John Strausbaugh, New York, March 30, 2009Father Knew Best
Are we seeing the beginning of the end of global corporate consumerism? It sure seems so. When it began — was it only a few months ago? — the collapse of Wall Street, banking and the housing market could reasonably be interpreted as a severe but predictable downturn of the eternal boom-and-bust cycle. Since then, a series of rolling disasters has swept around the world and across all sectors of every economy. As these sectors fall, they're taking millions of peoples' jobs, savings, pensions, food, cars, health care, homes and lives from them.
Now governments step in, inevitably printing a lot of Weimar bucks to pump into a failed system, to little immediate good and with no reliable hope of fixing what's really broken about the global corporatist system. In the beginning, the experts told us this will not be another Great Depression. It's now looking like a Greater Depression.
Global corporate capitalism has revealed itself as global co-dependent failure. It's hard to avoid the notion that the whole system, and all the world's cultures that have adopted or been co-opted by it, are now going bankrupt in every sense.
You know who saw all this coming? I mean besides you, me and Hyman Minsky? My father. My father warned me this was coming thirty years ago. And he was not a guy you'd expect to hear that from.
He was a banker. But he was a banker in the old school, George Bailey way. (In his younger days, before I knew him, he even bore a striking resemblance to Jimmy Stewart.) He came home after World War II and got a job as a teller in a big but local bank in Baltimore. As I was growing up he became a vice president. I was too busy being a rock & rolling hippie to pay close attention to what he did at the office, but I knew he oversaw a lot of loans to local businesses. Car dealerships, light manufacturing companies, warehouses, trucking firms, that sort of business. He knew the people who owned and ran those businesses and they knew him. They ate together at Chamber of Commerce and Rotary wingdings. They were the pillars of the local community.
In my father's day a loan was a loan, debt was debt, assets assets. A banking house was not a gambling house. A bank invested prudently in its community, helping people buy homes and local businesses grow and be strong. You didn't give anyone a loan until you'd done your due diligence and determined there was collateral and a reasonable expectation they'd pay you back. He operated in the real, tangible, fungible world -- real values, real obligations, real assets, real buildings, real products, real services. There was nothing novel, daring, arcane or ingenious about banking. Banking was the very antithesis of those qualities.
Bankers, or at least vice presidents of local banks, didn't get rich doing it. They didn't earn eight-figure bonuses and reward themselves with McMansions and G5s and trophy wives. My father died in the little brick rowhouse he'd bought in 1951 with a GI loan. He built the back porch out of brick and cinderblocks and paneled the basement himself. He put three kids through college while paying off the mortgage. His idea of rewarding himself was to own a motorcycle and, when he retired, a used camper he put on the back of a Ford F-150 pickup. He left a carefully husbanded estate for my mom to live modestly on. When she died she left the little brick rowhouse to me and my brother and sister. My sister lives there to this day. A live Christmas tree we planted beside the back porch a quarter-century ago now towers higher than the roof.
In the mid-1970s, my father's bank was eaten up by a larger, regional chain, which later went national and then global and is now, if I'm not misreading the news, shitting bricks. The new management who came sweeping into town were a bunch of hotshots thirty years younger than my dad. They brought with them a lot of novel, daring, arcane and ingenious ideas about banking and finance. They were early avatars of the sort of fantasy bookkeeping and virtual-reality investing that would run riot a decade later and inevitably led to the world's current state of complete fiscal collapse and chaos.
I knew my father was not at all happy about these newfangled ideas, because he and I had just started speaking again. I'd spent my teen years, as one does, rejecting and ranting against everything I thought he valued and represented: business, money, the Republican party, the Catholic church, the Vietnam War. My first bit of writing ever printed in a public venue was a letter I wrote to the editors of the Baltimore Sun, defending the rights of antiwar protesters. I was a junior in high school. My mom was a little proud of me, though she also thought I was showing off. She always thought that. My father was mildly scandalized at having his high-school son appear in the local establishment newspaper writing against the war. Things went downhill from there, and for a few years, as my hair grew down toward my ass and my opinions grew increasingly "radical" and "revolutionary" and generally imbecilic, we barely spoke or saw each other.
Now I was in my early twenties, and calming down. It was dawning on me that my father wasn't a bad guy, we just had different opinions. I think he was beginning to think something similar of me. I even had my own small, half-assed business with another guy my age. We painted houses and hung sheetrock as the Acme Home Improvement Company. Acme, of course, was a nod to the Roadrunner cartoons. My dad helped us do our taxes. He thought we were terrible businessmen, which we sure were, and it broke his heart to see me living on rice and peanuts and driving a Chevy Vega I bought for $250 and held together with duct tape and picture wire. But he kind of liked that at least I was trying to do something real in the real world.
