This is the end...beautiful friends, the end...

Yesterday, I discussed an interesting-if-flawed forecast by one Phil Scott (not an economist; just an average fellow exercising his right to rant on unsenet) of how the "economic Ragnarok" scenario might play itself out in the United States. A reader named Lynn sent me her own response, which I would like to pass on the readers:

A good friend of mine is a retired investment banker, and he has been keeping me abreast of the impending doom for a couple of years. First of all, one great source is foreign econo-mags. They have a much more realistic sense of what is going on than we do here. Big surprise.

But, from what my friend explains to me (and I don’t begin to pretend I have an independent clue), there are numerous more factors involved than Mr. Scott lists. And you’re right to take issue with his unilateral perspective on the tax, which points straight to the largest issue that he completely misses, namely the increasing class chasm. Mr. Scott presents taxes as if only the little guy gets them, but all along taxes have been (theoretically) structured to impose greater burdens on the wealthy. In fact, that's a tax keystone that dates back to Athens, the awareness that a society's privileged must support those less fortunate, as well as supply the lion's share of the society's infrastructure funding.

All that being said, Scott may well be referring to Bush's intent to go for a flat tax, which would have much the effect he describes, though he interestingly leaves out the exceedingly wealthy here, who would only benefit. Every aspect of his economic policy has been structured to benefit the wealthy at the expense of the poor; he is definitely creating a banana republic. Argentina comes to mind.

The problem is, our debt is so huge, those carrying it -- dutifully -- will soon just stop; Japan has been really taking it on the chin, but so has China, mainly because we are the greatest consumers of their cheap goods. But the dollar is so worthless now that these countries -- and others (most Central and South American reserve banks have been quietly converting to the Euro in recent years, and Russia announced just before the election that not only was it considering doing just this, but it wondered why oil trade did not convert to the euro as well, the death knell for the US) -- will no long find any benefit to investing in it.

Every economist my friend knows feels the crash will come in the next few months, this year, anyway. The real estate bubble will burst, and values will plummet, but Mr. Scott is likely correct to presume that rents will remain high or increase due to property tax increases. If you’ve spent any time in New England, or any intact neighborhoods from the 30s, you are aware of what happened to once large homes or even mansions during the Depression; quartered into multiple dwellings or made into boarding homes.

We’ll all be forced to live closer to the bone, a sort of imposed "back to basics." But this may not be all bad. Our culture has been way too long dependent on all these superficial and superfluous baubles, things that require others less fortunate work and live as slaves, essentially. Pride always comes before a fall, and we have a lot of humble pie facing us, but we’ll get the opportunity to not only see the other side of exploitation; we’ll be in a better position to explore the true meaning of democracy.

A couple of years ago, when it became clear we were no longer really living in a democracy, I started reading Ghandi and Vaclav Havel. In a nutshell, their hopeful observations are that government requires the cooperation of the governed, and general poverty compels everyone to take care of the community's needs at the local level. The more this is done, the less the government is involved or needed, and it simply disappears. The wall fell.

Yep, the world will abandon the US economy, and we will have a helluva time convincing anyone to help us out. Mr. Scott's notions about our military may be close to reality, I'm betting, although I don't see how we could possibly run it without major economic power to buy the oil products necessary to make it all move. So many trillion dollar door stops and sand collectors. Our children starving while they drop it all on another barrel. That old domestic abuse, substance abuse cycle writ large.

What worries me at this point is the increasing chuminess of Russia and China; combined they have a fairly impressive military, and though Russia's economy is pretty sad right now, China's is, of course, solid and growing. They're going on the gold standard; getting off that was the stupidest thing we ever did. Or that Tricky Dick ever did. But those two countries could easily just take us over, just like that, when the time comes.

Honestly, the way the Bush cabal is driving this truck like they stole it, I fully suspect that there may actually be some deliberate scheme to it. I know it's sick, but what a canny way to get rid of not only a whole host of "weak" people who are really just a drain on the system, right? But it also gets rid of the democracy and imposes the kind of tyranny conservatives have long envied of Roosevelt.

And what do they care? With all the power in the corporations anyway, they don't even need a country.

No small number of us have already had a taste of humble pie, of course, and we yearn for other vittles. Economic devastation in the United States will certainly hurt everyone in the world -- to whom will the Asians sell their goods if we are reduced to gathering in caves?

One scenario that I consider likely: Bush takes over more oil fields in the Middle East. Once a porta-nuke takes out the Sears building and the Art Institute of Chicago (followed by a media hate campaign in which Grant Wood's "American Gothic" sees much maudlin symbolic usage), our beloved-of-Jesus prez will have sufficient "political capital" to take out virtually any country he chooses. Iran? Saudi Arabia? Both? In the end, Bush will control the substance that will keep the Asian up-and-comers beholden to American corporations.