How much ruin in a nation?

On the one hand, there is a lot of ruin in a nation. On the other hand, that which cannot continue, will stop. The present level of government spending is unsustainable.

At what point then, do we get general collapse?

All the advanced western nations are in much the same condition, some a little better, some a little worse. Europe is more broke than America, Greece more broke than the rest of Europe.

The amount of debt a nation can sustain depends in part on its prospects for GDP growth. Thus nations in financial trouble lie about not only the amount of debt they have, and the size of their deficits, but also their rate of growth. All the western nations have been lying for a long time about their levels of debt and the size of their deficits, and have recently begun to lie about their rate of growth

People who lend to governments are showing indications of deep irrationality. Thus, for example, when Ireland told some of the truth about its financial situation and set to work getting its house in order, the market panicked, while continuing to lend to countries in far worse shape than Ireland.

Greece is the canary in the coal mine, which tells us how far we have to go before collapse. Greece is America in fifteen to twenty five years, and would have collapsed five years or so ago were it not for investor expectations that it would be bailed out, as it has been. The EEC issued a guarantee that people who lend money to Greece would be paid back by the EEC (aka Germany, Germany being the only EEC member that is halfway solvent), thus effectively issuing Greece a no limit low interest credit card, the equivalent of helping an alcoholic by giving him a barrel of whiskey. This, of course, produced venomous outrage from Greece. They had expected a wheelbarrow load of money from Germany, and merely received a no limit credit card.

In 1999 I predicted collapse around 2020-2025, with interesting times beginning around 2010 or so. Still looks about right.

When the US is as deep in the septic tank as Greece is today, no one will expect a bailout, therefore it will go under – and since by that time it will probably be bailing out and guaranteeing Europe through the IMF, Europe will go under simultaneously.

(When the US sets to work keeping Europe afloat through the IMF, expect a vehement stream of denunciations from Europe, complaining about its cruel and oppressive stinginess, similar to the spew of outrage and indignation now being emitted by Greece.)

When the crisis finally comes, the most likely way out is hyperinflation, probably followed or accompanied by by war, revolution and/or dictatorship, but the least damaging way out is that wisely chosen by the voters of Iceland in the recent referendum – to refuse to repay official debts.

This horrified the Icelandic governing elite, and will horrify our elite. They like to borrow and spend money which ordinary people will have to repay. Deficit is the most invisible form of tax, hence much beloved by the elite, and the only way to prevent it is to force the government to default on its promises.

Sooner or later, that which cannot continue, will stop.

If the problem was merely financial, it might well be resolved with no more drama than the Icelandic insolvency, but the problem is also political, making a more violent resolution likely.

A nation and its institutions exist because people intend that they exist – because people worked very hard to create them, and other people continue to work to sustain them. There is, as Smith said, a lot of ruin in a nation, but when the will to sustain those institutions is no longer there, collapse or very radical change follows in a generation or two.

Here are some recent examples of rot in the rafters. When the whole rafter is rotted all the way through, the roof will fall in, and everyone will be surprised, and ask “Hey how come the roof fell in?”. Each of these examples was the result of a long series of similar precedents, each worse than the preceding one.

This stuff has been going on for a long time, but it has become markedly more severe lately.

