When I was a teenager, I thought a lot about the end of the world. In particular, the rain of nukes that always seemed just around the corner. I was fascinated and terrified. I suppose that’s not an unusual thing for kids that age, and might even have been the usual for m-m-m-my generation. I grew up in the 70s, came of age in the early 80s. I was convinced that nuclear war was near-inevitable. I had no doubt that doddering dimwitted Ronald Reagan (read ‘his handlers’) and whichever equally doddering Soviet supremo was currently being propped up and jerkily animated with electric current (read ‘his handlers’) were going to blow the crap out the world. I dreamed about it. I can remember a grand total of one wet dream from my pubescent years; I can remember literally dozens of atomic holocaust dreams.
I remember Helen Caldicott and her Canadian-made If You Love This Planet. They showed it to us in high school. I remember the TV movies Threads and The Day After. Two and half decades after seeing Threads, I still remember the camera lingering on the puddle of urine at the woman’s feet as the mushroom clouds rose. I watched The Road Warrior when it was first released. I remember reading A Canticle for Leibowitz. I sucked up all the ’50s bomb-shelter paranoiac sci-fi juvenilia I could get my mother to buy for me at the bookstores on our shopping trips to the nearest city. I read what little I could find about the growth of the Cold War arsenals. It was… a hobby of mine.
Not that I was the archetypal Weird Kid or anything, muttering head-down through greasy locks about the ‘end of the world’. I had normal hobbies, too: comics and computers, swimming and biking, booze and friends’ fast cars. Girls. I showered regularly. But I did dream a lot about the end of the world.
And they weren’t all nightmares by any means. See, I grew up in a tiny town more than 1000 kilometers north of Vancouver. I was completely confident that when the bombs fell, we’d be safe and secure. When I was in Grade 5, my gifted-group teacher had had a meteorologist boyfriend who’d lent me (and the other smart kid they’d cut from the herd to study what and how we liked) his weather maps. I’d learned about the prevailing wind currents of north-central British Columbia. We’d be all good when the balloon went up. The nearest mushroom cloud might sprout and rain its deadly ash 500km away, at worst, accidental mistargetings notwithstanding, and leave us basically unscathed.
We had moose and squirrel salmon, we had farms and ranches, we had endless forest. Fruit might get a little scarce, but hell, I didn’t much like fruit anyway. My house had a deep well, and the lakes and rivers were sweet and clear. Nuclear winter? No worries. We lived through -45°C spells every damn year. We’d get by. Let the mad bastards down south kill each other off en masse. We’d be the inheritors of the earth, us hardy northern canucks, ululating our diesel-powered ways down out of the arboreal wastes, antlers strapped to the hoods of our Barracudas and pickup trucks, to rebuild things in our own Royal Reserve-powered image. Proud Canadians. There’d finally be some kind of payoff for living 40 miles up the asshole of the earth for so many years.
Armageddon didn’t seem like such a bad thing. Not the best result in a lot of ways, sure, but Ouroboros the world-turd was spinning at the bottom of the bowl, anyway. Time for cleansing holy nuclear fire! It’d be a shame, all those innocent people getting torched, but we kept reading how overpopulation was going to kill the planet even if the nukes didn’t.
So talk these days of a coming economic armageddon with Ground Zero in America’s bubble have actually put me in a nostalgic mood. Headlines like China threatens ‘nuclear option’ of dollar sales take me right back to 1982. Media tidbits like Jim Cramer’s recent howling monkey-boy histrionic meltdown — ‘It’s Armageddon out there!” have fascinated me in the kind of way that (metaphorical) nuke-porn did back in the day.
It’s far from certain, of course, that the blow up is going to happen, or even that things will fall apart. But I’ve been watching the whole thing for years now, after decades of conditioned ignorance about economics, and the New Great Depression feels as likely to me as nuclear tennis did back in the early ’80s.
Then again, that didn’t end up happening, did it? There’s some comfort in that, I guess.
A comment from the sometimes-overheated Malor in a recent Metafilter thread (among many others about the subprime mortgage mess, the yen carry trade, the liquidity dry-up, and all the rest) lays out genesis of the worst case scenario pretty well, I think. Is it a Minsky Moment? Yeah, probably.
