From
Hope To Barely Holding On By Gary North - Jun
23, 2010
The
recession that began in December 2007 produced a change in
Americans' perception of their economic future. They moved
from the tradition of hope to one of just barely hanging on.
I have never seen this before. Only someone born around 1910
can recall anything like it, assuming that he recalls anything
at all.
My parents were born in 1917. They were teenagers in the
1930s. The did not experience the euphoria of the roaring
twenties, when the stock market soared after 1924, and there
was tremendous optimism based on the new technologies or
radio and air travel. The sky was literally the limit. People
believed that Europe's war debts were irrelevant, that the
recession of 1921 had ended recessions, that America was
the wave of the future.
By 1932, that euphoria was a thing of the distant past.
Unemployment was at 20%. Prices were down at least 25%.
Over 6,000 banks had failed. There was no sector of the
economy that was flourishing except gold mining, which had
the benefit of a price floor set by law. Then things got
worse. Another 3,000 banks failed. Prices continued to decline.
Unemployment rose.
That was the world in which my parents went to high school.
My mother still talks about it. She remembers men in Portland,
Oregon, begging for food, willing to do odd jobs just to
eat. Those years scarred her. They scarred her generation,
who never fully bought into the idea that prosperity is
created by personal debt. They did not fully participate
in the debt-driven post–World War II boom, which relied
on an extension of consumer credit. Credit worked because
people saved. The end of the wartime price controls, coupled
with the return of the troops to civilian life, extended
the opportunities for capital. Money went into new industries.
It went into housing, which was revolutionized by new techniques
of mass production.
THE GOOD TIMES ROLLED
My generation knew nothing of hard times. Neither did the
generation born in the late 1920s, which did not get shipped
out to fight the war, and which came to adulthood in the
postwar boom.
All of our lives, we have seen economic progress. Television
replaced radio as the technology of the future in 1949–53.
Energy was cheap. Cars were everywhere. Teenagers had their
own used cars, their own records, their own subculture.
I watched The Glenn Miller Story last week. It was made
in 1954. It holds up well. I remember seeing it at age 12.
I liked it. It led to a revival of Glenn Miller record sales,
nine years after his death. What struck me in watching it
was that Miller and his musical peers aimed at audiences
of all ages. Younger adults bought their records, but so
did their parents. By 1954, when the movie was released,
this had begun to change. Teenagers soon adopted music preferences
that excluded their parents. This never changed back. A
friend of mine went to a stage production of The Buddy Holly
Story recently. There on the theater's wall was a poster
from one of Holly's tours. "Tickets, $1.50. Parents
get in free." Not many parents came. The mantra of
parents had begun: "Turn that thing down!"
I was reminded of all this last Saturday night, after I
had I driven for over three hours to Nashville to see a
show. It was a gathering of guitar pickers. It was in honor
of James Burton. I have consciously followed Burton for
over 40 years, but I was influenced by him for over 50 years.
In 1957, Ozzie Nelson, band leader of the 1930s, brought
him from Louisiana to Hollywood to back up his son Ricky,
Ozzie's answer to Elvis. It worked.
Later, Burton was the mainstay of Elvis Presley's band.
After Presley died, Emmylou Harris hired the band. It launched
her career, as she said when she introduced him to the crowd.
He has been there, playing backup guitar for over half a
century. He played for my generation and all the ones that
followed. That he came from the state whose motto is "Let
the good times roll" is delightfully symbolic.
Americans have all been living in spiritual Louisiana
since 1947.
My generation was the first pre-adulthood generation that
had enough discretionary income to finance its own subculture:
movies, music, and used cars. We could go where we wanted
to. We grew up without anything resembling economic hardship.
We stayed in school until we graduated from high school.
That was something new. A lot of us went to college –
also new. Education was seen as the ticket to success and
middle-class comfort.
PROPPED UP
The oil spill that threatens Louisiana is symbolic of the
end of an era. Government regulation was supposed to make
this impossible. The public has put great faith in the ability
of tenured bureaucrats to make things safe for Americans.
The Federal Register publishes 70,000 pages of small-type
regulations every year. This never ends.
Supposedly, this army of regulators and libraries of pulp-paper
rules are supposed to let us preserve our way of life. Then,
without warning, the platform blew up. The regulatory agency
that supposedly monitored all this had rubber-stamped the
authorization to skip the normal testing procedures.
