Conservation of Money, or Why The Fed Should Manage Derivatives

[For a brief comment on the President’s minor role in the BP Oil Spill, click here.]

Introduction
What is Money?
Conservation of Money: Scarcity and the Basics
Conservation of Money: the Nuances
What Has Happened since 2008
Conclusions

Introduction

The English word “conservation” has several meanings. Some environmentalists take it to mean using less, even if doing so hurts. An example is turning the thermostat down in the winter and feeling cold, just like the English before their adoption of central heating. Others think “conservation” includes making more efficient heaters so you can feel warmer while burning less fuel. Modern usage, however, tends to distinguish between “conservation” and “efficiency.”

But there’s another meaning entirely, which few outside the hard sciences know. That meaning proceeds from the assumption that certain things are―or ought to be―fixed in quantity, so that attempts to increase or decrease their total amount are impossible or disastrous.

The paradigm is the law of conservation of matter. “Matter,” said this law, “is neither created nor destroyed.” Even today, this is largely true. We can trace pollution from Chinese power plants and factories to the “tailpipe” of North America, which spews the pollution out of New England and over the North Atlantic with winds from the west. Matter―in this case pollution―doesn’t magically disappear; we can only convert it into less harmful forms of matter.

Einstein forced us the modify this law by showing that mass and energy are equivalent. So now we have the law of “conservation” of mass/energy. We know that neither is created nor destroyed without creating an equivalent amount of the other. Nuclear power plants and particle colliders practice this law every day.

Physics has other laws of “conservation,” including conservation of linear and angular momentum. But the law of conservation of “mass/energy” is the most intuitive and easiest to understand.

Will Rogers once said of real estate, “They ain’t makin’ any more land.” Just so, no one is making any more matter, at least not under conditions and on time scales of interest in ordinary human life.

The same sort of principle, I think, can explain a lot of economics. Unlike mass/energy, money is an artificial construct. So strict conservation, of the sort “enforced” by physical law, doesn’t apply. But if we think of “conservation of money” as a principle of macroeconomics, we can explain a lot of what’s gone wrong in the world over the last century.

What is Money?

How would you define “money”? I define it as something that represents economic value by social convention or mutual consent, but whose economic value so fixed vastly exceeds its intrinsic practical value.

All the things we humans ever used for money fit this definition. We probably started with shells and beads, which were worth far less than the food, building materials and weapons for which they were traded. Ditto for silver and gold, the next step in human economic evolution.

These precious metals have some intrinsic value because we can use them to make jewelry. (Today we also use them for various industrial and high-technology purposes, although we “graduated” to paper money long before those uses became a significant part of our economy.) But because they are heavy and not very hard, silver and gold always had far less practical value than the food, housing, clothing and weapons for which we exchanged them. You can’t make a decent sword or armor, for example, out of gold or silver. So except for the very wealthy, who sometimes used them for ostentation, their primary economic use was as a medium of exchange.

Today, of course, the divergence between intrinsic and conventional value is obvious. People work all day for a few strips of specially printed paper. Business ventures rise and fall on intangible electronic or magnetic records in the proper place. The trading in our financial markets uses electrons, which we can’t even see.

By themselves, electrons are useless to us in everyday life. Furthermore, they are unimaginably plentiful. We employ gazillions of them every time we turn on an electric light, and even more when we use our electric range. Yet lots fewer, inside a bank’s computer, represent a year’s wages or a start-up firm’s sole chance for success.

Conservation of Money: Scarcity and the Basics

This definition of money contains an inherent contradiction. If the money’s intrinsic, practical worth is so much less than its economic value as a medium of exchange, won’t people spend time and effort “making” money rather than things with intrinsic value, like food, clothing, shelter, vehicles, and weapons?

That contradiction explains a lot of things. For one thing, it explains the phenomenon of counterfeiting. If you’re a good forger, it’s better for you to make fake $100 bills than to make other, less valuable things and sell them for money. Why not eliminate the middleman?

