Brinkmanship Blues

While North Americans are staring over the precipice, it’s worth reflecting on how we came to the brink.  The credit collapse that began in 2008 occurred when too many Wall Street whiz kids arrived at the same calculation:  that the smart money was on anyone who could arrange to make a few points by betting on defaults and then selling their bets.  Credit default swaps became the rage just long enough to crash the gasbag of false hopes that sustained an economy held aloft by expectations of perpetual growth.

Meanwhile, most economists were caught up in the same assumptions.  They figured on endless upward curves that held an unbreakable allure for anyone whose own fortunes were based on the same assumptions. Throughout the last half of the 20^th Century in America, the economy was held aloft by vested interest as surely as it was by any superior ability to predict human behaviour. 

The whole house of glass, held up by hubris, is about to come down.  Political leaders who depend on mass support seem unprepared to make the selfless and unpopular  decisions required to set things right.  They have no models to fall back on to pattern their responses.  The New Deal-style solutions that propelled America out of the Depression under Roosevelt have proven to be insufficient under Obama.  It looks like we’re heading back into recession – or worse -- despite all the stimulus of the past two years.

With the global scope of the problem now confronting us, America can’t buy the rest of the Western world out of trouble.  China or India can’t be expected to do so either, 

As David Cameron told the House of Commons in Ottawa yesterday, it’s a “DEBT” problem we’re really facing – not a credit crunch, as it was called the last time.  People can blame the tight-fisted banks for their misfortune – and there is plenty of blame to go around among all those who extended easy credit to people who didn’t know how deep a hole they were digging, or seem to care.

But it comes down to the realization that the same individual choices that created such a mess will have to dig us out of this one.  Debt-driven consumerism held the postwar economy aloft because people who were bombarded with marketing hype believed their bubble would never burst. 

When it comes right down to it, sovereign debt is a collectivity of personal choices.  National sovereignty is little more than the aggregation of individual rights, bounded by historic geographic hopes. 

In the end, the same stiffened resolve that carved new nations out of wilderness homesteads will be the only salvation.  It’s going to be painful but pure and simple to behold.