There is an amazing disconnect between the two enablers of the Washington D.C. oligarchy. One of these enablers is the Federal Reserve Bank of the United States, which just published their latest Beige Book. The "Summary of Commentary on Current Economic Conditions by Federal Reserve District" is published eight times a year, and one assumes that the past 20 or so Beige Book reports would have been reporting a slow deep decline, with anxious notes regarding where the "bottom" might be. But of course, that was not the case. Fed Chairman Bernanke has remained hopeful, appearing increasingly to be a wide-eyed idiot of a man, serving his role as government banker and chief printing officer with a dedication to false assumptions reminiscent of the Titanic's Captain Edward Smith.
The June 8th report was received with alarm. It's not getting better faster, and it not getting better at all. My, how private economic activity has desiccated in the hot sun of government taking, borrowing, outright lies and Ponzi schemes! Phase I of the economic shakeout is not even complete, and yet we are faced with a whole new Phase II of economic reckoning. After the known known bubbles and the subsequent government buybacks, buy-ins, and bailouts, we will soon face the next generation of the ready-to-burst. These include bubbles and major downward adjustments in the reported value of municipal debt, commercial real estate, the public and federally aided university systems, the War on Drugs and the overbuilt prison system, even technology and health care. And the one mentioned here, the Department of Offense.
Several Federal Reserve regional governors understand something of the nature of these coming collapses, but no one substantially seems to get what's coming. Unless they are all liars, fraudsters, and pranksters extraordinaire, which could indeed be the case. It's really too bad we can't all live in their world.
In the real world, these bubbles will impact and touch each other, government will try and fail to resolve the valuation concerns, as it tries and fails to maintain its own credit worthiness and credibility. As municipal debt becomes unbearable and unserviceable, local government will increase taxes on remaining property and services, and eventually be replaced by a few angry men and women who will renegotiate and repudiate much of that debt. The commercial real estate collapse will remind many that their communities are lacking in community, and the shifting landscape of the marketplace will depress many, even as many will talk of what they could do with that place if only they could save money or borrow it. They will rage at the Fed policy of artificially low interest rates (a nod to the needs of Washington's insatiable past and present appetite for borrowing) for making both avenues for people to access capital impossible.
The public and university education system collapse will be particularly painful to many. Empty buildings, too many professors, too much debt and a lack of demand for what passes for an American undergraduate degree will break the back of these mastodons. Prisons built for government projections of pie-in-the-sky inmate growth (this in a country where we are already at the top of the heap) would have employed lots of unskilled and poorly educated people, except there aren't enough prisoners, and no money to run these facilities. Of course, having places to lock up people may serve a future government interest, but as of now, this is a bubble created by the bureaucratic desires of counties, states and the federal government for a bigger piece of the take and the power to effectively own people. The Drug War likewise will be ended, victim of its own addiction to the dole and corruption at levels high and low, and shocking counter-productivity for over 40 years.
All of these imminent un- and under-employed people, many who worked for the state in some menial capacity, with few marketable abilities or useful knowledge, will wonder why life is so hard, but most will not become exceptionally angry. Sheep usually do not, and most Americans have been cultured, educated and managed to be sheep. As I heard on Freetalklive.com recently, we have become the "livestock" of the political class, who "farm" us. It's very true.
Instead, the newly freed will begin to learn new skills, develop new interests, and new networks, and many will become reacquainted with the children in their lives (even as birth rates will drop). This new interest in the increasingly valuable child will deprive public elementary and high schools of their babysitting value, as the under and unemployed can and will teach their own kids. One of the first lessons will be that if a person from the government moves his or her lips, they are lying. This is the harsh lesson the parents have learned, and it will be passed to the children, with the overall excellent impact of creating independent critical thinking little hoodlums, who will always ask why and never take their Ritalin and Adderol, unless it is to remarket it for fun and profit.
But I digress! The twin enabler of the Washington, D.C. oligarchy, the Samson who holds up the pillars of corporate state, is the Pentagon. Indeed, the defense, offense and intelligence bubbles are near the popping point. Killeen, Texas is called out as a place where unemployment among the military and defense contractor class will increase, and that's one of many across the country. But who really takes this seriously? I mean, it's a big potential bubble, employing people in every Congressional district, and comprising one of our biggest export industries — big war and a multitude of weapons. How could it pop? I mean, even crime doesn't stop these guys from getting their cost plus contracts, year after year!
How could it pop, indeed. At least the Beige Book report admits the trends of contracting economies. Yet, this question is unasked and unconsidered by outgoing SecDef Robert Gates, who recently told NPR that the DoD of the future will have "a full menu" and that "… first of all, you have Iran and North Korea, both of whom are developing nuclear weapons. North [Korea] already has them. You have a very aggressive weapons-building program in China. You have a revolution throughout the Middle East. There are – the U.S. military has never been at a loss in being told to find things to do."
One finds oneself temporarily speechless. Gates sees the reality of executive-directed global war against despotisms and "creating democracies" at the point of a sword on the other side of the planet, as a "good thing," apparently not conflicting at all with his sworn oath to uphold and defend the Constitution of the Republic.
We do know that truth and economic reality always prevail, and as Nixon's economic advisor famously said, things that cannot go on forever, don't. Gates shares with Bernanke a stultified brand of last century thinking and a willful blindness to fundamental facts, recorded history, and ethics. "Full Menu" Gates and "Helicopter" Bernanke are the faces of the twin enablers of the Washington establishment, and they are increasingly dysfunctional and out of sync with each other. Any successor to Bernanke and Gates, as Leon Panetta proves now at the Pentagon, will be as wholly unimaginative and as faithful to the empire as their predecessors. These twins casually arrogate the people's present cash and future hope, and they consider these roles their due. They do not realize their days are numbered.
They will not find safe harbor on American shores, come their turn to u2018fess up and apologize. When these final bubbles pop, Republics will rise up again from sea to shining sea. None of them will have use for inflationary and imperial services — and in their youthful zeal, may even arrest and imprison those who publicly propose such anti-republican evil.
LRC columnist Karen Kwiatkowski, Ph.D. [send her mail], a retired USAF lieutenant colonel, blogs occasionally at Liberty and Power and The Beacon. To receive automatic announcements of new articles, click here or join her Facebook page. She is currently running for Congress in Virginia’s 6th district.