The contradiction also explains some wasteful and even more sinister things. What were the California and Klondike Gold Rushes but attempts by tens of thousands of (mostly) men to “make” money the easy way, by finding gold, and eliminate the middleman? The conquistadores’ genocide of South and some North American native peoples was in large part motivated by the same desire. The pursuit of money and neglect of things with real intrinsic value is nothing new.

These important events in the history of the Americas reflect the law of conservation of money. For money to succeed as a medium of exchange, it should be fixed in amount, or at least not easy to augment.

Shells and beads were not too good in this regard. If some people could find or make them, so could others. So as a medium of exchange, they weren’t too useful. Among other things, their use as money could distract people’s attention toward finding or making them, instead of more productive pursuits like growing food or protecting the homeland.

Silver and gold were better because they are intrinsically scarce. The Earth’s crust doesn’t contain lots of them, especially near the surface where they are easy to mine. Their weight also makes them hard to steal in bulk. So for centuries gold and silver served as useful media of exchange. They were not only impossible to counterfeit; their scarcity also satisfied the fundamental principle of conservation money. Apart from sporadic and rare “gold rushes,” their amounts were fixed, mostly in the castles and vaults of kings, princes, nobles and (later) less autocratic governments.

Because silver and gold satisfied the law of conservation of money, they served as media of exchange for centuries. But there was a problem. Their amounts were too limited for the growth of a modern industrial economy.

The distribution of these metals in the Earth’s crust had nothing to do with the development of human agriculture, industry, commerce and trade. As these features of human civilization developed, the amount of silver and gold that our planet provides proved too little. The very features of silver and gold that made them a useful medium of exchange―scarcity and relative immobility (due to their weight)―made them unsuitable for a rapidly expanding global economy.

In our country, this issue first came to a head in 1896, when William Jennings Bryan sought and won the Democratic presidential nomination. The question was whether our government could issue paper money based on a promise to pay silver or gold, not just gold alone (which was and is scarcer.)

Bryan’s famous “Cross of Gold” speech favored this so-called “bimetallism.” It examined the issue through a glass darkly, in the rotund and metaphorical language of the age. But it made two things crystal clear. First, Bryan addressed his fellow Democrats’ fear that, if they supported bimetallism, the Republicans would tar them as abandoning conservation of money and turning the medium of exchange over to an undisciplined rabble. Second, Bryan made clear his view that continuing the gold-alone standard, by providing Eastern financiers with a monopoly over a too-scarce medium of exchange, would hobble the economic development of a huge, diverse and rapidly growing nation.

Here is Bryan’s famous peroration:

“If [the Republicans] dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”

As often happens in hard-fought political battles, both sides were partly right. Bryan was right in thinking that letting money men continue their monopoly of a too-scarce medium of exchange would hobble commerce. There simply wasn’t enough gold to support our exploding trade and commerce during our nation’s most rapid growth.

But the Republicans had a point, too. Disconnecting money, as medium of exchange, from the scarcity of noble metals that Nature had decreed left it up to us imperfect humans to determine for ourselves what was money and how much of it there would be.

Eventually, Bryan’s view prevailed, but it put the principle of conservation of money up for grabs. The rest of human macroeconomic history is a tale of grappling with the unintended consequences of that change.


Conservation of Money: the Nuances

Bryan dreamed of a medium of economic exchange not limited by the natural distribution of scarce metals in the Earth’s crust. That dream would not be fully realized for another half century. In late 1945, after World War II’s devastation, the great powers signed the Bretton Woods agreement, permanently replacing the gold standard with a system of floating currency exchange rates and international financial institutions.

But in the interim, many of the awful things that our Eastern bankers feared in Bryan’s day actually came to pass. There were awful booms and busts, including the Great Depression. There was hyperinflation in Germany’s Weimar Republic. The economic agony that resulted led directly to the rise of Adolf Hitler and the Nazi regime. In the absence of an agreed and naturally limited (if scare) medium of exchange, nations manipulated their currencies, and many sought control over physical riches like the “black gold” of oil through military conquest. It exaggerates little to say that the most terrible war in history was not just a struggle over territory and ideology, but also a struggle for control over resources occasioned by the absence of a clear basis for international exchange and free international trade.