  • Imprisonment without charges or trial. When a sergeant on the battle field imprisons or executes someone administratively, that is no threat to freedom outside the battlefield. When the president has someone who was caught at an airport imprisoned administratively, that is a threat to freedom. So far only Muslims who murderously hate America and Americans have been treated so, but doing it to Padillo is getting uncomfortably similar to doing it to me. This is a continuation of the Clinton program of using administrative violence against “extremists”, in ways that past generations would have regarded as criminal, but which Clinton got away with. Bush’s extremists are genuinely extreme, but some of Clinton’s “extremists” were not, in fact, very extreme at all. The next step will be Bush style administrative detention applied against Clinton style not-so-extreme extremists.
  • Attack on the electoral process. Democracy requires that the losers accept losing, and the winners accept limits on their victory. On this the Democrats are the main offenders – refusing to accept entirely legitimate Republican victories as legitimate, while themselves industriously stuffing ballot boxes, registering the dead to vote, and treating the ballots they themselves fabricated as a limitless mandate. While both sides are guilty of ballot box stuffing, the Democrats do more of it, and are guilty of a dangerously extreme self righteousness about doing it. The Democrats are by far the worst offenders in this matter.
  • Attack on political debate. As predicted, the campaign finance laws have come to be interpreted as defining speech itself as money, and are now primarily about regulating speech, speech to which monetary values are quite arbitrarily applied, even though money seldom change hands. Since the NRA was forbidden to participate in politics, it reincorporated itself as news organization to take advantage of the freedom of the press exemption. In consequence, blogs and the mainstream media, the freedom of the press exemption, are now being treated as a “loophole”, and the problem of how to “fix” that “loophole” is now being addressed. This process has been going on for twenty years, it is starting to have a major effect in silencing some voices, and all voices now speaking, are speaking through what the enforcers consider to be “loopholes” and “problems“”.
  • Politicization of the judiciary. Court stacking has already reached the point where stare decisis is nonsense, and sooner or later judges are going to start acting on this fact, simply setting aside laws and precedents on the basis that the other side had a majority back then, with the result that the present minority will completely refuse to accept the outcome as binding. The main villains here are the Democrats, who think that the job of judges is to legislate stuff that would be political suicide if an elected politician tried it, such as gay marriage, though the Republicans are far from innocent. When a Democrat legislator says a judge is “mainstream”, he means that the average swinging voter would regard that judge as dangerously demented, and when he says a judge is “outside the mainstream” he means that judge has views that are too similar to those of the voter that the legislator reluctantly courted in his recent
    campaign.

The basic columns of rule of law and the rest that are the basis of the American nation are under determined and persistent attack from within, and are getting mighty wobbly.

Government applies state power to ensure political outcomes – for example it makes broadcasters toe the line by direct regulation of the airwaves. The print media get access to the extent that they play along with those they seek access to, hence the New York Times. The schools teach the government line on the great depression, and
scientists and economists know that if you scientifically prove what politicians and regulators want to hear you get ahead, and what politicians and regulators want to hear is always that regulators are doing good, except that they need a lot more power because they are not doing nearly enough – hence the noise about financial “deregulation”, when all the supposed examples of financial deregulation are financial regulation, financial regulation that happens to be highly favorable to Goldman and Sach, who are connected to the regulators by a revolving door.

At the same time, those seeking political outcomes, seek backing from state power. A marriage naturally ensues. Let us call this happy marriage and its numerous morbidly obese children “the Cathedral”. The Cathedral is almost the same thing as the left and the progressive movement, or rather it is the left in power, the established left, the professoriat, the mainstream media, the lawyer lobby, the judiciary, the senior public servants, the management of numerous supposedly non governmental quasi private organizations, and so on and so forth.

The Cathedral is the reason why history always moves left. The Cathedral is almost the same thing as the left. The right is an ever changing coalition of some of the groups and interests that are inevitably and inexorably being steamrollered by the Cathedral. Since the Cathedral steamrollers different things every few decades, the right is different people every few decades. Thus the Cathedral has different policies and programs from time to time, but its people and policies directly descend from previous Cathedral members policies, whereas the right has different policies and people from time to time.

In functioning, the Cathedral is very like a theocratic state. The guys with guns back the preachers, and the preachers endorse the guys with guns, resulting in the theocracy becoming ever more extreme and nutty in its religious doctrines, but in old fashioned theocracies power is concentrated in a King and high priest, with the King owning the high priest or the high priest owning the king.

In the Cathedral power is instead diffused amongst a large class of Brahmins, an ever more numerous, ever growing class of Brahmins. To get anything done, lot of Brahmins have to sign on, and each extracts tribute for signing on – which is why we cannot rebuild the two towers, and Dubai can, Dubai being an old fashioned theocracy.

You want to build a tower in Dubai, you just need one sufficiently high Mullah to sign on. In the theocracy of New York, you need lots of Brahmins to sign on, more Brahmins to sign on than anyone can count. So the two towers stay down.

