Global Analysis with J.R. Nyquist

The Downward Trend Is Unstoppable

by J. R. Nyquist, Global Analyst. October 26, 2007

We see the statistics on test scores, on measurements of consumption and narcissism, on growing debt and the sinking dollar, on the chaos in government, the disorder one finds on all sides, and a certain analysis naturally follows. Call it pessimism if you want. But it is merely common sense. We ought to be realistic about the future. And yes, scary things are happening. We read about an impending cyber-storm and the storm super-worm. Is someone taking over the world's computers for sinister purposes? It seems they are. Last June the Chinese military successfully hacked into Pentagon computers, demonstrating a capability to disable U.S. defense systems. In Europe Russia is rearming and one if its new weapons is the world's most powerful fuel-air bomb, made specifically for destroying urban resistance. The news in the Middle East gets worse and worse. The United States has announced sanctions on Iran despite Russian and Chinese objections. Meanwhile, the U.S. government appears nervous about an impending terror attack. The American public is confused and the people are no longer united. The economic news is even more frightening.

The United States is headed into a crisis of unprecedented proportions. The dollar continues to lose its value versus other currencies. Look at the price of oil this week. Look at the price of gold. These are objective measurements that defy market optimism. Consider the following sources of trouble: (1) runway debt, (2) credit inflation, (3) the bursting real estate bubble, (4) government spending and (5) hidden monetary inflation. In Michael J. Panzner's book, Financial Armageddon, we learn how creaky America's retirement regime is, and how liable to collapse. We read about that great house of cards, the derivatives business. In fact, it now appears that default is inevitable on many fronts. The U.S. government has made big promises related to financial and economic matters. Today's government takes care of millions of people; but this cannot continue indefinitely. And America's financial crisis isn't an exclusively American problem. The welfare state advances toward bankruptcy in Europe, North America and Japan.

Ancient political thinkers wrote about basic human corruption. When exposed to money and power for any length of time, people tended to become spoiled. The occasion of this spoiling heralded bloody upheavals and revolutions. In America and Europe we have already seen a social revolution. The attitudes of our grandparents have been disputed and set aside - in matters of church, state and family. New attitudes have taken their place. Our grandparents were strict in ways we are not strict. They were disciplined in ways we are no longer capable of discipline. They were frugal, and the Great Depression was real to them. Today we borrow money, and we borrow again. We are addicted to debt.

"Borrowing money was fast becoming the bad habit of choice for American consumers," noted Panzner in his book. "Households spent a record 12.75 percent of their after-tax income on servicing required interest and principal payments during the last quarter of 2005." Assuming a steady flow of income for the future, most Americans have stopped saving money for a rainy day. One would think an entire generation had lost its financial sense. One is reminded of Shakespeare's lines:

Neither a borrower nor a lender be; for loan oft loseth both itself and friend. And borrowing dulls the edge of husbandry.

Our husbandry is dull indeed! The dollar has been compromised in this process. And a new political situation will flow from this, both at home and abroad. The enemies of the United States are poised to take advantage of America's financial demise. Demagogues and troublemakers from within the country are also prepared. We have right wing fanatics and left wing fanatics eager to win followers. In a severe crisis the moderates of the political "center" tend to melt away. Discredited by the failure of the status quo, the moderate loses his voice. His truth no longer rings true. Instead, the unbalanced fanatic appears to be correct. People discover that the system is rotten after all. The system, in fact, is collapsing. The fanatic has his certainty, his heat without light. Who can deny his appeal?

When the economic crisis unfolds Iraq might as well be Mars. Iran's nuclear program won't matter at all. As Cato the Elder once remarked, the Roman voter is concerned with "the pebble in his shoe." An empty bank account and poor job prospects for fifty million citizens will have a greater political impact than WMD proliferation halfway around the world. Terrorism hurts a few thousand people at a time. Economic malaise hurts tens of millions (and urban unrest is not funny). Under such circumstances the United States is bound to turn inward, to become domestically self-involved, to forget the outside world entirely. When this happens, the enemies abroad will seek their advantage. First, they will want to disarm the United States as circumstances permit. Second, they will want to punish the United States because old resentments seldom disappear overnight.

There is another aspect to all this: The foreign policy errors of the Bush administration partly stem from the failure of U.S. intelligence. There is also the problem of ineffective counterintelligence. The cheapest defense is to know what your enemy is doing so that you can counter him in the most inexpensive way. A terrorist strike, or a strike under false terrorist colors, can best be thwarted or understood through good domestic intelligence work. But this work is forbidden by current interpretations of the U.S. Constitution. We have no stomach for domestic intelligence. As the United States turns inward during an economic crisis, it becomes more vulnerable to terrorism from abroad. The rhetoric of politicians, ever self-serving, will focus in on domestic opponents. These will be blamed for everything. The already poisonous intellectual atmosphere, combined with ideological and ethnic divisions, opens the door to various nightmare scenarios.

One might assume that this crisis is merely bad for Americans. The truth is that when the United States turns inward, global impoverishment and war must follow. Those who argue that the United States is the author of the world's miseries have misread their history. The period following World War II was a period of unprecedented progress and prosperity for mankind. The United States deserves the credit, not the blame, for the last sixty-two years of peace. The decline of the United States unleashes the genie that was bottled up in the 1940s. Dictatorship and war will break free. Nuclear and biological weapons will be used to settle old scores. The use of these weapons will not be restrained. Billions of people will perish. Most will die of starvation.

Once a downward motion begins it is sustained by something akin to momentum. Civilization has climbed so high that any stumble must be fatal. Much of what unfolds will be made possible by false thinking and the spread of false ideas. We have the accumulated wisdom of great economists and political thinkers to fall back upon. But we have neglected their works. We have grown superficial and stupid in our prosperity, adopting policies that guarantee catastrophe.

It is madness, all madness. It continues, it unfolds and nobody can arrest its progress.

© 2007 J. R. Nyquist

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J. R. Nyquist
Global Analyst and Author, "Origins of the Fourth World War"

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