Cyreenik Says

August 2011 issues


The England Riots: Lost Children? Lost Enfranchisement!

What does it mean when whole neighborhoods run wild?

This is a hot topic this week, and this 13 Aug 11 WSJ editorial, Après le Déluge, What? by Peggy Noonan, gives an instinctive thinking explanation. From Peggy, "The causes were greed, selfishness, a respect and even lust for violence, and a lack of moral grounding." and from Theodore Dalrymple, "A population thinks (because it has often been told so by intellectuals and the political class) that it is entitled to a high standard of consumption, irrespective of its personal efforts; and therefore it regards the fact that it does not receive that high standard, by comparison with the rest of society, as a sign of injustice."

My take on this is: It is an example of lost enfranchisement. These rioters don't see themselves as meaningful parts of the community and the community doesn't pay much... no... the right kind of attention to them.

The right kind of attention would mean teaching, seriously teaching, these people that what they did made a difference to the community. An important part of that serious teaching is a meaningful job. These people should know that their actions, every day, affect the well-being of the community. If they don't have a meaningful job, then they should be working to get one. ...and, once again, working in a way that feels meaningful.

Everyone in the community should feel enfranchised -- feel what they do matters to the community and that the community is paying attention to their opinions and efforts. This does not mean that the community has to service every whim expressed by every person, but that the decision makers are paying attention, and every person's viewpoint is important in the decision making process.

When enfranchisement is not strongly felt by a significant minority of the community, then outbursts of damaging "rage" of some sort are to be expected. It can be spectacular and acute as these English summer riots have been, or chronic and insideous as the ill effects of the US War on Drugs have been, or some other form.

All have in common that they deeply damage the community. Disenfranchisement is expensive.


The Stress Rises: The Time of Nutcases is still coming

The summer of our discontent gets more discontented.

The financial markets have been deeply roiled by the news of the US bond rating downgrade and by continuing debt crisis in Europe. Now physical violence is spreading through the streets of England as discussed in this 10 Aug 11 WSJ editorial, London is Burning.

In sum, the foundation for making Blunders is growing. The increasing social stress and inability of conventional solutions to relieve that stress means that an up and coming The Time of Nutcases is growing more likely.

The Time of Nutcases happens when people who are normally ignored when they spout unconventional solutions to social problems are paid attention to. Some of what is being advocated is new, innovative and beneficial. But those good ideas are gems in a sea of rehashed urban legend and feel-good/don't-work ideas that just waste time, money and attention.

It is an interesting time; a scary time.

For the US, the Tea Party movement is an example of a step in the Time of Nutcases. The elections coming in 2012 are now likely to produce even more steps.

If this evolution towards new and untried solutions in time of social stress continues, then I see our current conditions as more and more resembling the social stress the US experienced during the 1930's. And if that is so, then Barack Obama is playing the part of Hoover.

Our "FDR" of the 2010's is yet to come.

Update: Not all the news is bad. This pair of 11 Aug 11 WSJ editorials are examples of moving attention to the right issues, The Folly of Economic Short-Termism by Allan H. Meltzer, discusses how to grow the economy out of this mess, and Transportation Spending Is the Right Stimulus by Ed Rendell and Scott Smith talk about how to help growth by investing in infrastructure. The ideas may not be right, but the attention is in the right place.


A Shoe Drops: Austerity becomes the Crisis of the 2010's

This 5 Aug 11 WSJ article, S&P Strips U.S. of Top Credit Rating by Damian Paletta and Matt Phillips, talks about how the inconceivable has happened: US Treasuries have lost their AAA rating at Standard and Poors. This is the first time in seventy years that treasuries have not had this rating. (An indication of its inconceivability: each article I read in the week after writing this quotes a different number.) The last time Treasuries were less than AAA was when America was both responding to World War Two and coming out of the Great Depression.

As I pointed out last month, this is a seismic financial event. It is taking away a financial "given" and so it will change financial thinking for decades.

And it's changing thinking in a direction that hasn't really been considered a possibility before now -- no one has been doing "fire drills" for this event.

One likely outcome is more volatility. This 5 Aug 11 WSJ article, A Wild Ride for Financial Markets by Tom Lauricella and Conor Dougherty, describes the wild ride that bond and stock markets have been on for a week prior to this bombshell. This kind of volatility is likely to continue as Wall Street, governments, companies, and investors large and small try to figure out what this inconceivable event means, and search for a replacement solid foundation.

We are living in interesting times.

One silver lining to this scary event is that we are transitioning to a new Crisis of the Decade. Austerity and Debt Crisis will now replace terrorism as the scary event Americans spend the most time worrying about.

I'm happy to see terrorism being eclipsed, it has been so expensive! But I worry that this new concern will turn into a new panic, and we will now experience our 2010's blunders.

Here, as I see it is the root of the 2010's problem.

This 6 Aug 11 NY Times blog, Double Dip or Not, Economy Is Falling Further Behind by Nate Silver (thanks to David Ziegelheim for finding this) has a graph that shows that for many years the US GDP has been behind the curve. My interpretation: we got "off curve" starting with the Dot Comm Bust. What should have happened during the 2000's was a search for the "next big thing" that would have become the next US boom and continued the US growth. This should have been accompanied by steady investment in infrastructure of the sort that would have made US commercial and consumer life more convenient -- more power lines, road maintenance, better air travel functioning, things of that nature.

Instead the US spent the 2000's distracted by anti-terrorism. This was expensive, but the expense was masked by the general mania (such as the wars) and by the housing bubble. The 2007 bust was the beginning of anti-terrorist hangover. Now we are paying the piper for a decade of building anti-terrorist security instead of building our productivity and entrepreneurial-promoting infrastructure.

Sadly, instead of realizing what we were distracted from -- researching, finding, and developing the next big thing -- the Obama administration has decided it knows what the next big thing is: Green and extended health care. The government is picking winners based on feel-good instinct rather than letting American free enterprise do the tedious legwork of discovering and picking winners based on real-world market conditions.

Ah well... the Great Distraction... I mean Great Recession, continues.

Update: A 6 Aug 11 blog in The Economist "Free Exchange", Downgrading our politics, highlights what I think is the big issue, "America’s ostensible success in avoiding default in fact highlighted the growing dysfunction of its political institutions.  If these events are portents of things to come, then the day when China displaces America as the world’s economic superpower is closer than I thought."

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