We had even taken to sitting together on weekend afternoons, knocking back a couple of beers, and chatting. We weren't real good at it. He was a quiet guy, and I was still half a hippie. There were only so many topics we could discuss before one or the other of us got hot under the collar. But we were trying.
And that's how I've known for thirty years that the current global meltdown was coming. In bits and pieces, I listened to my father grouse about his new bosses. Not them personally, but what he considered their dangerous and unethical notions about how to run a bank. I remember one afternoon when he explained to me this idea they had for "repackaging" debt so they could pretend it was an asset. The way he described it, it basically amounted to banking as a big game of make-believe. "Let's pretend that debts are assets," the new cowboy yahoo managers were saying. If everyone agreed to play along, it was as good as true, wasn't it?
It sounded preposterous to me. Debt was debt, assets were assets. Even half-a-hippie knew that. Three decades later, we all know the lazy susan of repackaged debt as one of the key Ponzi scams that just brought down banks and investment firms all over the world.
My father counseled his new cowboy yahoo bosses against this and other schemes they were hatching. His new cowboy yahoo managers smiled indulgently and patted him on his gray head. And then they forced him to retire. He was Old Banking. They were New Banking. He was standing between them and their eight-figure bonuses and McMansions and G5s. He had to go.
Was my dad hurt and bitter? You bet he was. My mother and his friends got a few earfuls.
He did not speak to me about the personal affront of getting shoved aside. We still weren't good enough at talking for that. He did yell at me one day when he heard that I'd shifted my meager savings from a bank account to a savings and loan. Savings and loans had recently been deregulated and were up to the same sorts of wacky schemes my dad's ex-bosses were dreaming up. One of those schemes was to offer fantastic, ridiculous interest rates on simple savings accounts. Like a lot of dopes I thought this was great and chucked all my dough into a new account paying something like 15% interest.
"Are you nuts?" my dad railed when he heard. He checked his watch. "Go over there right now and close that account while you still can."
I did. The S & L went belly up right afterward.
The flight from reality my father saw banks start to take in the 70s spread throughout our culture, and all affluent cultures around the world, in the couple of decades after he died. We cocooned inside an infantilizing bubble of fantasy, of virtual this and cyber that. We became our own role-playing avatars in a giant game of make-believe. The only folks still facing the real world anymore were the ones who could not afford to avoid it.
Now that bubble is bursting. You know and I know it. Reality is rushing in.
Governments can take over whole sectors and pump trillions of dollars into the system, but at best they'll be patching and reinflating a bald, flat tire. Personally, I don't think there's anyone who knows how to fix what's really wrong about global corporatism, because no one's alive who remembers how to make economies work in the real world. They've all grown up and been trained in this fantasy-bubble economy, completely unmoored from reality. Now that it has crashed mightily, I don't think they have a clue.
I happen to be half-assedly in business for myself again, as a freelance writer. Let me tell you, this is a very spooky time to be a freelance writer. The book and journalism sectors are crashing along with every other. I fully expect to be living in a cardboard box in Hooverville a year from now. Or in my sister's basement in that little brick rowhouse.
Maybe I could go back to painting windows and hanging sheetrock. It'd be a heck of an adjustment at my age. But at least I'd be doing smething real in the real world again.
It's the sort of adjustment we may all be facing. Playtime's over. My father would probably say that's not an altogether bad thing.
Now governments step in, inevitably printing a lot of Weimar bucks to pump into a failed system, to little immediate good and with no reliable hope of fixing what's really broken about the global corporatist system. In the beginning, the experts told us this will not be another Great Depression. It's now looking like a Greater Depression.
Global corporate capitalism has revealed itself as global co-dependent failure. It's hard to avoid the notion that the whole system, and all the world's cultures that have adopted or been co-opted by it, are now going bankrupt in every sense.
You know who saw all this coming? I mean besides you, me and Hyman Minsky? My father. My father warned me this was coming thirty years ago. And he was not a guy you'd expect to hear that from.
He was a banker. But he was a banker in the old school, George Bailey way. (In his younger days, before I knew him, he even bore a striking resemblance to Jimmy Stewart.) He came home after World War II and got a job as a teller in a big but local bank in Baltimore. As I was growing up he became a vice president. I was too busy being a rock & rolling hippie to pay close attention to what he did at the office, but I knew he oversaw a lot of loans to local businesses. Car dealerships, light manufacturing companies, warehouses, trucking firms, that sort of business. He knew the people who owned and ran those businesses and they knew him. They ate together at Chamber of Commerce and Rotary wingdings. They were the pillars of the local community.
