Thursday, January 01, 2009
Could we have a world without money? It's not just "pay your bills", it's "pay your dues"!
David Ignatius offers a nice moralistic op-ed on p A13 of the New Year’s Day Washington Post, “It’s Time to Pay the Bills,” link here. I would add another phrase, “It’s time to Pay the Dues” (or “pay your dues”). Visitors familiar with the tone of some of the posts on my main blog probably know what this means (it would make a good multiple choice question on a history test in Virginia’s SOL’s).
Ignatius, writing a piece that starts out as if it belongs in The Washington Times instead, quite reasonably questions where we stop sliding down the slippery slope of what we call Bailout America, and it isn’t John McCain’s “Country First” – it may come back to Barney Frank’s “punish the country”.
I divert for a moment, recalling that on a Sunday night in March 2008, seeing a headline on AOL news, and writing the posting called “New alarms: ‘Margin Calls’ on the US Economy and the Financial System”, about Bear Stearns, on March 16 (navigate there with the archive links on the left side of this page). Then, on another Sunday afternoon, September 14, 2008, I saw another AOL headline about Lehman Brothers and a second one about AIG’s credit rating. I had intended to blog about the movies. That was indeed The Margin Call (that would make a good name for an indie movie, wouldn’t it, maybe with John Malkovich). I wrote a post with a milder title “Weekend Wall Street Turmoil”. But I also dropped everything else that I was doing and emailed a financial planner / life insurance agent that I knew pretty well and told her to read all the breaking news before she talked to another client. Here we go – I worked in the life insurance and financial services business in I.T. and know it pretty well (ING and ReliaStar, etc) but I don’t want to “sell things” – I’ve been through all this before. But anyway, I told her in the email that this was financial Armageddon (the end of Life As We Knew It), with the whole Sunday session on Wall Street falling apart over the credit default swaps, and that either the government rescues Lehman and AIG right away, or the whole economy would fall like a house of cards. This all happened on my computer in less than an hour. She wrote back soon, pretty much agreeing.
Ignatius maintains that that Paulson pretty much missed the test question on Lehman Brothers; but maybe not; if he had saved it, we’d still be in pretty much the same place on the Bailout Nation slide.
What this amounts to is a failure of our financial business leadership, and the political leadership in both parties (it’s as much about Congress – now Nancy Pelosi – as it is about Bill Clinton and George W. Bush) to know right from wrong. In our system, we get the leadership that we elect, and we therefore get the leadership that we deserve. Here’s a specific example of my own. Tuesday, on the way to see the new Visitor’s Center at the Capitol (that opened Dec. 2) I got into a conversation on the Metro with a middle aged couple from Sacramento, CA about the housing bust. Yes, they were upside down like everybody else, but they were good moral Republicans and paying their mortgage and all their bills. But they were mad that their neighbors were intentionally defaulting on upsidedown “pineapple” houses and then going across the street to buy foreclosures. These are ordinary citizens, doing what’s morally wrong (but legal) because everybody else is doing it.
This makes me think we’re completely out of control. Ordinary homeowners encouraged to commit what amounts to fraud. We’re going to wind up with an economy run on Monopoly money.
In fact, it’s pretty easy to imagine an Armageddon style disaster movie where people start using Monopoly money after civilization has collapsed. You just keep printing it. It doesn’t matter what it looks like. Welcome to another Weimar Republic. Every banker becomes another Bernard Madoff, and nobody can get caught.
Or, if you will, imagine a civilization maybe forty light years away that doesn’t have the concept of fiat money at all, only “karma”. (Maybe it’s on a smaller planet, like the History Channel’s “Arinelle” with one side facing it’s sun all the time.) That’s another good sci-fi or Ion Channel premise. Such a civilization probably watches our movies and TV shows from a few decades ago and can tell where we’re headed. It would scoff or laugh at us, knowing in advanced extraterrestrial wisdom that all money-based economies have not just business cycles but real business depressions.
Anyway, given Ignatius’s pessimism that Bailout America can continue to function, I still wonder how we can have infrastructure programs without almost another dictator. After all, FDR was practically a dictator himself, however benevolent. Is that what we expect of Barack Obama?
So, maybe we’re headed for a Sci-fi Channel style world without money at all. We're headed, at best, for a "free market cultural revolution." Pay your bills and pay your dues.