Cyreenik Says
The depths of the 2008/2009 economic crash keep surprising everyone, and I'll admit that I'm as surprised as anyone at the length and depth of this downturn. In 2006 I pointed out that there was what Alan Greenspan liked to call "exuberance" in the air. The thing I noticed was how many record tall skyscrapers were being built. Record-breaking skyscrapers are only built when money is easy and people are optimistic, but I didn't see any particular action to take because it wasn't clear when the exuberance would end.
Likewise, in the mid-2000's, I noticed that the housing market hadn't tanked in the 2001 recession. That was a mystery. I kept wondering what demographic, what "baby boom" of buyers, was powering that robustness. That mystery was not solved until the Subprime Mortgage Crisis came into full bloom. That revealed that the new demographic wasn't a new cohort of home buyers, it was a new cohort of mortgage buyers.
So, what is behind this surprisingly deep economic slump?
Here is my current guess.
In 2007 I predicted that China would have a post-olympic recession. In 2007 and 2008, it was at the crest of a very predictable Olympic Mania, which was causing some political blunders, such as the handing of unrest in Tibet. The Olympic situation is a repeat of the pre-1997 mania in south and east Asia caused by excitement over the Hong Kong Handover. Once the Olympics ended, it would be time for a post-mania letdown, one aspect of which would be a mild recession.
The surprise was that the US chose 2008 to begin recovering from its 9-11 Disaster Response Mania. As the Bush Administration has been showing the world so vividly for eight years, actions taken in hot-head revenge are as bad as they have always been advertised to be. The surprise was that in addition to supporting Bush politically, part of the US response to the 9-11 Disaster was a large and sustained economic exuberance.
The election of Barak Obama was a sign that America was ready to make 9-11 revenge and preparedness thinking part of history -- it is time to face new problems. The surprise is that part of what is passing is mania thinking.
So, both the US and China -- two of the world's largest economic engines -- are going into "hangover mode" simultaneously.
This is my explanation for the surprising length and depth of the slump the world economy is experiencing now.
This is new and scarey territory to be in. But, it's not mania time, it's hangover time, a time of unexcitement and unaction, so we may get through this relatively unscarred. If this hangover time turns into panic time, it will also turn into blunder time. So, I predict 2009 is going to be just as interesting to live through as 2008.
The National Intelligence Council report of December 2009 is filled with a lot of depressing speculation for Flag-waving, America-will-always-lead-the-world, Americans.
The short summary of the report is that by 2025 we will be sharing world leadership with China, India, Europe, Russia and perhaps other upwardly mobile developing nations. While this may seem like doom and gloomish news, I find it exhilarating.
This report is good news because:
a) Mainstream media took notice of it, albeit briefly.
b) If mainstream media noticed it, mainstream government people will notice it, too.
This is good news because it means America is moving beyond the Panic and Blunder thinking of the 9-11 Disaster experience. America's powers-that-be collective consciousness is moving from thinking mostly about what RPG-toting nutjobs are doing to thinking about what the nations of the world are doing.
This is good... very good! Governments should think about other governments, policemen and lawyers should think about nutcases.
The contents of the report hark back to the concerns of people such as Henry Kissenger, who spoke about this multi-polar national power issue back in the 1990's -- just before 9-11 changed our national attention.
The roots of those trends of the 1990's never went away, but America's media, government and people were blinded to them, first by the spectacularly scary 9-11 Disaster, and then by the essentially invisible, but very rosy, housing bubble that followed as the Bush Administration successfully stopped a recession after the 9-11 Disaster.
When America was "housing booming" in the 2000's, it looked like it would stay ahead of the world indefinitely... very similar to the Japanese feeling in the 1970's and 80's. This was a time when the Japanese economy was booming away at 10% per year economic growth, and real estate prices were growing even faster. In those days many Japanese talked enthusiastically about their inevitable passing of America's economy to become the world's biggest.
Wow... how the world can change!
