white collar or Unions, to take our fiscal lives and those of our fellow passengers in our own hands. We are all in the same sinking boat.

I am sending this column to my legislators at both the state and Federal level. I am going to hound them about priorities and building life rafts. And I'm making sure my own life jacket (my financial "house") is secure. What are YOU doing?

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