When a rare thing hasn’t happened for a while, people begin to think it never will. But after it has happened, they expect it to happen everyday.
After 9/11, Americans bought duct tape and plastic to protect themselves from sleeper cells they believed lurked in Duluth and Farmington. Now, they keep their eyes on hurricanes and earthquakes.
What kind of disaster is next, we ask ourselves? Of course, we don’t know, dear reader. But we will take a wild guess anyway: The disaster people least expect and most deserve, a financial one.
When you build a city below sea level, between two large bodies of water, in a hurricane zone, you have to expect that sooner or later you’ll get your feet wet. So too, when you live on borrowed time and borrowed money, you have to expect that sooner or later you will have to pay up. That wouldn’t qualify as a disaster except for the fact that so many people have staked their finances on the hope that tomorrow would never come. It will come as a disagreeable shock to them when it does.
One thing leads to another. The 9/11 attacks led to two responses — both of which have already weakened the empire. The Feds vastly increased their own spending at home and undertook a series of expensive, disastrous wars overseas. In historical terms, the empire needed to find a way to stay in business. An empire is essentially an international protection racket. It needs something to protect people from. After the demise of the Soviet Union, the American empire had no worthy enemies; it had to create them. As predicted in this space, in those terms, the war against Iraq has been a success:
“Under the American and allied assault,” says the International Herald Tribune today, “what had been a relatively small, conspiratorial organization has mutated into a worldwide political movement, with thousands of followers eager to adopt its methods and advance its aims.”
That this cost a lot of money goes without saying. The United States had little in savings to draw upon, so it drew instead on credit. The debt surge in America began in earnest after the Nixon administration made it possible to get away with it, by totally eliminating gold backing from U.S. currency. Faced with the threat of a post-9/11 slowdown, the Fed made debt even more attractive and encouraged Americans to take advantage of it. “Buy a new SUV…preferably a Navigator,” urged Fed Governor McTeer.
Pity the poor man who follows a Fed governor’s advice. Gasoline sold for an average of $3.01 a gallon this weekend. At that price, it cost $100 to fill up a large SUV. Thank God his house is still going up; as long as it floats, he can hang onto it.
Now that the storm in New Orleans has passed, the financial nightmare is about to begin, says the Financial Times. There is a big insurance gap, says the paper. Most people had storm insurance, but no protection against floods. In the Big Easy, it was the floods that did the damage. Losses are expected to tally as much as $125 billion.
Who’s got that kind of money? Alas, the empire that sets out to save the entire world has not saved a penny for a rainy day. So, the flood leads to more debt. “Katrina relief to worsen groaning U.S. deficit,” says AFP.
All of this debt — private and public — builds up behind the levees like storm water. It rises day and night. We don’t know when the dikes might give way, but readers are urged to stay on high ground…just in case.
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.