Using the Japanese 80's bubble as an example, we should expect that one of the major effects of this crisis will be to change America's expectation of what America will do and be over the next twenty years. Just as the Japanese of the 90's steadily and quietly gave up their dream of surpassing America in economic power, post-Bubble America will steadily and quietly give up some dreams. Which dreams will be given up remains to be seen, but the dream changes will be major, and America will be a more humble and pragmatic place at the end of the process.
America will be a post-Panic place. This will be a less exciting time, a less maniac time, but a lot more comfortable time.
It has become very painful, but the Bush Administration has demonstrated decisively that focusing America's attention on gun-toting, bomb-throwing, web-casting nutjobs is not making America either greater or a better place to live.
With the election of Barak Obama, the American community has said that it is ready to move on.
What will we Americans move on to? What new dreams will we build?
And what mistakes should we move away from, but we're not likely to?
Those things that we should move away from, but won't, are Panic and Blunder "scars". When a community panics, it often blunders... makes a really big mistake that seems like the very right thing to do at the time. Some of the Blunder will be remedied, but much that should be remedied will not be, it will linger. It becomes a community scar.
o The 20th Century's biggest Panic and Blunder was World War One (WW1). Starting the war wasn't a blunder -- wars come and wars go. What made WW1 a Blunder was fighting for many years and producing millions of casualties. If the war had ended in six weeks-to-six months, with less than fifty thousand casualties, it would have been the equivalent to the Iraq War ending at Bush's Mission Accomplished speech, and little about Europe's lifestyle would have changed.
But it did go on way too long, and it started Blunder Chains all over the world -- hundreds of them. Two of the blunders that followed WW1 were the rise of Fascism and Communism. One of those became a scar that lasted roughly eighty years.
o The Volstead Act, ushering in American Prohibition in 1919 under Woodrow Wilson, was a blunder. In 1933, under Roosevelt, it was repealed. One of the scars of that blunder was the rapid growth of organized crime in the US. Another is the strange patchwork of post-Prohibition liquor laws that American communities now live with.
These are examples of historical blunders and historical scars.
o Airport Security -- Sadly, very sadly, the TSA is not going to become invisible. As I have pointed out elsewhere, contemporary passenger screening techniques are the rituals of a religion -- a state-sponsored modern religion built on the faith of many Americans that getting searched and harassed in various mysterious ways will make airplanes fly better. Now that most Americans are being sternly taught to have faith in these rituals, the situation is unlikely to change to using more effective, transparent techniques.
Q: What is the key indicator that what the TSA does is faith-based, not fact-based?
A: You can't say bad things about it. If what people say is important, that's a key signal you are dealing with thoughts, not facts.
o The government needs secret and above-the-law methods to protect Americans -- This is the most serious scar that this Blunder will leave us with. This flies directly in the face of the Constitution and The Founding Fathers and all they fought for, but enough Americans don't see the threat of this scar to put their foot down and say, "No more! We stick with the Rule of Law, we stick with Informed Democracy, and they apply in all cases."
Since we are still in the free fall of the Housing Bubble Burst, it's harder to see what the Blunders are (and will be) and which will survive to become scars. But, here are some things to watch:
o The Bubble is gone. Even if the government takes no Anti-Bubble measures, the bubble is not coming back. Billions of people around the world have gotten burned, and billionaires around the world have gotten burned. "It ain't a-comin back, no mo." Some years from now, when those who are now teenagers are doddering fools, we will have a new bubble, but not until then. This one has stung too many people. Even if governments do nothing, people are going to be vigilant about bubbles.
o One thread of popular sentiment is saying this bubble cycle was caused by greed. If the community acts on that sentiment -- makes laws against being greedy -- that will become a scar. Greed predates and postdates bubbles, it's not the problem.
So far, I have to give our government and business leaders a round of applause. Compared to the wackiness that came out post-9-11, the response to this equally big crisis seems to have been level headed. It's not over yet, and there is still plenty of incentive to Panic and Blunder, but so far the response has been good. I suspect that part of the reason the response has been so good is that financial panics are not new, and for that reason they fall in the category of sport thinking rather than panic thinking.
That's what I have for December in Cyreenik Says.
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