Stat counter


View My Stats

Friday, February 5, 2010

Après nous le déluge





The phrase "Après moi le déluge" (after me the deluge) has been attributed to Louis XIV of France, although some authors attribute it to his lover Madame de Pompadour I recall first hearing this phrase and story behind this while taking European history while in college. I was amazed. How could anyone view the world in such a short sighted manner? Little did I realize that this perspective is the norm and not the exception, with educated and professional classes well represented in having this viewpoint.

Fast forward to the early part of the 21st century. We are spending ourselves into oblivion. We are not alone. Greece may default on its sovereign debt and the EU is grappling with how to deal with this impending calamity.  We have plenty of precedents of financially failed states and the paths they take to arrive at their defaults. It generally involves spending more money than they have for an extended period of time. One does not have to look back at Weimar Germany. Just look at eBay for the 100 trillion dollar Zimbabwe notes that you can buy on the internet.  http://www.ecrater.com/product.php?pid=6564401.  They stopped making these because they no longer hand the hard currency to pay the printers.

Although we are not as far down this road, we are moving briskly toward where our debt consumes us. We continue to make promises for entitlements which are actuarially unsound. We are not talking about things which may be marginally unsound, but programs which even the most optimistic projections take us under in the next twenty years at most.  Sustained growth of these programs beyond the overall growth of the economy, even modest when examined on an annual basis (a few percentage points), will lead to consumption of all available resources. This is not an if issue, it is a when issue, unless there is a brake on the growth of government spending. For that to happen it will require a  fundamental change in how use the tax system to reallocate resources. Even a Congress with no Republicans will not be able to play Sugar Daddy (Moma) effectively when there are no discretionary funds left. 


 I am not generally pessimistic or a doom sayer. In fact, my favorite quote is from David Landes book "The Wealth and Poverty of Nations" where he essentials proclaims that history belongs to the optimists since the pessimists have only the empty consolation of being right.  However, I find myself disheartened by the apparent myopia of even of most educated elements who see financial and economic issues as essentially political ones.  The problem is we have converted what should be private decisions regarding allocation of private resources into political decisions regarding resources moved to the common realm. 


 We are left with good news and bad news. The good news is there is still  plenty of money to be made in gaming the system and it will always take longer to play out than the Jeremiahs believe.  The bad news is it is highly unlikely that anyone can muster the political will move control of resources key to maintaining the wealth generating engine out of the public realm and take politics out of the equation. Until the end game, we will continue to witness the tragedy of the financial commons revealing itself in slow motion. I wonder which politician's picture will appear on the US 100 trillion dollar notes? 


No comments:

Post a Comment