But enough of history. Today we have the World Bank, the International Monetary Fund, and huge electronic markets in which national (and regional, for the EU) currencies trade in the trillions (and sometimes in nanoseconds) every day. Virtually every nation of consequence (or region, in the EU’s case) has a central bank, which controls directly the amount of money there in circulation and indirectly the value of that money relative to the currency of other nations and regions.

The purpose of this extraordinarily complex system is to let us humans, not Nature, control the amount of money available in each separate economic entity, i.e., in the world’s various nations and the EU. The conservation of money still obtains, but it’s up to fallible human beings in each jurisdiction to enforce it. (More on this point later.)

The last century’s painful spasms taught us what happens when conservation of money breaks down. If there is too little money, commerce and trade suffer, just as Bryan understood. If control of natural resources and trade (through tariffs) makes some nations feel threatened, they may go to war. Stripped of their ideological pathologies, that’s precisely what Nazi Germany and Imperial Japan did. Economic conditions were a far more important motivator of that horrendous conflict than most historians admit.

It may be too much to say that scarcity of exchange was a dominant cause of World War II. But it is fair to say that it, combined with tariffs, protectionism, and military control of natural resources, was. The open, global free market of today, with its freely adjustable exchange rates (except for China), obviates those particular causes of war. At least we humans have learned something at the cost of 50 million dead.

But what William Jennings Bryan feared is only half the story. The scarcity of money against which he inveighed is a far less common phenomenon than plenitude.

Why? Well, to most of us, money seems like a good thing. Everyone wants more of it, especially the politicians, central bankers, private bankers, currency and securities traders, hedge-fund managers, and economists who now control how much there is. So there is an irresistible and very human impulse to violate the principle of conservation of money on the upside. The danger that Bryan feared turned out to be much less fearsome than its opposite.

We all know now what happens when there is too much money. Inflation results. Too many dollars chase a limited number of intrinsically valuable assets, such as food, clothing, housing, cars, airplanes, medicine and computers. So everything gets more expensive. People on fixed incomes (especially pensioners) get poorer because their fixed incomes buy less. People borrow too much because they hope to pay back their loans with cheaper currency as it inflates. Savings suffer, because everyone wants to spend money now, before it loses value.

This same phenomenon―too much money―works in two ways. When it happens slowly, we call it “inflation.” When it happens quickly and affects only a few assets, we call it a “bubble.” But either way, it’s a disaster. And either way there are much the same effects: some people get poorer, everyone borrows too much, savings suffer, and normal financial prudence goes out the window. The recent asset bubble in housing and mortgages nearly destroyed the world’s economy, and we may not be through it yet. Stay tuned.

What Has Happened since 2008

To understand what is happening now, you have to understand how we’ve kept things under control since Bretton Woods. Since then there has been no gold or other precious-metal standard to keep us on the safe path of conservation of money. Preserving this essential principle and avoiding inflation has all been up to us, i.e., the fallible human beings who control our national, regional (for the EU) and global financial systems. In our country, that’s the Federal Reserve Bank, nicknamed the “Fed.”

The most important thing to appreciate is how hard it is know what is the “right” amount of money to conserve. If you have too little, you can hobble commerce and stunt economic growth. That’s what William Jennings Bryan taught us with his “Cross of Gold” speech. But if you have too much money, you get inflation and asset bubbles. If these economic horrors happen in a powerful culture like Germany’s or ours, they can have terrible effects indeed. There are reasons why Japan and Germany (after China) are now the most prudent and cautious cultures with their money.

It would be wonderful if there were some simple equation, like Ohm’s Law in electronics, to calculate the right amount of money to conserve. Just collect the necessary data, put them in your computer, press a button, and voilá, you would know what to do.

But there isn’t. And even if there were such a formula, we wouldn’t have enough reliable data to use it. Every national economy―let alone the global economy―is just too complex. The National Oceanographic and Atmospheric Administration (NOAA), with its huge supercomputers, is doing a far better job of predicting global and regional weather, but even it can only do so a week or two in advance.