In my father's day a loan was a loan, debt was debt, assets assets. A banking house was not a gambling house. A bank invested prudently in its community, helping people buy homes and local businesses grow and be strong. You didn't give anyone a loan until you'd done your due diligence and determined there was collateral and a reasonable expectation they'd pay you back. He operated in the real, tangible, fungible world -- real values, real obligations, real assets, real buildings, real products, real services. There was nothing novel, daring, arcane or ingenious about banking. Banking was the very antithesis of those qualities.
Bankers, or at least vice presidents of local banks, didn't get rich doing it. They didn't earn eight-figure bonuses and reward themselves with McMansions and G5s and trophy wives. My father died in the little brick rowhouse he'd bought in 1951 with a GI loan. He built the back porch out of brick and cinderblocks and paneled the basement himself. He put three kids through college while paying off the mortgage. His idea of rewarding himself was to own a motorcycle and, when he retired, a used camper he put on the back of a Ford F-150 pickup. He left a carefully husbanded estate for my mom to live modestly on. When she died she left the little brick rowhouse to me and my brother and sister. My sister lives there to this day. A live Christmas tree we planted beside the back porch a quarter-century ago now towers higher than the roof.
In the mid-1970s, my father's bank was eaten up by a larger, regional chain, which later went national and then global and is now, if I'm not misreading the news, shitting bricks. The new management who came sweeping into town were a bunch of hotshots thirty years younger than my dad. They brought with them a lot of novel, daring, arcane and ingenious ideas about banking and finance. They were early avatars of the sort of fantasy bookkeeping and virtual-reality investing that would run riot a decade later and inevitably led to the world's current state of complete fiscal collapse and chaos.
I knew my father was not at all happy about these newfangled ideas, because he and I had just started speaking again. I'd spent my teen years, as one does, rejecting and ranting against everything I thought he valued and represented: business, money, the Republican party, the Catholic church, the Vietnam War. My first bit of writing ever printed in a public venue was a letter I wrote to the editors of the Baltimore Sun, defending the rights of antiwar protesters. I was a junior in high school. My mom was a little proud of me, though she also thought I was showing off. She always thought that. My father was mildly scandalized at having his high-school son appear in the local establishment newspaper writing against the war. Things went downhill from there, and for a few years, as my hair grew down toward my ass and my opinions grew increasingly "radical" and "revolutionary" and generally imbecilic, we barely spoke or saw each other.
Now I was in my early twenties, and calming down. It was dawning on me that my father wasn't a bad guy, we just had different opinions. I think he was beginning to think something similar of me. I even had my own small, half-assed business with another guy my age. We painted houses and hung sheetrock as the Acme Home Improvement Company. Acme, of course, was a nod to the Roadrunner cartoons. My dad helped us do our taxes. He thought we were terrible businessmen, which we sure were, and it broke his heart to see me living on rice and peanuts and driving a Chevy Vega I bought for $250 and held together with duct tape and picture wire. But he kind of liked that at least I was trying to do something real in the real world.
We had even taken to sitting together on weekend afternoons, knocking back a couple of beers, and chatting. We weren't real good at it. He was a quiet guy, and I was still half a hippie. There were only so many topics we could discuss before one or the other of us got hot under the collar. But we were trying.
And that's how I've known for thirty years that the current global meltdown was coming. In bits and pieces, I listened to my father grouse about his new bosses. Not them personally, but what he considered their dangerous and unethical notions about how to run a bank. I remember one afternoon when he explained to me this idea they had for "repackaging" debt so they could pretend it was an asset. The way he described it, it basically amounted to banking as a big game of make-believe. "Let's pretend that debts are assets," the new cowboy yahoo managers were saying. If everyone agreed to play along, it was as good as true, wasn't it?
It sounded preposterous to me. Debt was debt, assets were assets. Even half-a-hippie knew that. Three decades later, we all know the lazy susan of repackaged debt as one of the key Ponzi scams that just brought down banks and investment firms all over the world.
My father counseled his new cowboy yahoo bosses against this and other schemes they were hatching. His new cowboy yahoo managers smiled indulgently and patted him on his gray head. And then they forced him to retire. He was Old Banking. They were New Banking. He was standing between them and their eight-figure bonuses and McMansions and G5s. He had to go.
Was my dad hurt and bitter? You bet he was. My mother and his friends got a few earfuls.
