Forest Fires

I was taken aback to read Paul Krugman’s recent column, Kick That Can, over the weekend.  There’s been considerable press and debate over the economic necessity – or not – of austerity and the events taking place in Greece put a very human face upon it.  Austerity is now in the pipeline here at home and the debate is on over how much debt is supportable and at what point the plug is pulled on further spending.  Krugman’s stance is that the damage of reducing government spending – remember C+I+G+(X-M) – with no other driver available would be too much for the economy.  Of course, the bulk of government spending at the moment is directed towards either the sandbox wars or untouchable entitlement spending which add nothing to reinvestment.  After reading his column, all that I could think of were forest fires.

The US Forest Service was founded by Teddy Roosevelt as we’d gone through our lumber resources like a hot knife through butter.  Protecting the forests meant protecting it from any threat, including that of forest fire.  Fire killed trees and left areas denuded for years to come.  But through decades of study and experience, the Forest Service learned that there was actually a place and a purpose for fire; while it did damage, it also cleared away the undergrowth that clogged the forest floor and prevented substantive new growth if left untreated.  My family and I have driven through smoke-choked areas, the roads marked with signs advising that there were controlled fires ahead.  Clear away the debris and invasives and set the stage for the real new growth.

This is also the way of capitalism and why capitalism has proven to be such a good economic model for real growth.  Credit is misallocated over time and even with real growth, there is a considerable amount of deadwood that builds up.  The downturns are occasions when the deadwood is cleared away and the stage is set again for further growth.  In terms of humanity, the effect is one of job loss and economic pain and those are the realities that have to be addressed by public assistance programs and personal preparation.  It’s not an idea that is popular or pleasant, but it is the reality in which we have to live.  Despite our best public and private efforts, things are messy and there will be real-life pain.

Some argue that we haven’t had true capitalism for more than a decade and I can ascribe to the idea of bifurcated capitalism, capitalism for the masses who must pay for their financial errors while the Too-Big-To-Fail institutions are protected from their excesses and errors.  So much has been spent, so much debt incurred, in preventing any failure that might clear away the undergrowth – and yes, even good wood – that the economic forest is thoroughly dense with should-be dying businesses and kudzu-like predatory practices that siphon off so much real wealth.  What’s happening now is the opposite of forest fires; it’s the rampant addition of fertilizing liquidity across the financial spectrum in the hope that the good wood will somehow grow fast enough that it will eventually actually overtake the forest again.  But this is impossible since the fertilizer not only goes to the invasives as well, but they gain even more by leeching onto the healthy growth and siphoning off of them until they finally succumb.  The result is a blighted, tangled mess that produces nothing of value. 

Despite the best efforts of Forest Service and Federal Reserve, there will be forest fires.  But so many aspects have come together that I fear a true conflagration, an economic burn that will lay waste to the nation’s economy:

  • The repeated deficits that ratchet up the national debt to levels that are simply unpayable;
  • The failure of the Congress to even pass a rudimentary budget that actually addresses our priorities;
  • The willingness of the Federal Reserve to abet this travesty by expanding their balance sheet to handle the newly printed government debt;
  • The continuing uncontrolled actions of the Too-Big-To-Fail institutions that further lever themselves to levels of derivatives that make the levels of 2008 pale;
  • The unwillingness or inability of the government to regulate these institutions and bring their actions to heel;
  • Further, the failure to meaningfully prosecute for the financial crimes – and yes, they are crimes – so that a truly painful punishment is exacted and a lesson is taught;
  • The willful compliance of the business networks in propagating a view that all is well and that is out of touch with the reality on Main Street.

Bad news sells but in my worst moments, I have to concede that the next forest fire could rival that which struck the 1920s German Weimar Republic or the 1990s Soviet Union. 

While this kind of view is often nay-sayed and derided, the reality is that this concern is permeating our society and especially in how it impacts families and child-rearing.  There’s been an awareness of helicopter parenting and well-deserved criticism of it since it doesn’t augur well for children who must move into adulthood.  Sites such as Free Range Kids question whether we’ve become too over-protective and promote a more balanced view of society’s threats.  There’s an understanding that the economy has shifted tectonically and the conventional wisdom of how to succeed is actually hurting our young people by saddling them with toxic debt.  Even before they reach that young-adult level, we’re becoming aware that our teens are financially illiterate, even for surviving in an economic consumption model that’s simply unsupportable moving forward. The upshot is that while nobody in the mainstream is willing to say it, the concerns are circling at the family level. 

As parents, our role is to not just to provide food and shelter, but ultimately to raise children who have the resiliency to survive what life throws at them.  There will always be forest fires and it’s our jobs to give them the character and tools to manage through them.  But our collective failure to press for action only sets the stage for fires that will burn through everything and scar our children for generations. 

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