So what central bankers have done for half a century is a like a law-abiding driver cruising down the road with a broken speedometer. He wants to obey the speed limit, but he can’t easily tell how fast he’s going. He has to monitor his speed by watching indirect effects, for example, what happens to other cars. If he starts passing them, he slows down. If they start passing him and honking, he speeds up.

Just so, central bankers watch two observable indicators of proper conservation of money. The first is inflation. If the cost of everything starts to rise, they know to ease up on the gas pedal and reduce the amount of money and credit in circulation. If prices start to fall, the economy falters, and people become unemployed, they step on the gas.

The second indicator that central bankers watch is floating international exchange rates. This approach is more like the other cars in our broken-speedometer analogy. If people in other countries see your currency as less valuable, it probably is. That means inflation is nigh, because your currency will buy fewer things, at least abroad. If your currency goes up relative to others’, and you consequently have trouble selling your wares abroad, you may be conserving money too much and risking unemployment at home for lack of exports.

Preserving conservation of money without ever knowing exactly how much to conserve is an heuristic, seat-of-the-pants exercise, based primarily on these two indicators: inflation at home and currency exchange rates abroad. It is an art, not a science. (How China does it without one indicator—currency-exchange-rate signals that it blocks by its pegging its renminbi currency to the dollar—is another mystery entirely.)

But what’s happened in the last few years is something entirely new, which has complicated the process immensely. Until recently, central bankers controlled the amount of money under conservation, using these two reliable indicators. Because they controlled the sources of domestic currencies and the primary determinants of domestic credit, they had a pretty good idea of how much money and credit (a proxy for money) were in circulation.

Then along came so-called financial “innovation.” “Innovative” private financiers, entirely beyond the control of central bankers, created new forms of money. And they did so without a thought for the venerable principle of money conservation.

To understand this point, it’s helpful to review the evolution of money in human history. It all started with shells and beads. Then it evolved to gold and silver. All these things are tangible. You can see them and feel them. Even the paper money now still used is tangible. Clever modern technologies, including multicolor printing, specialized paper, holograms and watermarks, make paper money hard to counterfeit; but it’s still tangible.

In contrast, the vast amount of money in circulation today is not tangible at all. It’s entirely abstract. It’s electronic records in banks and brokerage houses. It’s signed agreements on ordinary paper and their electronic images: things like mortgages, car loans, business loans, and the few remaining stocks and bonds actually printed on paper.

You might not call these things “money,” but they are. They fit our definition of abstract instruments of economic value far in excess of their intrinsic practical value as paper, electronic records, or magnetic domains on a hard disk drive. So when our private-sector financial masters of the universe created the derivatives that nearly brought the entire global economy down, they were, if effect, creating a new form of money.

Indeed, that was their very purpose. They “sold” their new form of money to the authorities (at least those who were paying any attention at all) with assurances that these new instruments would create greater “liquidity” and thereby facilitate mortgages and home purchases that otherwise would not occur.

Isn’t “liquidity” just a fancy, modern term for “money”? The derivatives the innovators created and sold were therefore to be a new form of currency, used to increase commerce in housing and related financing. In effect, the private financial innovators were selling the authorities a form of fool’s gold with which to expand the money supply, without regard to conservation of money.

To be sure, the new form of money was highly specialized. Only financial institutions could use it as a medium of exchange, and it pertained primarily (although not exclusively) to housing and mortgages. You couldn’t use this new form of money to buy a hamburger, tank of gas, or wide-screen TV.

But the new money’s specialized character was only a small saving grace. If the private bankers had issued new generalized financial instruments in the same amount, we would have had generalized hyperinflation to match the Weimar Republic’s, followed by a crash to rival the Great Depression. As it was, we just had a hyperinflated bubble in real estate and mortgages, whose bursting caused multiple effects on credit markets that nearly (but not quite) brought down the global economy.

What happened next confirms this analysis. Through the Federal Reserve, our central bankers acted exactly as you would expect them to react to a flood of new money that grossly violated the principle of money conservation. They quarantined it.

