Calling American Swine

A lot of people are panicked by the swine flu (H1N1) that has recently emerged in Mexico and has since spread across the American continent and far beyond. Panicking is a perfectly normal human response to frightening new things, one which we humans share with our relatives the apes and the monkeys. And, just like them, once we are done panicking, we try to find out what it was that had us panicked.

Swine flu seems like a flu like any, spread through coughing and sneezing and (my personal favorite) wet kisses. If you catch it, you will develop a high fever, your joints and muscles will ache, and a day or so into it you might develop a dry cough. In three days or so your fever will subside somewhat, and in a week to ten days you will recover. Unless there are complications.

It just so happens that, for the next couple of weeks, I will be taking the subway between East Boston and Downtown. It's just a short hop through a harbor tunnel, but at the same time it is a commute between Latin America (on the East Boston side) and New England. I hardly ever hear any English on that train. I would bicycle, but the bike ride is circuitous and very long. Perhaps you'd think that I should consider myself directly in the path of this new contagion, but I probably am not. The carriers are probably mostly tourists and other recent travelers, not the local Latinos.

Flu kills hundreds of thousands of people every year, mainly because they are not healthy to start with. All those drunken bums I see lolling around the Financial District next to half-empty bottles of Listerine antiseptic mouthwash look really unhealthy, and will probably die of something sometime soon. I would venture a guess that their cause of death will be noted as something other than terminal halitosis. Swine flu seems like an impressive-sounding thing to put down on a death certificate. The actual cause of death will probably be something like "Despair" but that just doesn't sound scientific enough for us.

One thing that makes this particular panic interesting is that American public officials are stoking the panic by declaring a state of emergency. (Even our brave Vice President, "Amtrak" Joe Biden, apparently forbid his family to ride public transportation.) There is a simple reason behind these quick declarations of emergency: there is quite a financial drought right now, state budgets are being cut and public workers furloughed. By declaring a state of emergency, public officials gain access to emergency funds. So swine flu is just an excuse for them to vacuum up and spend some loose change.

Another thing that's peculiar is that some nations, notably China and Russia, have banned the import of American pork. Many other countries are following their example. The flu is not spread through eating pork, and so banning it is an economic move and a symbolic gesture rather than a medically motivated public safety measure. But the popular appeal of the symbolism is irresistible: here they have a chance to ban American Swine!

American Swine come in three main varieties: the Hog, the Bankster, and the Neocon. The Hog is often a public safety menace, because factory farming practices result in large groups of immunocompromised animals confined in conditions that are perfect for incubating new diseases. These practices should be banned, and banning American pork around the world seems like a step in the right direction.

The Banksters who have crashed the world financial system through their fraudulent activities should be banned around the world as well. In addition, it would be nice if they were rounded up and herded into capitalist reeducation camps, where, thanks to hard physical labor, daily capitalist indoctrination sessions, and compulsory public self-criticism, they would, over the course of months or years, be reformed into model capitalists, ready to rejoin a free market economy. Perhaps our Chinese friends would be nice enough to send over some advisers, to help us set up these camps.

Unlike the Hogs and the Banksters, the Neocons who illegally murdered, imprisoned and tortured countless civilians across the world should be exported — extradited, that is, to stand trial at an international war crimes tribunal. The list is not that long: Bush, Cheney, Rumsfeld, Rice, Gonzales and a few others. All the ones who "were only following orders" are not important enough. The United States government is bound by international treaty to either prosecute or extradite these people. Since prosecution in the US is unlikely to be carried out properly, extradition remains as the only option. President Obama's recent paying of lip service to this being "a nation of laws" is no substitute for action.

Of the three varieties of American Swine, the actual pigs seem like the least troublesome, swine flu notwithstanding. We should certainly do all we can to stay healthy, but in the meantime we should stay focused on doing something about the other two varieties of American Swine.

Change You Can Suspend Disbelief In

This is a guest post by Publius III. I am happy to see that guest posts are becoming a venerable institution here at ClubOrlov. Long live Samizdat!

Comprehensive tax relief is America's surest route to effective economic stimulus and genuine recovery. Elimination of all US income taxes would offer irresistible incentives to every American to go out and shop, swiftly restoring hope, confidence, and economic stability. For the US government, this policy shift would produce greater benefits at lower cost than any rescue package that has been tried or even considered.