Now what has been steadily happening ever since 1915 is that the power to print money has been diffused through a larger and larger class of people resulting in an ever greater inflationary bias, much as the power to obstruct the building of towers and housing has been diffused through a larger and larger class of people resulting in housing becoming ever more expensive. But these were stuffy conservative bankers, not really part of the Cathedral, or rather no longer sufficiently part of the Cathedral now that the Cathedral has moved a long way further left than it was in 1915 and become vastly more numerous. In 1993, the Cathedral decided these bankers were racists, and that they must join the new improved onsiderably more progressive Cathedral, or else. In due course, they did. Hence the present financial crisis, which is affirmative action lending leading to a run on the repo market, which run started silently and furtively in 2005 November, in response to the escalation of affirmative action lending, which had started to become excessive in 2000 or so, and became bizarrely extreme and ludicrously blatant in 2005. The run crashed the repo market in 2007, causing a reduction in affirmative action lending from blatantly insane to less blatantly insane – which reduction appears only temporary.

The “stabilization” of the repo market and the “normalization” of financial markets is a huge breakthrough for the Cathedral, and was indeed the original objective of declaring the banks racist, for it means that any large American business that can have its debt rated AAA can in effect issue money, for a government stabilized repo market trading AAA debt with an implicit government guarantee makes AAA rated debt directly cash equivalent. Today, in the “stabilized” financial market, an American financial institution gets and keeps AAA rating by political favor, rather than actual solvency, and to get political favor, it has to kiss up to political activist groups such as Acorn, so the effect of “stabilization” is that more and more elements of the Cathedral get to issue money outside the government budget, resulting in more rapid escalation of the ever growing inflationary bias.

Another factor is that every so often, by its nature, the Cathedral will simply go to war. The Cathedral lives on conflict. Each reform,real or purported, produces a new dispersal of little bits of state power with which to reward the ever more numerous members of the Cathedral, so the Cathedral always needs new reforms involving new conflicts. Conflicts are apt to get out of hand. The longer it has been since the Cathedral last went to war, the more it is apt to spoil for a new war, the more it is willing to take on a conflict that runs the risk of getting out of hand.

Thus we can foresee an ever more warlike Cathedral, that is causing ever more serious problems – the latest “reform” (bringing the bankers into the new Cathedral line) being one that is causing huge damage and will rapidly cause vastly more damage, which damage will lead to a multitude of conflicts, conflicts with a Cathedral that is
increasingly spoiling for a fight.

In short, the reasons why the two towers would stay down were evident in 1999 well before they fell. It is now 2009, and they are still down. This foreshadows crisis and collapse. What prevented the towers from rising again is also what caused the financial collapse, which foreshadows more of the same.

At the same time, we hear from the Cathedral, rhetoric ever more violent, ever more warlike.

It is perhaps too soon to bet that a faction that has won every conflict over the past three hundred years is going to lose this time but outright war is apt to have surprising outcomes, war that follows collapse the more so. Trees do not grow to the sky. The ever multiplying Brahmins of the Cathedral are increasingly becoming liability, rather than an asset, and if it should survive the coming financial collapse and win the coming war, the Cathedral will have to thin the ranks a bit. If it survives, as it likely will, it will start looking more like a traditional theocracy, relying more on the gulag and less on persuasion and bribery.

12 Responses to “How much ruin in a nation?”

  1. Bill says:

    There is much more ruin than you are giving credit for. Sweden’s government spends something like 55% of its GDP. The US government spends something like 40%. Other than a slowdown in growth and a modest reduction in the standard of living, why should we believe that having the US government increase to spending, say, 60% of GDP would be disasterous? It would be a bad idea, but ruin? The present level of spending is sustainable pretty much forever.

    The problem is the accumulation of debt, firstly from the appetite for spending without taxing. Even here, there is way more ruin than you give credit for. US interest on the national debt is 1.6% of GDP, lower than the eurozone average. US deficit is high, over 10% of GDP.

    If the US government continues to increase spending without increasing taxes and if there is not a significant economic recovery, then 15 years from now, debt service will be very expensive. At that point a default or high inflation become likely (if it continues to be impossible to raise taxes or cut spending). But those are very pessimistic “ifs.”