He did not speak to me about the personal affront of getting shoved aside. We still weren't good enough at talking for that. He did yell at me one day when he heard that I'd shifted my meager savings from a bank account to a savings and loan. Savings and loans had recently been deregulated and were up to the same sorts of wacky schemes my dad's ex-bosses were dreaming up. One of those schemes was to offer fantastic, ridiculous interest rates on simple savings accounts. Like a lot of dopes I thought this was great and chucked all my dough into a new account paying something like 15% interest.
"Are you nuts?" my dad railed when he heard. He checked his watch. "Go over there right now and close that account while you still can."
I did. The S & L went belly up right afterward.
The flight from reality my father saw banks start to take in the 70s spread throughout our culture, and all affluent cultures around the world, in the couple of decades after he died. We cocooned inside an infantilizing bubble of fantasy, of virtual this and cyber that. We became our own role-playing avatars in a giant game of make-believe. The only folks still facing the real world anymore were the ones who could not afford to avoid it.
Now that bubble is bursting. You know and I know it. Reality is rushing in.
Governments can take over whole sectors and pump trillions of dollars into the system, but at best they'll be patching and reinflating a bald, flat tire. Personally, I don't think there's anyone who knows how to fix what's really wrong about global corporatism, because no one's alive who remembers how to make economies work in the real world. They've all grown up and been trained in this fantasy-bubble economy, completely unmoored from reality. Now that it has crashed mightily, I don't think they have a clue.
I happen to be half-assedly in business for myself again, as a freelance writer. Let me tell you, this is a very spooky time to be a freelance writer. The book and journalism sectors are crashing along with every other. I fully expect to be living in a cardboard box in Hooverville a year from now. Or in my sister's basement in that little brick rowhouse.
Maybe I could go back to painting windows and hanging sheetrock. It'd be a heck of an adjustment at my age. But at least I'd be doing smething real in the real world again.
It's the sort of adjustment we may all be facing. Playtime's over. My father would probably say that's not an altogether bad thing.
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Comments (1)
A tale without capitalism.
Let me tell you the story as seen from the other side of the Atlantic. From Belgium, Europe.
The second World War left our country in shambles.
(My father started career by showing his business talent at 17, by selling sigarettes to GI's, and connecting them with Antwerp women, earning the then phenomenal amount of 25 dollars a day.)
Children had to be educated, schools need to be build, and the government took on that task, society could not wait until some free enterprise started delivering education. This was probably the start of demise of our culture. The European governments would never relinquish control of education.
After an humble rebuilding of everything, we entered the golden sixties, in Germany they had the "Wirtschaftswunder", the German Economic Miracle. Taxes were low, government had not even realized that they could intervene. Society was largely capitalist, although, a roaring inflation must have been an indication that already then, they were printing money as hell.
Some people, simple enterpreneurs got rich quick in the sixties, everything was novel, and people had buying power. Then the catholic party dominated government decided all this luxury was unnecessary evil, and they raised the highest income tax bracket to 90%. Then they added VAT, a sales tax going as high as 33% on luxury goods. Also an obligatory social and medical insurance was levied on every wage. Almost immediately the economy went into a steep decline, except of course the government sector.
A few years later, unemployment went into the double digits, just as the government deficits. In the eighties and later, only a few percent of the population had credit cards, because most people simply did not have disposable income, even if you worked full time. The only people that could get loans were bureaucrats, because people that worked for the government could not lose their jobs, and everybody else was too great a risk for the bank.
The past 35 years we saw business closure after business closure, but no-one heeded the warning signs. The press had the be subsidized by the government, and was from then on under its full control. We had no silicon valley, and usually people that were hailed in the press as economic wonderboys were in jail for fraud a few years later. Enterprise became very perilous, and everyone of my generation who tried, failed, and we do not have benign bankruptcy laws in Europe, if you fail, you pay everything, and debt collectors will even collect your children's toys, just to harass you, because they get only cents from it on a public sale.
But everybody was well indoctrinated with this collectivism, socialism or communism, call it as you like, the school system made it acceptable, thought it was a noble thing, nobody was left in the cold, in theory, and for all this high taxes were necessary. The one remaining private school in Antwerp, European University, was set up in an artificial scandal, and closed. Only government schools had the right to issue diplomas.
At school, we were taught to loathe capitalism, and the country that stood as an example for it, the US of A.
But the people who were in the money business, the banks, had a more international perspective, and the successes of Reaganomics, and the recovery of Britain under Thatcher did not go unnoticed.
Needless to say, that our banks, who mainly gotten rich by supplying mortgages to job secure bureaucrats and robberments could not find any business in the ailing socialist European economies to invest in. Of course, they knew that capitalism was the better system, they saw what was happening at home, no successes, nowhere.