How I learned to stop worrying and love the deficit

Over the last thirty years, the world has learned that deficits are a boon to any economy that is wise enough to use them appropriately. Indeed, perennial deficits have become a useful predictor of a nation's economic health and growth. It is government deficit spending that has created the jobs that have kept our little home planet glowing so brightly in the darkness of interstellar vacuum. The value of economic growth stimulated by each year's deficit invariably exceeds the nominal cost of the deficit itself. Budget deficits are also desirable on their own merits, because government borrowing provides a risk-free financial safe haven where the world's economic winners can place their winnings. These facts compel us to recognize that a perpetually growing total debt is highly desirable. The Obama administration certainly recognizes this key fact, and has been doing all it can to push public finances into the red as far and as fast as possible. It has also been working hard to "get the banks lending again," in order to promote rapid debt expansion in the private sector as well. Although most of this new debt would never be repaid, the massive wave of defaults will present a perfect opportunity for more government bailouts of insolvent financial institutions, further enhancing the deficit.

American redux

In 1835, the debt of the adolescent American republic was an unimpressive $34,000. But decade after decade the federal debt continued to expand, along with American power and influence. By the middle of April 2009, America's federal debt stood at $11.2 trillion. Current projections suggest that the total is on track to make $13 trillion before the end of the 2009 fiscal year.

Coincidentally, this figure is close to the one Bloomberg gave toward the end of March for the costs of the US government's various rescues, backstops, and guarantees in the current crisis. Bloomberg's tally so far shows the American public with $12.8 trillion in such spending and promises. Realistically, the odd war here and there will add another $3 trillion to America's deficit spending in the relatively short term. Neil Barofsky, the Treasury Department's Special Inspector for oversight of the first $700 billion allocated by Congress to help ease the pain on Wall Street, asserts that an additional $2.3 trillion will be needed for that purpose, taking the visible banking tranche to about $3 trillion, for now.

Meanwhile, a different branch of the US Treasury -- the Office of the Comptroller of the Currency -- catalogs $170 trillion in derivative exposure among five large US banks. A commonly accepted estimate of the failure rate of these derivative instruments is 20%. If the government is to continue to bail out the country's major financial institutions, the American public should expect this exposure to yield at least $34 trillion in new obligations. America's federal housing lenders Fannie Mae and Freddie Mac will no doubt want to pitch in as well, contributing another $5 trillion of their own exposure.

Finally, estimates of the present value of the unfunded entitlements of Social Security, Medicare, and Medicaid involve much guesswork but generally tend to fall in the range of $50 trillion to $150 trillion. For the sake of this analysis, let us accept the mean value of $100 trillion as gospel.

And so, in round numbers, we are looking at somewhere around $180 trillion in total American public debt. No other single parameter could better indicate America's full spectrum dominance in world affairs. Now, contrast this majestic sum with America's net income-tax receipts in 2008: a mere $1 trillion. The idea that such a paltry sum can defray the nation's public debt is simply laughable, and yet the economic damage it inflicts is no laughing matter at all. Its continued existence is nothing less than an insult to America's hard-working men and women.

Although the notion that income taxes could be eliminated altogether might seem shocking at first glance, the logic for doing so is deeply reassuring. Our $1 trillion in tax receipts is trivial. It would never be missed by the American government. Yet it remains a drag on consumer behavior. While the tax represents less than 0.6% of America's debt being amassed as you read these words, it represents 217 times America's disposable income. That is, the abolition of the federal income tax has a benefit-to-cost ratio of more than 36,000 to 1. A negligible increase of existing debt would translate promptly into a massive and continuing stimulus as taxable earnings are transformed into disposable income.

Deficit attention disorder

In an environment where $12.8 trillion can be conjured and deployed in a matter of weeks, and where expressions of dollar-denominated public obligations require fifteen digits, America's income-tax revenue is a mere rounding error in terms of government finance. Furthermore, as Federal Reserve chairman Ben Bernanke revealed in his recent “60 Minutes” interview on CBS television, the money being spent to rescue the American economy costs taxpayers nothing, because “it's much more akin to printing money than it is to borrowing.” And so Bernanke should find no problem with printing an extra trillion each year to make up for the loss of federal income tax receipts. Although it may superficially seem like an increase in government obligations, rest assured that it will not cost taxpayers a thing. Banish the thought of eventual repayment! We know full well that deficits just make America stronger! History now demands bold, decisive action from all of us!