    The other way we are accumulating debt is through the Federal Reserve expanding its balance sheet — buying mortgage backed securities with money it gets via a combination of selling securities and encouraging banks to increase their excess reserves with the Fed by paying interest on them. When banks come asking someday for their excess reserves back, the Fed can 1) sell MBSs, 2) sell T-bills, 3) stiff the banks, or 4) print money. The nightmare scenario is if MBSs are revealed to be worth very little and other US debt is so high that 2 won’t work. Then 4 will be chosen, potentially kicking off a run on T-bills and the dollar leading to high inflation.

    I think you are watching two cars playing chicken. It’s true that the game can’t go on. But it can end four ways: car A swerves, car B swerves, both swerve, wreck. If neither the tax cutters nor the spenders swerve, then bad things will happen. My bet is that the republicans cave and taxes go up a lot, restoring fiscal balance at a lower growth rate. If you are right, then gold is cheap.

    • jim says:

      Submitted on 2010/04/02 at 3:51am

      There is much more ruin than you are giving credit for. Sweden’s government spends something like 55% of its GDP. The US government spends something like 40%. Other than a slowdown in growth and a modest reduction in the standard of living, why should we believe that having the US government increase to spending, say, 60% of GDP would be disastrous?

      Taxing beer, wine, food, cheap housing, and petrol would raise more revenue, but such taxes are extremely unpopular. Raising income tax on the middle class and rich is popular with the majority of voters, but will reduce real GDP, rather than increase revenue. We are pretty close to the Laffer limit on income tax, hence the proposals for a (violently unpopular) broad based consumption tax. Clearly there is no way either of the parties could do what is needed to sustain current spending – soak the poor.

      In general, when a debtor massively lies to his creditors, and the creditors credulously believe him, it is going to go boom sooner or later. When word was quietly circulating as to what Enron was up to, what it was up to was nothing much compared to what Western nations are up to.

      The present level of spending is sustainable pretty much forever.

      Not sustainable at present US standards of living. Sweden is way poorer than we are. Although statistics say Swedes are doing great, the actual lifestyle of the ordinary Swede is pretty grim.

      The problem is the accumulation of debt, firstly from the appetite for spending without taxing. Even here, there is way more ruin than you give credit for. US interest on the national debt is 1.6% of GDP,

      Low interest costs are seigniorage, rather than investor assessment of US credit worthiness. The price of gold is investor assessment of credit worthiness.

      If the US government continues to increase spending without increasing taxes and if there is not a significant economic recovery, then 15 years from now, debt service will be very expensive. At that point a default or high inflation become likely (if it continues to be impossible to raise taxes or cut spending). But those are very pessimistic “ifs.”

      Every western democracy is in the same hole. Among other problems is that in order to massively expand the number of tax consumers and diminish the number of tax producers, thereby biasing the voters towards more government, the government put large numbers of people on the government payroll, and promised them generous inflation adjusted pensions. And pretty soon those people are going to be retiring. A multitude of similar past promises are starting to bite. Every measure that governments have undertaken to move the voters left is a measure that decreases revenue and increases costs, and often these costs are back loaded – set to start biting from around 2010 to 2025, set to start biting about now. If the government does nothing for the next twenty years except the most fiscally responsible actions that are thinkable in anything resembling today’s political climate, they will only slightly slow the rush to the precipice.

      I think you are watching two cars playing chicken. It’s true that the game can’t go on. But it can end four ways: car A swerves, car B swerves, both swerve, wreck. If neither the tax cutters nor the spenders swerve, then bad things will happen. My bet is that the republicans cave and taxes go up a lot, restoring fiscal balance at a lower growth rate.

      Democrats are not proposing taxes that are likely to increase revenue, now or in the distant future, nor is it thinkable that they will, and if they somehow were to do so, Republicans would have a field day. Typical Democrat tax increases are the latest drama where they removed a tax subsidy for eeeevil corporations, which tax subsidy was to encourage eeeevil capitalist exploiters to provide benefits to retirees rather than dumping them on Medicare. The likely result of removing this tax subsidy is more people on Medicare, for very little net gain. A tax that actually would raise revenue would be to tax alcohol and petrol to European levels.

