I recently spent some time in a flyover state and had some surprising discussions with people who, despite their extreme views, appeared in every other respect to represent the solid heartland of America. By that I mean they were not rednecks, but rather, enterprising, middle class, church going citizens with strong family values. They included a ranch owner, a retired professor, an attorney and a business owner who did something with furnaces. They exuded respectability and dependability and there is a sense in which I would have trusted them with my life. They all assured me that their views reflected those of their community. In a series of conversations they expressed a profound alienation from the U.S. Government, a deep-seated disenchantment with its policies on a wide range of issues and a belief that the political system is broken. Last but not least, they said they were determined, not just to hold on to their firearms and large capacity magazines, whatever new laws are passed, but also to stockpile them together with ammunition and food supplies, against the bad times they expect if current policies continue. They talked openly about secession, to secure what they consider to be their constitutional rights. It is easy to dismiss this kind of talk as the incoherent ramblings of a small group of right wing extremists but that would be a mistake. Alienation stemming from one or more of these beliefs is widespread in the heartland and an important part of the prevailing zeitgeist, or spirit of our times.
Even in the ‘other’ liberal America on the coasts there is alienation, although not so deeply felt as in the heartland. There is frustration that economic reality seems to have put limits on the dream of pursuing a progressive agenda through big government. To some extent liberal America also shares the feeling that we cannot continue as we have been, letting our government be captured by financial elites that don’t even come close to representing the public interest, however it is defined.
For investors there is disquiet about how to invest savings. There no longer seems to be a safe asset, let alone a safe institution, including and even especially, the United States Government. All is flux and everyday verities prove to be nothing of the kind. Is cash safe or is cash trash? If safe, where are you going to keep it? In a safe bank? Hopefully not one in Cyprus. The Australian government has just announced new rules which tax citizens who have responsibly set aside savings for their own retirement in accounts which were not previously taxed. Of course this could never happen to Roth IRA holders in the United States, could it? Make no mistake, when you see bank accounts confiscated, laws made by non-elected administrative officials and sectional interests openly favored, you are seeing the erosion of the rule of law and the cracking of the foundations of civil society.
The problems seem so big, so systemic, that we can’t even conceive of a solution, because to do so would just create a whole new set of problems. Without the concept of a solution we are left with no strategy other than papering over the cracks and kicking the proverbial can down the road. How should a sane and rational individual react to such an insane and irrational world? Do we retreat into our own heads, the only place where we retain some control? Do we search for community, for like-minded people to provide us with solace and support? Do we involve ourselves in activism or turn to religion, traditional or technological? Or, do we, like most people, just bury our head in the sand and hope it is all a bad dream? Whatever we decide to do it is clear that long range planning has become that much more difficult. What assumptions to do we make for planning purposes? The most unrealistic assumption seems to be the expectation that life is going to continue the same way it has been for the last thirty years.
Although the U.S. stock market is back to the 2007 highs and investors are as complacent as they have ever been, key divergences in economic indicators tell a different story. Base metals are slumping, the demand for energy is falling rapidly, treasury yields are at historic lows, GDP is close to stall speed and consumer confidence is down sharply, all indicators suggesting that economic activity is slowing and that the economy is teetering on the edge of deflation. March was marked by the biggest monthly increase in people dropping out of the labor force since January 2012, when the BLS did its census recast of the labor numbers. A record 90 million Americans are no longer even looking for work. While levels of corporate earnings appear to justify stock markets at all-time highs, this has been brought about through productivity increases which are unlikely to be sustained. More importantly, gold, which has spent the last 20 months consolidating, has just decisively fallen through key support levels, suggesting that deflationary forces are winning the battle against the Fed’s money printing. I suspect that in the next few years cash will not prove to be trash after all.
“There is no escape. We have gathered vast populations
incapable of free survival, insulated
From the strong earth, each person in himself helpless,
on all dependent. The circle is closed and the net
Is being hauled in. They hardly feel the chords drawing,
yet they shine already. The inevitable mass-disasters
Will not come in our time nor in our children’s, but we
and our children
Must watch the net draw narrower, government take all
powers – or revolution, and the new government
Take more than all, add to kept bodies kept souls – or
anarchy, the mass-disasters.”
Selection from The Purse-Seine by Robinson Jeffers, 1937