Don't take it to the bank

No other program could produce an equivalent psychological or economic impact. For every individual US taxpayer, the abrupt and overwhelming relief of tax absolution would trigger an avalanche of consumer spending dwarfing all previous exuberances, irrational and otherwise. The benefits would extend to every wage earner and to all who are self-employed. Even those who pay no taxes today would indirectly benefit from the inevitable tsunami of prosperity. Stop thinking of it as debt; think of it as free money. Repeat after Chairman Bernanke: "it's much more akin to printing money." And if that money is printed in sufficiently large denominations, then printing a lot of money at once becomes very economical. Let's roll!

Burning our Bridges to the XXI Century

The future does not resemble the past – or does it? When the lights go out, people burn candles and oil lamps, just like they used to before the electric grid came into existence. No longer accustomed to working with open flame, they tend to set things on fire, and for a while, until they regain this experience or until natural selection whittles away the truly incompetent, the neighborhood is a constant blaze.

When we find out that the supermarket is out of food and that the cupboard is bare, we hunt, fish, forage, plant kitchen gardens, and start experimenting with raising poultry and rabbits. Those who are incapable of doing so, or who feel that such lowly pursuits are beneath their dignity, become dependent on the charity of those who are more adaptable, or starve.

As modernity runs out of resources (those photons sequestered eons ago in fossil form, now released as carbon dioxide into the atmosphere) patterns of life naturally retreat to their pre-modern forms. If there are no more sneakers from China, we sew moccasins or whittle clogs. If we are resource-poor but resourceful, we can still weave basket-like shoes out of birch bark, stuffed with straw for insulation, called lapti. If we are truly destitute and feckless to boot, then we go barefoot.

It seems commonsense to accept this reversion to norm as natural, and to strive to have enough of whatever we are going to need, be it tools for working leather, a stock of paraffin, seeds, fishing tackle, and a myriad of other similar items that comprised the pre-industrial survival kit. The last thing we should want to do is to throw these things away at first sign of economic distress and for trivial reasons. And yet that seems to be the prevailing pattern.

For instance, if the expectation is that foreigners will no longer want to trade their dwindling crude oil endowment in exchange for worthless US Dollars, and that the US will lose access to 2/3 of its liquid hydrocarbons, it would make sense to make some provisions for raising food and for moving freight. Since a John Deere won’t run on hay, that calls for some horses. Furthermore, now is a perfect time for farms to get “horsed up” because so many horse-owners can no longer afford the luxury of keeping a horse, and it is possible to buy a horse very, very cheaply. Many horse-owners would be perfectly happy to donate their horse and take a tax write-off rather than see their beloved pet turned into glue. Instead, horses are trucked to rending facilities across the border in Mexico, to endure incredible suffering while in transit, and then to be incompetently hacked up with machetes.

Before the advent of fossil fuels, freight that could not be moved by horse and wagon moved by sail. It would therefore make perfect sense that we keep all the sailboats we currently have, because they will surely be pressed into use once other transportation options are no longer available. Keeping a sailboat afloat is not particularly expensive; there are protected coves where a boat can be kept anchored free of charge, provided it is tended to once in a while. The smaller, trailerable boats are also useful, and can keep for years on the hard, under a tarp in someone’s back yard. And yet what is happening now is that sailboat owners, unable to pay the slip fees and the upkeep of their luxury toy, abandon it, simply letting it float away and eventually sink, with its mast protruding out of the water at low tide, or to wash up on a beach, where the surf pounds it into rubble. Even if the boat itself is unsuited for any practical purpose (and, thanks to the combined detrimental effects of sport and luxury on the sailboat market, there are far too many of these) then at the very least they could be stripped of Dacron sailcloth, stainless steel and bronze fittings, lead ballast, marine-grade stranded copper wiring, aluminum spars, and many other items which are both very useful and unlikely to be manufactured in the future in an economy that runs on wind, hay and firewood. The remaining hollow fiberglass husks could make interesting, long-lasting treehouses.