      If you are right, then gold is cheap

      If I am right, gold is priced about right. The present price of gold is high enough that if tomorrow morning everyone lost faith in paper money, and to buy beans and ammo you had to offer a some bits of gold, which the merchant tested with hydrochloric acid and weighed with a postal scale, there would be enough gold to keep the economy going. The current price of gold only makes sense as an investment if that scenario, or something not far from it, is going to happen in the next decade or so. The current price of gold represents a major proportion of the world rich preparing for a high probability future in which paper spoiled by ink is worthless.

  2. Bill says:

    Democrats are not proposing taxes that are likely to increase revenue, now or in the distant future, nor is it thinkable that they will, and if they somehow were to do so, Republicans would have a field day.

    Agree. But I’m thinking of something along the lines of the social security compromise back in the mid 1980s. A compromise which is hashed out in private by a “blue ribbon panel” and then mindlessly endorsed by both parties at once, guaranteeing that neither party can profit much from it. Bob Dole was rewarded for that one with a presidential run, right? This is what happens routinely in Europe. The parties conspire to do whatever the great and the good think needs doing, and the citizenry be damned.

    When elites run a place off a cliff, it’s usually because they are too busy fighting amongst themselves to pay attention to turning or because they are stunningly stupid. That’s not happening in the US. Obama, Pelosi, McCain, Graham, and etc don’t disagree about much of substance. Middle Americans disagree with the elites. But, the easy, shmeasy way the tea partiers are being co-opted by Dick Armey and Sarah Palin show how impotent middle America is.

    The elite will spring whatever massive tax increase they contemplate when they are ready or when events force their hands. Presumably a high VAT, but it could be something else.

    • jim says:

      But I’m thinking of something along the lines of the social security compromise back in the mid 1980s. A compromise which is hashed out in private by a “blue ribbon panel” and then mindlessly endorsed by both parties at once, guaranteeing that neither party can profit much from it. Bob Dole was rewarded for that one with a presidential run, right? This is what happens routinely in Europe. The parties conspire to do whatever the great and the good think needs doing, and the citizenry be damned.

      Yet Europe is still even more broke than the US. Not only can we not afford European style social democracy, we cannot afford it even with European style taxes and a European style standard of living.

      Why did Germany bail out Greece? Not because Germany is solvent, but because it is broke. If Greece were to default, a wave of panic would ensue in which the next weakest would default, and the next, and the next, and the next. The price of gold is what it is because people are preparing against such a wave of panic.

  3. Matt says:

    What do you think of moving to Australia (or elsewhere)?

    • jim says:

      Australia is in good shape, due to the resource boom caused by the industrialization of China and India, due to the fact that reproduction rate is quite decent, (thereby providing sufficient taxpayers to pay off the Australian equivalent of social security), due to the Howard governments highly effective attempt to address the social security problem by getting people to form their own super funds, and the fact that most of the immigrants brought in to replace the missing grandchildren are relatively smart and peaceful Asians, rather than violent and stupid Muslims.

      The health scheme is not too bad – it has a socialist disaster providing “free” health care, but also a system of private health care that works rather well. Unfortunately the labor government wants to get everyone into socialist health care, but is moving rather cautiously compared to Obama.

      The best health care system, and best education system, is that of Singapore, which has truly private system that is three times the size of its truly socialist system, but housing and use of the roads is very expensive in Singapore.

      As Jim Rogers says, Singapore is the future, and America is the past. Jim Rogers has moved to Singapore, with his family, and intends his children to grow up Asian and speaking Mandarin. But I notice that though Jim Rogers is a billionaire, his garden is crappy, and the view from his house is exceedingly ordinary. Singapore housing is just dreadful.

  4. Karl says:

    > “The basic columns of rule of law and the rest that are the basis of the American nation are under determined and persistent attack from within, and are getting mighty wobbly.”

    It is not a nation if the basis is rule of law. The basis of a nation is common ancestors and common language. For example, Germany had a monarchy, a nazi dictorship, a communist dictorship, a democracy ruled by law – that all was German.

    Opening the borders to massive immigration from outside Europe lead to city districts (arguably whole cities) in Germany no longer being German at all. Even if German law would still be enforced on the streets of these cities (city districts), they would no longer be German. The same has basically happened in Sweden and France – is actually still happening.