So they started laying their eggs in the US, not knowing a thing about the CRA, Fanny Mae or Freddy Mac. They were only allowed, even by law, to buy triple A papers, and so they did.
They never suspected that all this was a setup, they never suspected that the US of A had gone socialist undercover, they thought that the US of A still applied capitalism as it ever was. Unknowingly, they borrowed loads of money to people in the US, people that in their homeland they would not even allow to have a checking account.
Europe has learned nothing from history, we do not have Tea Parties, or a Massachusetts voter revolt. Belgium stands to borrow more than 50% of its annual tax revenue. A recipe for disaster.
Einstein fled Europe in 1932, if there is a new Einstein in Europe, he'd better flee too, but this time, the USA might not be his best choice.
Cherish your capitalism and free market reflexes. You will need them, it is the only thing that will help out.
A small note to Celia : if the government had not intervened in any way, would there be the hiv-aids monster we have today ? We call it the Big Money, Big State, Big Labour principle.
Uwe Hayek.
The second World War left our country in shambles.
(My father started career by showing his business talent at 17, by selling sigarettes to GI's, and connecting them with Antwerp women, earning the then phenomenal amount of 25 dollars a day.)
Children had to be educated, schools need to be build, and the government took on that task, society could not wait until some free enterprise started delivering education. This was probably the start of demise of our culture. The European governments would never relinquish control of education.
After an humble rebuilding of everything, we entered the golden sixties, in Germany they had the "Wirtschaftswunder", the German Economic Miracle. Taxes were low, government had not even realized that they could intervene. Society was largely capitalist, although, a roaring inflation must have been an indication that already then, they were printing money as hell.
Some people, simple enterpreneurs got rich quick in the sixties, everything was novel, and people had buying power. Then the catholic party dominated government decided all this luxury was unnecessary evil, and they raised the highest income tax bracket to 90%. Then they added VAT, a sales tax going as high as 33% on luxury goods. Also an obligatory social and medical insurance was levied on every wage. Almost immediately the economy went into a steep decline, except of course the government sector.
A few years later, unemployment went into the double digits, just as the government deficits. In the eighties and later, only a few percent of the population had credit cards, because most people simply did not have disposable income, even if you worked full time. The only people that could get loans were bureaucrats, because people that worked for the government could not lose their jobs, and everybody else was too great a risk for the bank.
The past 35 years we saw business closure after business closure, but no-one heeded the warning signs. The press had the be subsidized by the government, and was from then on under its full control. We had no silicon valley, and usually people that were hailed in the press as economic wonderboys were in jail for fraud a few years later. Enterprise became very perilous, and everyone of my generation who tried, failed, and we do not have benign bankruptcy laws in Europe, if you fail, you pay everything, and debt collectors will even collect your children's toys, just to harass you, because they get only cents from it on a public sale.
But everybody was well indoctrinated with this collectivism, socialism or communism, call it as you like, the school system made it acceptable, thought it was a noble thing, nobody was left in the cold, in theory, and for all this high taxes were necessary. The one remaining private school in Antwerp, European University, was set up in an artificial scandal, and closed. Only government schools had the right to issue diplomas.
At school, we were taught to loathe capitalism, and the country that stood as an example for it, the US of A.
But the people who were in the money business, the banks, had a more international perspective, and the successes of Reaganomics, and the recovery of Britain under Thatcher did not go unnoticed.
Needless to say, that our banks, who mainly gotten rich by supplying mortgages to job secure bureaucrats and robberments could not find any business in the ailing socialist European economies to invest in. Of course, they knew that capitalism was the better system, they saw what was happening at home, no successes, nowhere.
So they started laying their eggs in the US, not knowing a thing about the CRA, Fanny Mae or Freddy Mac. They were only allowed, even by law, to buy triple A papers, and so they did.
They never suspected that all this was a setup, they never suspected that the US of A had gone socialist undercover, they thought that the US of A still applied capitalism as it ever was. Unknowingly, they borrowed loads of money to people in the US, people that in their homeland they would not even allow to have a checking account.
Europe has learned nothing from history, we do not have Tea Parties, or a Massachusetts voter revolt. Belgium stands to borrow more than 50% of its annual tax revenue. A recipe for disaster.
Einstein fled Europe in 1932, if there is a new Einstein in Europe, he'd better flee too, but this time, the USA might not be his best choice.
Cherish your capitalism and free market reflexes. You will need them, it is the only thing that will help out.
A small note to Celia : if the government had not intervened in any way, would there be the hiv-aids monster we have today ? We call it the Big Money, Big State, Big Labour principle.
Uwe Hayek.
,
February 13, 2010
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