But all of those fun things are so fuckin’ convoluted, dude! Taking forever to think out and then to write. Whereas I could just refer to this excellent little Financial Times piece by Stephen Roach. Now, at least I know one of my readers – I’m looking at you, Brian! – is as into depression prediction porn as I am. There’s a vast audience out there for those books with titles like: 1980s – Coming Depression! 1990s – Great Crash! 2000 – How the coming depression will change everything! Myself, I’ve even got depressed about this coming depression. The key word seems to be coming. It is always coming, but never arriving. Hey hey, I told you it was porn, didn’t I?
In actual fact, depression (recession is of the same genre of euphemisms as Defense department is for Department of War – it was coined in the fifties to make life seem more comfy) has long ago become a sectional thing, and the Keynesian economy (which undergirds the present neo-liberal order) has gotten very good at compartmentalizing it. The Rust Belt’s depressed – the Sun Belt’s booming. Finances sag, the power market surges. The political advantage of this from the standpoint of Mr. Moneybags, your softshoeing Monopoly card capitalist, is that depression never becomes a category around which political identification can take place. Divide and conquer and all that shit.
But though we don’t think of the totality, the totality thinks of us. And this is what Roach’s article does pretty well, laying out a schema that makes sense of some everduring features in our current economic landscape:
“The US has been the main culprit behind the destabilising global imbalances of recent years. America’s massive current account deficit absorbs about 75 per cent of the world’s surplus saving. Most believe that a weaker US dollar is the best cure for these imbalances. Yet a broad measure of the US dollar has dropped 23 per cent since February 2002 in real terms, with only minimal impact on America’s gaping external imbalance. Dollar bears argue that more currency depreciation is needed. Protectionists insist that China – which has the largest bilateral trade imbalance with the US – should bear a disproportionate share of the next downleg in the US dollar.
There is good reason to doubt this view. America’s current account deficit is due more to bubbles in asset prices than to a misaligned dollar. A resolution will require more of a correction in asset prices than a further depreciation of the dollar. At the core of the problem is one of the most insidious characteristics of an asset-dependent economy – a chronic shortfall in domestic saving. With America’s net national saving averaging a mere 1.4 per cent of national income over the past five years, the US has had to import surplus saving from abroad to keep growing. That means it must run massive current account and trade deficits to attract the foreign capital.
America’s aversion toward saving did not appear out of thin air. Waves of asset appreciation – first equities and, more recently, residential property – convinced citizens that a new era was at hand. Reinforced by a monstrous bubble of cheap credit, there was little perceived need to save the old-fashioned way – out of income. Assets became the preferred vehicle of choice.”
Now, there’s a little sour grapesianism going on here. Bubbles have a bad rep – and deservedly so, at least back in the Tulipomania past. Myself, I’m open to the question of whether we don’t have an affluent enough framework in which bubbles actually do a different kind of job, now – bubbles might be the thing that, in tandem with the sectoral depressions, keep the economy afloat. Much as I hate to say it, they’ve done a really good job at that. While a marginal old fart such as myself has long been among the people who are sat on by the people who are sat on by the people who are sat on in this economy, I’ve noticed much less disgruntlement among the masses about the general sitch. It might be that Roach is right – we can’t borrow any more, the bills come due, the walls of Jericho, NYC, Washingon D.C., Houston, L.A., Dallas, Atlanta and Miami fall, and we all come face to face with the face of capitalism, a picture of which I am including for your viewing pleasure here:
But forgive an old dodderer his doubts. I’ve heard this before. Maybe the years are just wearing away my resistance to being sat on. And of course Roach ends with an unjustified inference:
“It is going to be a very painful process to break the addiction to asset-led behaviour. No one wants recessions, asset deflation and rising unemployment. But this has always been the potential endgame of a bubble-prone US economy. The longer America puts off this reckoning, the steeper the ultimate price of adjustment.”