    In your post you write “nation”, but you really write about how to organise a nation.

    That is an important problem. It was the problem of the last century. A world war and the cold war have been fought about it. Nowadays, many people in Europa would love to have that problem. The problem that is becomming ever more pressing is what do with two or even more increasing hostile peoples (“nations”) living in the same area.

    • Carlylean Restorationist says:

      This is an interesting mistake.

      I’m as racialist as you are, and I’ll say right away that the nature and content of the state ultimately flows from the biology of the people who comprise it, so it’s no mistake that Germany (to take your example) came to be the way it was.

      Nevertheless, where you go with this is wrong. Germany under the Weimar Republic was a very different place to Germany under Bismarck.

      If Sweden today was cleansed of the real existing rape culture, the filth and degeneracy, the atomised individualism, the cultural and economic Marxism and all the other garbage that makes it such a hell-hole, but the multi-racial population stayed fixed……. it would be far better to live in for white Swedes than a Sweden in which nothing changed legally, culturally or institutionally but all the woggoes decided to up sticks and move away because it’s too cold.

      Yes ultimately a mulatto culture is going to degenerate, but it’s the changes to the culture and environment themselves that cause the problems, not the people so long as the people are kept in check.

      This is actually a ‘white pill’ because it means so long as the right people get back on top, we won’t have to deport anyone. Those who can fit in with Sweden as it should be, Germany as it should be, etc. will fit in with it, and those who can’t will leave of their own accord or end up destroyed by the system.

      That means the whole thing’s a lot more feasible than it would otherwise be.

      Fix the laws, the culture, the institutions first (by seizing and monopolising power) and let the people worry about themselves.

      Now: that doesn’t mean don’t have a border policy! Quite the opposite: on day one of a restored Sweden, those borders CLOSE, FULLY; and child benefits are going to look very ‘racist’, as will many things.
      A motivated Somali who genuinely belongs in Sweden because it’s the place he loves the most in the world and he really deep down just yearns to BE a Swede, will have no problem with this.

      The rest will just go.

      • jim says:

        Equalist madness.

        In the same culture, the same society, there are huge differences between one race and another, and actually existing nations primarily reflect their dominant and ruling race, rather than their particular culture and society.

        Universities have been trying to make remake the smarter blacks into the image of whites ever since the War of Northern Aggression, with a near total failure rate. Obama was non stereotypical and behaviorally white, probably the only one they could find, but his wife, a product of an elite university, is a stereotypical black, and the black woman they had rebut the State of the Union speech was hilariously stereotypical of everything that is wrong with black women. They probably searched the entire nation for a black female Obama to give the speech, and could not find one black female Obama.

        There are smart black engineers, though they are not as smart as the smartest white engineers, and their skin color is brownish, or even yellowish, rather than black. But even if they are smart, still act noticeably black. A smart black engineer wearing a suit is usually an OK guy, but he still acts black.

      • jim says:

        > I’m as racialist as you are

        Liar.

        You believe that the different races differ only by culture, except that English blacks are smarter than English whites,and that is the reason they are overrepresented at English elite universities, and you tell us you hate them for no good reason, because you delude yourself that we hate them for no good reason.

        We don’t hate them. We are merely aware of good reasons why some races should live apart.

        You are projecting onto us the academic fantasy of what the right is, and what the right believes, and telling us that we are one of what you hatefully imagine us to be. You intend to murder us all.

        I know you intend to murder us all, because communists always murdered the people they announced themselves to be one of. Communist entryism is always directed at those you intend to kill.

        • Carlylean Restorationist says:

          [*deleted*]

          • jim says:

            Unresponsive.

            Explain to us how that early iron age woman who went from spinning and sewing (the lowest paid occupation) to vineyard owner by thrift, hard work, forethought, capital accumulation, and directing capital to its highest value use, was not a capitalist.

            She does not merely save money and buy a vineyard. She “considereth” land, and plants a vineyard. When she “considereth” she is directing capital to its highest value use.

            Grape vines take a long time to grow. When she plants the vines and tends them, or has her people tend them, she is creating capital.

            While you plan to kill the cows of the peasant with two cows, because you supposedly love the peasant with one cow so much.

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