The End of Trust, the End of an Economy?

I heard an interview of Victor Davis Hanson by Ray Appleton today on KMJ. Evidently, he has a book manuscript now undergoing editing (by the publishers of the Harry Potter series) about ancient precedents for many of today's political developments, even those we consider to be innovative.   Should be good.

They spoke about the europeanization of the United States and its implications for the psychological health of Americans and the financial health and future of the entire world.  They also discussed some similarities between Greece and California.  The governments of both Greece and California face severe  financial difficulties caused by over-spending.  And the natural blessings (and blessings left by past generations)  in both Greece and California allow unrealistic spending to continue longer than in less-beautiful climates and less-blessed regions.

Taxes are so high in Europe that ordinary citizens are becoming as adept at tax evasion as, say, the typical nominee for President Obama's cabinet.  People don't seem to think about the long-term consequences of their actions, because "the government" will take care of everything.  They think  (something also pointed out by Mark Steyn).

Victor Davis Hanson spoke so plainly and clearly. Everything he said made sense. I wish everyone I know could have heard it.  However, he has written a short piece which I can recommend, which covers some of the same topics.  And Wretchard has written a wonderful commentary on a second piece by VDH in which VDH reports his observations while riding a bicycle around rural California, not far from us, and compares what he saw to what he sees and hears in more prosperous parts of the state.  These pieces cover topics which involve us very personally, as people who live in the most economically-depressed part of California and who are participants in the state pension system.

The first piece which increased my understanding of the world is called  "The End of Trust".   It starts out with the financial debacle in Greece as it relates to the sudden disclosure that the books were cooked concerning public pensions in California. Shortfalls come to about half a trillion dollars.   He also discusses other manifestations of the end of trust in financial dealings. 

The world is getting a little edgy when very few investors are willing to buy Greek bonds — given what they know about Greek politics and productivity. . . .

California, take note. Some Stanford economists and analysts just refigured the cooked books at the various California public pensions and found a $500 billion shortfall. The state is already broke. Its taxes are the highest in the nation, the flight of its wealthy per week unsustainable — and its teachers apparently (please explain this?) furious that their salaries are the highest in the country and their students among the worst. So we either float more bonds, or ask retirees to take a cut or freeze. The latter is not even being discussed. . . .

From what the administration announces almost daily, from the radio ads blaring now in the popular culture, and from congressional promising, I think I get the new narrative. “Trust” is an archaic construct established by capitalists to ensnare the more noble poor. When you buy that blue-ray DVD player or plasma TV (saw lots of that today at Best Buy in Fresno), in lieu of a catastrophic insurance plan, and add to it a night out at the Macaroni Grill and the multiplex, it is not all that certain you will have to pay all of that charge back. As you go from one maxed-up credit card to another, there will be a new company waiting to renegotiate your debt, and a demagogic congress person to explain why you were snookered into doing what you did.

“Walking away” is suddenly not defaulting, but a smart move when the house you were betting would go up went down in value. Note that we didn’t have any law suits five years ago against new “greedy” homeowners who woke up each year with thousands of dollars in “equity” that magically appeared out of nowhere. No one wished then to sue the speculative homeowner that banked rightly on his investment; instead, on the way down is where we get the human interest stories about greed — and the need to violate the trust of an obligation. It is all sort of analogous to the Old West stereotyped saloon scene, in which the confident would-be card player struts up to the card game, starts losing, and then overturns the table, guns blazing.

There are dangers to all this.

He then recounts prior similar events in classical history. Read the whole thing.

Wretchard's brilliant commentary:

Two articles, one by Christopher Booker describing the impending bankruptcy of the UK and another by Victor Davis Hanson describing the catatonic walk over the financial edge by California are united by a single theme: the power of denial.

You will learn a lot if you read both of the links above before you read Wretchard's "I want my MTV".

VDH in California: "Are We Parasites?"


Christopher Booker in the UK: "Don't let the voters know we face bankruptcy"


Wretchard in Australia:

Until recently the difference between the First and Third Worlds was that the Western future was real. The Western tomorrow was a definite quantity; loans would mature at a certain date, elections would be held at scheduled times and the pension check would arrive in the mail every 15th and 30th of the month. By contrast the Third World timescale had only the present. Tomorrow was ink on a calendar. Only things you could touch, take or use now were real. Checks in the future were as unreal as rocket ships and rayguns.

What a whole generation of Western political leaders have done is abolish the future. Comprehensively and perhaps irretrievably. And since that hasn’t happened in two generations, very few can even come to terms with it. Victor Davis Hanson describes the bewilderment of Californians who find that, for the first time in living memory, tomorrow isn’t coming. It’s so absurd people treat the fact with disbelief. People continue to act rich even though they’re poor. They live as if that check will arrive tomorrow even though no one can give a reason why it should. . . . 

Were you brave enough to read these articles?  Worried yet? Any ideas how to protect our future?