The head of this obscure agency resigned her position.
I suspect she was asked to resign. This sent a message to
senior appointees in every agency: More paperwork! No latitude!
This will no doubt lead to a new era of agencies that tie
up progress in reams of red tape. And so it goes.
The mortgage market was unilaterally nationalized in September
2008 on the word of a lame-duck Secretary of the Treasury.
The public accepted this without a protest. The Federal
Reserve System doubled the monetary base over the next few
weeks. Congress passed a $700 billion bailout over the protests
of voters. Then a newly elected Congress passed $787 billion
more soon after inauguration day.
The American stock market peaked in early 2000. It has
taken constant intervention by the Federal Reserve to prop
up the economy. It is becoming apparent to people on Main
Street that the people on Wall Street have been able to
survive only because of bailouts. The idea that the economy
is in a recovery phase is accompanied by assurances from
most economists and most Congressmen that the economy would
slide back into depression were it not for the courageous
intervention of the Treasury and the Federal Reserve System.
This has been the argument of every textbook
in U.S. history regarding the New Deal. "Roosevelt
saved capitalism from itself!" But here we are, almost
eight decades removed from Roosevelt's famous first inaugural,
in which he excoriated bankers. This inaugural address is
one of only three that the textbooks cite, along with Lincoln's
second and Kennedy's famous "Ask not." Here was
the rhetoric of class warfare. Here was imagery of Jesus
driving out the moneychangers.
Yet our distress comes
from no failure of substance. We are stricken by no plague
of locusts. Compared with the perils which our forefathers
conquered because they believed and were not afraid, we
have still much to be thankful for. Nature still offers
her bounty and human efforts have multiplied it. Plenty
is at our doorstep, but a generous use of it languishes
in the very sight of the supply. Primarily this is because
the rulers of the exchange of mankind's goods have failed,
through their own stubbornness and their own incompetence,
have admitted their failure, and abdicated. Practices of
the unscrupulous money changers stand indicted in the court
of public opinion, rejected by the hearts and minds of men.
True they have tried, but their efforts have been cast
in the pattern of an outworn tradition. Faced by failure
of credit they have proposed only the lending of more
money. Stripped of the lure of profit by which to induce
our people to follow their false leadership, they have
resorted to exhortations, pleading tearfully for restored
confidence. They know only the rules of a generation of
self-seekers. They have no vision, and when there is no
vision the people perish.
The money changers have fled from their high seats in
the temple of our civilization. We may now restore that
temple to the ancient truths. The measure of the restoration
lies in the extent to which we apply social values more
noble than mere monetary profit.
The voters in 1933 were
unaware that from his defeat in 1920 as the candidate for
Vice President until his inauguration as Governor of New York
in 1929, he had made his living – a very good living
– as a bond salesman. He was, in short, a moneychanger.
The textbooks and even multi-volume monographs on Roosevelt
remain silent on this fact. Antony Sutton told the story in
Wall Street and FDR over 30 years ago, but academia has never
paid attention to that book.
So, here we are again, with a banking reform plan in front
of Congress. If this bill passes, new power will be given
to the Federal Reserve System. But wait! Wasn't the Federal
Reserve System set up in 1914 as the institution that would
end recessions as bad as the "bankers' panic"
of 1907? Wasn't it also given the authority to establish
a stable dollar? Then why have we had so many recessions?
Why has the dollar declined by 95%?
Every reform gives us more of the same. Every reform promises
to save capitalism from itself. It then transfers more power
to the Treasury Department, which in 2008 became widely
known as a wholly owned subsidiary of Goldman Sachs.
The reforms transfer more power to government regulators,
or in the case of the Federal Reserve, a consortium of privately
owned banks under the titular authority of a government
agency. But when in 2009, a Federal judge told the Federal
Reserve Board to turn over information about which institutions
in the camp of the moneychangers were loaned how much money
and got sweetheart of Treasury debt swaps at face value
for toxic assets, the FED appealed the case. As for any
suggestion that the government has the right to audit the
FED, Congress has watered down that bill, as I said it would
from day one. It may not be clear who is in charge here,
but it is not the voters.
