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Minyanville Round Table: Debt Ceiling Talks Victimized by Social Mood


With social mood positioned against compromise and consensus, we're likely to see more economic hostage-taking.

I suspect i have underestimated the political upheaval to come. It was the mid to late 1930s before the real political upheaval from the Great Depression occurred in this country. And our standard of living is so much higher that it will probably take another full year of 10% reported unemployment to get the ball really moving. Having said that, there is no doubt gamesmanship was involved in the most recent unemployment reports, and that data tweaking and gamesmanship will continue through October of this year so that 2012 comparisons will be very positive and easily beatable in the run-up to the election. That gamesmanship won't change the underlying reality of joblessness, of course.

But going back to our chart for a moment, let's consider that for a moment. What is really going on here? If you sift through the rhetoric of the two parties, the primary -- perhaps even primal -- separation point is theologically grounded. Let me explain what I mean by that, because I believe it is theological in a very deep primordial sense, not Baptist vs. Catholic vs. Judaism etc.

The primary objection, evident in the split between the two parties, is a fundamental objection to overt commonality. We have a system that we idealize as built upon a fundamentally theological framework where good deeds in service to the system, individualism and hard work, are inevitably rewarded and sins are punished. While Within this system, the poor are viewed as sinners. Within this theologically-grounded framework, debt, too, has taken on an increasingly representational role as the manifestation of our sin.

The grand irony is that while we let the largely faceless yet for-profit institutions, the banks (Bank of America (BAC), Wells Fargo (WFC), Citigroup (C), etc.) that fomented and encouraged our personal debt sins off the hook without punishment, cleansed their sinful balance sheets with public funds and through the intermediation of the Federal Reserve, we will afford ourselves no such quarter. We are hell bent for punishment and austerity. Someone has to pay for these sins. And that someone won't be institutions, it will be us. This is ironic because one of the largest roles of government -- this is my own view, and I understand this view is highly arguable -- is to provide a safety net for the people during severe economic crises. While it is true that government cannot spend its way to prosperity, there are times when the benefits of increasing debt by investing in infrastructure and public works projects outweigh the drastic social consequences of austerity. This is one of those times.

Furthering the irony, large banks and the men who run them were able to pocket their bonuses and cleanse their balance sheets thanks to the safety net we provided, an act of benevolent forgiveness that conveniently chooses to overlook the transgressive looting that actually occurred. In this perverted theologically-grounded structure, the safety net that should have gone to the people has instead gone to the banks.

This is not the fault of government, or the result of collusion between government and banks, it's the by-product of a negative wave
of social mood that is seeking self-punishment through austerity. So, austerity we shall get. When social mood finally shifts, the austerity will be rolled back, the debt ceiling debates will once again be buried on page 2,365 of the U.S. budget proposal and we'll resume a more normalized lifestyle.
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