We should have gone into a horrific recession after the stock market bubble popped in 2000. The size of that bubble was far bigger than the one in 1929, so the consequences should have been even more severe… something on the order of severity of the Great Depression, although I think a 1970s-style stagflation writ large was the likeliest outcome.
What happened instead is that the Fed panicked and hit the liquidity button, flooding the system with incredibly cheap money. New money chases inflation, and causes more of it, so it went into housing, and then people started leveraging themselves up into massive debt to buy more of it.
Bubbles have been called the fiscal equivalent of a nuclear weapon; the only way to avoid the fallout is by not having one in the first place. The stock market bubble was a huge deal, though probably survivable.
But the Fed, which set off the original bubble with easy money, tried to fix the fallout with more of the same medicine that got us sick in the first place. To stop the fallout from one atomic bomb, they set off two fusion weapons instead…. and we didn’t even dodge the fallout from the first bomb, we just delayed it. The explosion of the other two bombs just sent the fallout into orbit, but it’s still up there, and we’re still gonna eat every rad.
At the very least, we’re going to have a full generation of very hard times, tougher than anything in living memory. I think we will be exceptionally fortunate if the United States continues to exist as the same legal entity.
In terms of likely outcome, my operating theory is that we’ll go into a short-term deflationary crunch, but the Fed will open the floodgates and send us into an inflationary death spiral. Not just nasty horrible stagflation for two decades like we would have had from the Y2K pop, but an actual hyperinflationary death spiral for the dollar.
With fiat currency, I just don’t think a true deflationary collapse is possible… although with the unbelievably massive leverage in the derivative positions, I suppose it could happen. Money could be destroyed from debt default faster than the Fed can lend new dollars into circulation.
There’s one name you should remember in the coming crisis: Greenspan. This is all his doing. His refusal to ever allow a recession, ever, led us directly into this mess. He never met a problem he couldn’t cover up with liquid paper.
I think Malor might be overstating the case when he talks about a generation of hard times. On the other hand, if China pulls the economic trigger, he might be understating it.
Anyway, the winds taste the same to me because as the tension builds I’m once again far from the places where the corpses will litter the ground if and when the hammer falls. Two and half decades ago I was in the far north of Canada, confident that we’d be able to sustain ourselves while the rest of the world went to hell. Now I’m in Korea, and if economic armageddon happens, once again I’m not directly in the line of fire. Once again, if it all goes to hell, I’ll feel sorry for all the people (even the stupid ones who went for their two year no-money-down teaser-rate no-declare ARM mortgages for a McMansion they knew they couldn’t afford) who lose it all. The rich will make it through, as they always do, this time with Bushy legislation and offshore accounts rather than hardened bunkers and hidey holes.
Well, I like to say I’ll feel sorry about the end of days. I said to myself when I was 17 that I’d be sorry about all those crispy corpses down in CanadAmerica South. But not entirely sincere the sentiment, I have to admit, then or now. The truth is, of course, in some ways, on some days: I think I’d feel like pumping my fist, taking a deep breath, and shouting ‘That’s what you get for shortsighted greed and systematic stupidity, you bastards!’ Or more succinctly, ’cause my wind is not what it once was, ‘Suck it, dummies!’
I’m a bad man that way. Or part of me is and was, at least.
Bad things are going to happen to the Korean economy, certainly, if and when America’s economy goes tits-up and takes the rest of the world with it. But if I lived in North America, if I was mortgaged to the hilt, if I was living from paycheck to paycheck, I’d be a lot more worried about it than I am here in Korea with my life savings in won and no debt.
Maybe we ought to buy some gold, though.
So I am back where I was when I was young — a cleansing fire might just be what’s needed to clean out the corruption and cauterize the wounds. Part of me almost looks forward to it. I’m not sure if I really believe that, or if it’s just the romantic teen I was surfacing again for a last misanthropic gasp before he goes down into that dark cold water for the last time.
Either way: armageddon schadenfreude. It’s not just a good name for a postmodern superhero.
[Update: more background material and some excellent explanations of the IMPENDING DOOOOOOOM in this MeFi thread.]