A SLOW AWAKENING
The Tea Party is excoriated by Democrats. It is excoriated
by Republican leaders. Pundits in the shrinking mainstream
media tell their viewers and readers that now is not the
time for radical change.
But wait! Don't I recall hearing something about the need
for radical change – change we can believe in? Do
you recall this? "Restoration calls, however, not for
changes in ethics alone. This Nation asks for action, and
action now." Yes, yes! That was what FDR promised in
his inaugural address. And we got change. How we got it!
We are getting change now, too.
A funny thing happened on the way to the temple. The moneychangers
bought the priesthood.
Tea Party voters have only the faintest understanding of
how the political system works. They know that the political
leaders have promised change, yet the crises have been getting
worse. They are told that more government spending is necessary.
They are also told that a trillion dollar annual deficit
is required to prop up the economy.
They are beginning to think like Lois Lane in Superman.
When Superman tells her, high above the ground towards which
she had been plummeting, "Easy, miss. I've got you,"
she responds: "You've got me? Who's got you?"
Keynesians look at Federal deficits as Superman. Deficits
can leap buildings in a single bound. The higher the building,
the larger the required deficit.
The public in general still believes this. Voters assume
that someone is in charge. They assume that those in charge
know what they are doing. They defer to higher authority.
They don't want to think about economic cause and effect.
They don't want to think that they will be required to pay
off these deficits. That will be someone else's problem.
The bills will never come due.
The Tea Party people have this nagging sense of fear. They
do not see how these debts will ever be paid off. But many
of them are dependent on the prompt payment of Social Security
and Medicare. They are the ones who are dependent on the
Federal government to pay its bills on time and at full
value, as promised.
They see that the system is propped up on four legs: regulation,
taxation, fiat money, and debt. They can see the results
of regulation spreading in the Gulf of Mexico. They can
see an increase in taxation coming in 2011, when the Bush-era
tax cuts expire. Fiat money is being held at bay only by
the terror of commercial bankers, who are not lending. Finally,
Federal debt looms ahead for a decade. They know that it
will extend far beyond this decade, but no one is offering
official estimates.
The system is propped up by the Big Four. But faith is
declining in all four.
A LOSS OF HOPE
The voting public is losing faith in political leadership.
The voters do not know how to get positive change. They
are not agreed on the nature of the required change. They
got Clinton for two terms. All they got was entertainment:
Hillary and Monica. They got Bush for two terms. They got
Afghanistan, Iraq, Homeland Security (left over from Clinton's
Administration), Hank Paulson, and the worst recession since
1933.
What are they getting from Obama? They don't know, but
the majority do not like it.
Most of them know something is wrong with Social Security
and Medicare. They smell a rat. There are too many politicians
and economists telling them that a few minor alterations
will make both programs fiscally sound. They have been told
this ever since Nixon's era. If the system is easy to fix,
why is it still broken?
If the banking system was fixed by Roosevelt, why is it
broken?
If the economy is in the initial stages of a recovery,
why aren't bankers lending?
If the worst of the financial crisis is over, why are short-term
T-bills at less than two-tenths of a percent?
The average voter knows nothing about the details. He only
knows that Main Street is not offering them the future he
had expected. He has stopped saving much, yet he thought
economic growth would come, no matter what. He sees that
he is getting under 1% at his bank, and he concludes: "I
cannot expect to save my way into a comfortable retirement."
Americans look at their struggling adult children or grandchildren,
and they conclude, "They will not have it as good as
we did." This is the first generation of Americans
to conclude this. This is a change of monumental proportions.
Americans are beginning to think that their golden years
will not be golden. They don't know what to do about it,
other than keep working. They are correct.
They want change they can believe in. They are losing faith.
CONCLUSION
James Burton is retired in Shreveport. He went back to
where the good times roll.
Far south of Shreveport, in the Gulf, the good times are
not rolling.
For millions of Americans who have never heard of him,
but who spent money to buy the records and MP3s of artists
who relied on him, good times are also not rolling. People
are moving from hope to just barely holding on. This shift
of attitude is common in Europe, too.
Jacques Barzun has lived long enough to tell us about this.
He is 102. The title of his book, From Dawn to Decadence
(2000), conveys the underlying story of the West over the
last 500 years.
To rely on the Federal government to bail out a nation
that has voted for the politics of envy for eighty years
is to rest one's weight on a weak reed.