Thursday, August 12, 2010
"Its too late, baby, its too late, though we really did try to make it"
Our hog, "Ms. Piggy" (we broke tradition this year... in the past ALL female hogs were named Charlotte I, II, III...) broke out of the hog yard this afternoon... I found her in the neighbor's pasture nestled beneath a roll of hay with 9 piglets. We got them back in the yard, but are keeping the other hogs away, lest they eat the piglets...
"The Constitution is a limitation on the government, not on private individuals. It does not prescribe the conduct of private individuals, only the conduct of the government. It is not a charter for government power, but a charter of the citizens' protection against the government." – Ayn Rand
"Its too late, baby, its too late, though we really did try to make it." - Carol King
I love Carol King and Ayn Rand... 2 of the more interesting individuals of the 20th century...
I have been reading and thinking about the IMF and CBO reports that I wrote about in my last post...
My sense is this: The U.S. financial and political system will both be reset. No other outcome is even remotely likely. The U.S. will lose its reserve currency status. The overwhelmingly optimistic projections for S.S./Medicare will not be met. U.S. Treasuries might actually be paid back - and then again they may not... it all depends on how the entitlement programs are undone... but more than half of the remaining debt in the U.S. economy will not be repaid. Oil imports will continue their decline into the U.S. irrespective of whether or not Iraq's production comes on line at the most optimistic level, and if Iraq's potential has been overstated and their exports come in at only a million or 2 bpd (or even 3) per day the rate of the decline will accelerate from .7% per month to over 1% per month for at least several years at some point between here and 2020.
This does not have to be all that bad provided that a Constitutional crisis does not develop. Wealth is not bytes on a screen... these are merely markers representing fractional ownership of the resources and production of a particular nation. Hitting the "reset" button does not destroy the crops and livestock in the field or demolish all of the houses, roads, and sewers. To my mind, the one thing that must be preserved is the U.S. Constitution and the Rule of Law. These can and must withstand what is to come.
When I say "reset" our political system, I am not referring to the Constitutionally directed structure; I am referring to 400,000 lobbyists, 1,100,000 odd lawyers, and the top 1,000 corporations as well as the top 1% wealthy, bottom 20% permanent underclass, and all of the special interest groups... all have had a hand in corrupting and controlling the system... we need to find a way to remove their undo negative influence. This is the risk... this, along with a few other imbalances, can be the spark that fires a Constitutional crisis. My sense is the wealthiest will lose their position, and the underclass will learn to provide for themselves or find themselves removed from the gene pool by Mother Nature, but the battle will be brutal.
How to individually navigate this is far more important than trying to figure out how to manage the upheaval from a macro point of view. We can't all be president or even a Senator, but we can all interpret our own personal environment in an effort to enjoy the life we have. In any event, that is how I see it.
If you have been reading my stuff for a while you know I have been commenting on this for several years now, as have many other Economic Bloggers. A year and a half ago I posted that my response is that I am "Going Galt". Perhaps an exaggeration, but I have gotten much done in this regard. I cannot say what works for everybody everywhere, nor even for my own self, as our lives are a work in progress and we don't yet know the consequences of all of our actions and decisions... that said, in "Going Galt" I went on a tear to simplify my life. I returned most of the capital in my funds to our investors, and merged the remaining capital into one small fund. I returned ALL of the capital in my broker-dealer (stock brokerage) and withdrew my membership in the SEC and FINRA. I cut out every piece of personal overhead that I could without a family revolt, and we continue to "shrink" our consumer identities. I still maintain 2 homes, because my older son is in his last year of high school, but I expect that upon his graduation next spring to be able to consolidate our lives into a single home (an event I look forward to with great anticipation).
I have gone into the livestock trading business, and we grow or raise 75% of the food we eat when we are on the farm with surprisingly little inputs. That means milking (my grip strength is outrageous), feeding, slaughtering & butchering, fencing, barn & house repair, weeding, watering, preserving... homesteading is no small amount of manual labor. I went well over 1 year without buying anything other than food, household supplies, and entertainment (with the exception of second hand, traded for, or good will, or necessities for the farm... I do take my wife out to a sushi restaurant every week or there might be a revolt...). It has been a fascinating experience. I realize that I have the luxury of not having to live this way - but I must tell you that I am in very good physical shape, my love life is as good as it gets for folks having young children in the house, and I am happily involved with my new found "real life". I cannot say that I will always live on a farm and this lifestyle, but if it were solely up to me I think that I would. I can say with certainty that I will always live as modestly as I possibly can as I think it has been good for the soul. It seems I cannot have everything I want - food, drink, luxury... whatever - indulging just because I can does not mean anything good from my experience... doesn't seem to be a net positive for your physical and mental well being... I guess what I am saying is that some of the "progress" and "higher lifestyles" made over the past several decades may not have been all that good for us.
Anyway, just musing... I have to go and milk the cow now...