Not that, in general, there is a lack of effort to save things. We are making an effort to save financial institutions, which are the ultimate ephemera of industrial civilization, and are absolutely guaranteed to have no reason to continue into a future in which debt, denominated in future earnings that will be meager at best, and money, which will only hold its value for as long as it guarantees access to sources of pure, concentrated energy, all steadily dwindle to nothing. It is as if the doctors decided to only try to save persistent vegetative quadriplegics with terminal cancer, or if the environmentalists decided that the endangered species list only has room for one animal: the vampire bat. It would make much more sense to try to save small businesses, such as family businesses that serve local communities, because there is a good chance that they will find a use in the future, or at least facilitate the transition. Instead, we are squandering the remaining resources on the various dinosaurs of the industrial age.

I believe in providing a hopeful vision of the future as much as I believe in providing a sufficiently horrific vision of the present for it to be, in my opinion, a realistic one. However, I am beginning to feel somewhat thwarted in my efforts by this new compulsion sweeping the land to shoot oneself in the foot while simultaneously setting one's hair on fire. The only hope I can offer you today is that this current trend toward suicidal stupidity is temporary, and that it will run its course long before we completely ruin our chances for an orderly regression.

Bullets from the Drug War

The US has lost the "War on Drugs" The losing side is usually not the one to decide when a fight is over or how it ends Unlike other recent defeats, this lost war is a defeat followed by an invasion Mexico is the natural staging area for the invasion (inconvenient though it is for the Mexicans) New franchises are being set up to service the North American drug market (which is the biggest in the world) The CIA has to eat, and all they know how to do competently is run guns and drugs and control thugs; they get a seat at the table The narcs have to eat too, and all they are trained to do is deal (with) drugs; they get a seat at the table too As the federales grow weak in the US and Mexico, the battle lines will advance north of the border, leaving Mexico a quiet and largely intact backwater This is an inter-US conflict, because Americans are the most avid consumers, sellers, and prosecutors of drugs Life in the USA gives everyone a pain that is for many people simply not survivable without drugs: either alcohol, pharmaceuticals or illegal drugs Illegal drugs are far more cost-effective than either pharma or alcohol — government-licensed industries which are either excessively lucrative or taxed heavily As Americans give up hope, they will need to self-medicate in ever-larger numbers They will be far more able financially to afford illegal drugs than either pharma or alcohol. Illegal drugs (and moonshine) are two very large post-collapse enrepreneurial opportunities within the fUSA/бСША [Orlov 2005] This is no longer a war against drugs; it is now a contest between alternative drug distribution systems One alternative is a centralized, paramilitary organization run by CIA remnants, former military, and former police Another alternative is ethnic mafias, which will diversify into many other kinds of trade. The third, nautrally most cost-effective alternative will be provided by informal, local distribution networks based on barter, which will be all that is left once the dust settles The downside of all this is that it will be hard to find anyone sober enough to operate a light switch The upside to that is that the national electrical grid will go away, so there will be little need of that

Welcome to Fuffland!

In the unfolding global financial collapse, it is not just our accounts and balance sheets that come up short, but our language as well. What do you call a bunch of liar loans packaged into toxic assets and placed on the balance sheet of the Federal Reserve as collateral for rescue loans? J,K. Galbraith has proposed the term “Bezzle,” taking it to mean the eternal ebb and flow of questionable transactions within an economic cycle. Rational actors cut corners during easy times when they know no-one is looking, and then play nice again when the times change and someone starts paying attention again.

But I believe that the phenomenon we are observing is something different: we need a word that describes the artifacts generated in response to irrational actors who demand to be fooled. As the old saying goes, “A fool and his money are soon parted” – at the fool's own insistence, no less! If the deer comes out of the forest and walks up to the hunter, it is not proper hunting, and this is not proper con artistry or grift or embezzlement or any other term we use to describe proper works of evil. If the victim, at the sight of the economic predator, goes into doggie submission, we must stop discussing the phenomenon in terms of conflict and consider whether what we are observing might be some strange instance of symbiosis.

