Falling for the Sequestration Shuffle

Mark Twain said history does not repeat, but it does rhyme. The great empires of history burgeoned due to their ability to protect and allow freedom to their productive citizens, later peaked as they took those citizens for granted, and ultimately declined and fell as they abused and dispossessed those citizens. The madness may descend on each society a little differently, but a Chinese emperor launching a ship on a lake of wine is not that different from an Egyptian luxury barge that transported Cleopatra, which resembles Emperor Nero’s luxury lake boat, which in turn presages a contemporary Russian oligarch’s luxury yacht. What ties all of these together is a civilization in decline due to its subjugation of its own people but simultaneously affording its elites outrageously lavish lifestyles. The signature excesses need not float, Europe even today is full of palaces and castles, and American is dotted with well-preserved symbols of the Gilded Age built by the likes of Vanderbilt and Hearst as well as newish ones in the Hamptons and South Florida and Malibu.

Whether the society is ancient Babylon, the Aztec empire or Renaissance Venice or even any number of enlightened Muslim empires, a good thing goes bad, typically due to the cupidity of the leadership. The society coasts along for a time on the momentum formed in its glory days, but at some point decline becomes apparent: taxes are raised to try to support a bloated bureaucracy and social programs for the underclass (however elites find ways to exempt themselves), the military is increasingly used to create newly conquered people to pay tribute rather than the society attracting neighbors to freely join, and the shrinking pie of prosperity divides minorities and classes against one another. At some point it happens: an apocalypse.

I’m not talking about an all-destroying catastrophic event. That would be The Apocalypse. What I mean is an unveiling, a sudden revelation of all the corruption and decay and injustice that has bred beneath the shiny surface of the system. It’s hard to say when that moment is coming for America. However there is no question that it’s coming.

It could come at the end of this week. It looks to me as though we have been set up for it. What I mean is that at the beginning of this year every working American was hit with a tax increase at the same time that the Federal Reserve’s printing of $85 billion each month drove up the cost of fuel. The final straw that could kick away the rickety ladder on which the stock market is standing could be the sequestration of a tiny part of the federal budget at the end of this week.

For days the press has been full of lurid stories about long lines for air travel, closure of national parks and historic sites, and furloughs of federal workers. Of course at the high levels sequestration will not be felt: those officials are exempt. In other countries sequestration goes by another name: austerity. It is routinely imposed by technocrats acting at the behest of faceless bond markets that communicate their diktats through rating agencies. It is the means by which pensioners go cold and hungry and ruinous taxes are laid upon the ordinary citizens and small businesses.

Once sequestration kicks in, the Federal Reserve may see fit to withdraw its remaining support of the American economy. Interest rates will go up, and the money will only flow to the largest foreign concerns. Chairman Ben Bernanke has already admitted that the Federal Reserve is not a branch of the government and answers to nobody. The bankers have already determined that the U.S. is a losing play, and they have shifted their investments overseas to emerging markets and determined that we who are stateside are now the competition that must be crushed.

When that happens what has been a grinding slide for the economy will accelerate into a bloodying tumble down a steep hill. There will be more and more people unemployed, and higher and higher taxes for those who must support those unemployed. For those who missed it, those are reflexive, self-reinforcing negative spirals. Productive people will leave the economy, either through retirement, emigration or death while unproductive people proliferate. The apocalypse we may be looking at is the realization that under our current system no recovery is possible. In essence, we may become Greece.

Sequestration itself will not be the cause. As usual, the American public will be subjected to misdirection and blame for what the Fed has caused will be deflected onto Washington, and perhaps specifically at Republicans. By blaming the political process, Americans will be tricked into taking the blame themselves for something foisted on them by banking interests--foreign ones at that. Failure to apprehend these facts will prevent Americans from claiming the same right to recover with dignity that Iceland has claimed for itself.