I am Russian, and so I tend to use my Russian background to look for answers to questions big and small. Sometimes this works rather well for me. It seems that the Russians are better-equipped to survive financial collapse than just about anyone else. They have formidable reserves of gold and foreign currency to soften the downward slide. They have a dwindling but still sizable endowment of things the world still wants, even if at temporarily reduced prices. They have plenty of timber and farmland and other natural resources, and can become self-sufficient and decouple themselves economically should they choose to do so. They have high-tech weaponry and a nuclear deterrent in case other nations get any crazy ideas. After all the upheavals, they have ended up with a centrally-managed, natural resource-based, geographically contiguous realm that is not overly dependent on global finance. Yes, the Russian consumer sector is crashing hard, and many Russians are in the process of losing their savings yet again, but they have managed to survive without a consumer sector before, and no doubt will again.

Be that as it may, because as far as our own welfare is concerned the subject of Russian economic survival will be little more than academic. Perhaps Russia will thrive, all the way on the other side of the globe, just like it did while we wallowed in the Great Depression; how could that be helpful to us, in our predicament? Well, it turns out that Russia has something to offer that should be to our great advantage in coming to terms with financial collapse, and it is something that it is perfectly willing to share with us, because it is just a matter of learning some new vocabulary. All we need to do is borrow a single word, and learn to understand the concept it signifies.

Yes, the Russians actually have a word for precisely the thing that has bewitched us, first accounting for an ever-increasing share of our gross domestic product, and is now responsible for our ever-larger financial black hole. That word is “фуфло” /fufló/ when applied to a quantity of something, and "фуфел" /fúfel/ when applied to a singular item. This word has the obscure English cognate “fuffle,” which the Oxford English Dictionary dates to the early XVI century but fails to define adequately. I suspect that this word has been in circulation in many languages ever since some Protoindoeuropean simpleton showed up at some archaic fair and, being none too wise, bartered his meager trade goods in exchange for what thereafter became known as a fuffle. At that point, his story may have gone two different ways. Either he could have discovered that he'd been handed a fuffle, chased after the unlucky fuffller, and summarily ran him through with a pointed stick (positive outcome) or he could have stumbled back to his village proudly displaying his prize, and perhaps even got his entire tribe to acquire a taste for fuffles (negative outcome). In the latter case, the fuffle-addled tribe could never grasp the meaning of the word “fuffle,” because doing so would have resulted in some painful cognitive dissonance. (Perhaps this psychological mechanism accounts for the fact the Anglo-Saxon tribe still has the vestigial word but no longer remembers its meaning.)

A fuffle is an artful fake, an artifact specifically made to fool, beguile, seduce, or intimidate people into paying for it. Ideally, the initial transaction serves as the basis of a permanent arrangement, with the victim roped into an installment plan, which keeps the payments flowing even after the fuffle itself has crumbled into a pile of dust. An even better fuffle is one that grows over time. Since a fuffle is, in essence, a fake, its useful properties, should it have any, are largely irrelevant, and so its abstract (which is to say, financial) properties come forth as being the essential ones. The most important such property is, quite obviously, size, and indeed fuffles tend to get bigger and bigger over time. This is a telltale feature of fuffles that makes them easier to identify: if something gets bigger and bigger over time while delivering the same or lesser value, then it is quite likely to be a fuffle. Also, fuffles breed: as a fuffle gets larger and larger, it produces offspring of other fuffles, which also grow. Examples come from many realms.

Take, for example, suburban and exurban houses. For a time, people couldn't get enough of them, and at one point fully half of the US population was living in them. Their square footage had increased far past what even a large family might actually need, while at the same time their cost had exceeded what an average family could afford. In the final act of suburban expansion, these fuffled houses begat fuffled mortgages: fraudulent loans clearly not intended to be repayable over their entire term but quickly rolled over into some other fraudulent monstrosity. And fuffled mortgages begat fuffled equity-backed securities. And these begat fuffled government bailouts.

Another example is America's favorite fufflemobile: the SUV. This is a truck chassis made to superficially resemble a gigantic passenger car, with none of the advantages of either and all the disadvantages of both. These were advertised as safer than cars, while they are some of the most unsafe passenger vehicles ever sold. These also grew in size and cost, while begetting fuffled auto loans, and eventually leading to fuffled automaker bailouts.

Or take the gigantic fuffle of guaranteed student loans, which enabled fuffle-like growth in college tuitions. Following a few years of flipping burgers or serving lattes the value of the diploma may be zero, and most of the knowledge it implied either forgotten or obsolete, but repayments continue, sometimes until the poor student's death. And if a period of financial hardship results in a deferment, interest and fees are piled on top of the original loan, allowing it to balloon to an astronomic size that bears no relation to either the value of the diploma or the expected earnings of the graduate. To keep the payments flowing, income and social security payments can be garnished.

My last example is private retirement based on IRA and 401k retirement funds. Unlike proper retirement systems, which transfer a percentage of earnings from working-age people directly to retirees, this fuffled scheme takes these earnings and invests them in some fuffles, expecting these fuffles to grow like they always do, making the retirees well off upon retirement. The non-fuffled fallback, as a lot of retired fufflers are about to discover, is to come to rely on your grown children for support, awkward though that may be.

It may be clear to us that fuffles must be eradicated. But it is almost impossible for a society that has for so long and to such an extent put its faith in fuffles to part with the notion that they are valuable and accept the notion that they are a lot worse than worthless. And so they grow and grow, until they swallow up the entire country. At some point last year, in a vain effort to avert financial collapse, the Federal Reserve started accepting fuffles (which they called “troubled assets”) as collateral for fuffled rescue loans to insolvent financial institutions. Thus, the assets column of the Fed's balance sheet is now loaded with fuffles. And next, we have the US Treasury poised to create the next wave of fuffles. These are US Treasury securities, backed by whatever remains of the full faith and credit of the US Government, but destined to be sold not to investors (who have no taste for any more fuffles) but, in a truly incestuous move, to the same old Federal Reserve Bordello of Blood! They are calling this “quantitative easing.” A better term would be “qualitative fuffling:” the financial snake is finally eating its own tail. The Fed will place these fuffles on its balance sheet as assets, and in return issue prolific quantities of our new national currency: the US Fuffle. Like all fuffles, the US Fuffle will grow by leaps and bounds, by sprouting ever more denominations.

"How much do I owe you for this latte, dear graduate?"
"Well, Sir, that will be six trillion fuffles, if you please."

Welcome to Fuffland, people! Enjoy your stay!

「崩壊時の相違」を見極める：ソ連はアメリカよりも崩壊の備えに長けていた

I would like to thank Dr. Masayuki Ohtani for translating my "Closing the Collapse Gap" presentation into Japanese.

みなさん、こんばんわ。ぼくは何かの専門家や学 者でなければ、社会活動家でもありません。むしろ、ぼくは目撃者ですね。ぼくはソ連の崩壊を観察したわけです。それで、観察したことを簡潔なメッセージに しようとしているわけです。ぼくのメッセージがどれくらい緊急性を要するものか、その判断はあなた次第ですけどね。

今夜のぼくの話というのは、アメリカ合衆国では 崩壊への備えがなっていないなぁ、というものです。そこで、ソ連が崩壊する前の状況とアメリカの現状とを比べてみようと思います。仰々しく言えば、「崩壊 時の相違点」とでも言うべきことを扱うわけでして、これは冷戦時代に顕著だった超大国間の様々な相違、核開発における相違点だとか、宇宙開発における相違 点のようなものです。

How we treat each other in hard times

I contributed a segment to this week's broadcast of The State We are In, a weekly program of Radio Netherlands. My segment begins at 6:30, but the rest the broadcast, which deals with how the Icelanders treated each other when their economy collapsed, is certainly worth a listen as well. I would like to thank WBUR at Boston University (my alma mater) for providing the studio and the technician.

Interview on ABC's Late Night live (Australia)

This interview was recorded last night (US) and aired some hours later in Australia. Audio is available for download here. The host, Philip Adams, was well primed for the occasion and asked thoughtful questions. A good, short introduction to the subject. Although Philips did suggest opening one's veins at the end, he also suggested opening a bottle of wine as an alternative. I am in favor of the latter.

Interview on Russia Today

Similitudini tra superpotenze

Many thanks to Michele for translating an entire chapter of my book into Italian.

La propaganda ufficiale ha sempre provato a dipingere il conflitto tra superpotenze come una conseguenza ovvia e inevitabile delle differenze non conciliabili tra le due parti.

Una parte era rappresentata come la manifestazione di tutto ciò che è buono e giusto nel mondo, l’altra come tutto ciò che è malvagio e repressivo. C’era sempre un’etichetta per descrivere il nemico, efficace nei confronti della propria audience, tipo l’aggressore Imperialista o l’impero del male...