They did so by buying a controlling interest in the failing banks and other financial institutions (such as AIG) that owned it and putting it aside. They could do so at a reasonable price because the flood of new money had upset the economic system, no one knew what it was worth, and many suspected it was worthless. At the same time, the Fed “bought off” most of the “owners” of this new money (the banks, both investment and commercial) by opening the Fed money window at a near-zero interest rate, giving them free money with which to restore their profit margins through less risky business.

A second way to appreciate how the derivatives amounted to new money is to look at the numbers. Estimates of the total face value of derivatives involved in the meltdown range as high as several hundred trillion dollars. (Yes, that’s trillion, with a “tr.”) In contrast, the total value of real estate in our nation is about $42 trillion. Talk about leverage! How else would you describe novel abstract financial instruments that created “value” amounting to several times the value of the underlying assets but as “new money”?

No wonder the Fed doesn’t want to be audited! Its leaders know that when the numbers come out, two facts will become obvious. First, the private sector, entirely without adult supervision, created a parallel financial universe that amounted to a specialized form of alternative currency. And it did so without regard to the universal principle of conservation of money that had occupied and troubled macroeconomists and political leaders since long before William Jennings Bryan.

Second, once the Fed had failed utterly to foresee, supervise or avoid that debacle, it picked up the pieces by quarantining the new money so it could re-establish the principle of money conservation, quietly and without much public notice. But in an economic system in which private property and private contract are sanctum sanctorum, it had to bribe the owners of the new money, to the tune of tens of billions of dollars, in order to do so.

The public surely won’t like this story when it comes out. Politicians of both parties will have a field day, pointing their fingers of blame and recrimination. But the fact is that, once the debacle occurred, the Fed did well in quarantining the toxic new money and re-establishing the principle of money conservation. The alternative would have been a whole new specialized currency totally divorced from real economic value, and therefore from reality—a “loose cannon” in the financial system like those that repeatedly plagued the nineteenth century.

Conclusions

Unlike the derivatives themselves, the moral of this story is simple. We humans no longer use shells, beads, silver, gold or even paper as our principal medium of exchange. We use abstract intangible records in various computers and electronic systems. These records include every form of agreement and instrument capable of occurring to the fertile imaginations of people motivated by the prospect of obscene riches. All of these intangible records can and do serve the same purpose as money and therefore can become indistinguishable from money in economic effect.

Throughout human history, the trouble with money has been regulating the amount in circulation so as to obey the law of conservation of money. That amount must be just right, neither too much nor too little. What is “just right” depends on the society’s state of economic development. It is constantly changing and is devilishly hard to determine in the abstract.

Like driving that car with the broken speedometer, setting the right level of money is a job for expert, disinterested public servants with superb education and incorruptible character, free from political influence and private self-interest. In short, it is a job for central bankers and no one else. In our country, that’s our Fed.

To the extent the current financial reform legislation fails to incorporate these principles, it will only postpone the next financial catastrophe. It could be a double dip of this “Great Recession.” It could be another burst bubble and crash a few years down the road. With global financial systems so stretched by the present predicament, it could even be a second Great Depression.

Whether any of these disasters will actually happen, no one can tell. But one thing is certain. Leaving the venerable principle of conservation of money in the hands of self-interested private parties oblivious to that principle is no way to handle a monetary system based on abstractions, whose only real currency is the trust and confidence of the people and their international trading partners. If that dereliction of central-bank duty happens again, another financial catastrophe is virtually certain. The only question is when.

To avoid such a second catastrophe, Congress must give our Fed all the authority it needs. It should have the power to preclude and to regulate the development of new money equivalents (i.e., new financial instruments) of any sort. It must have the power to forbid their use without its own prior approval, in order that it be able to perform its vital stabilizing role in maintaining the conservation of money.

The Fed should also have the power to require the terms of any new monetary instrument to be standardized, published on the Internet, and observed scrupulously by all parties engaged in commerce. It should be able to monitor the total amount of new instruments outstanding, find out who owns them, and have the power to suspend or curtail their use. Finally, the Fed should be required to analyze and report publicly, at least semiannually, the effect of any new instruments on the conservation of money and the financial system generally.

In a national economy that recently attained the dubious distinction of deriving 41% of its profits from the financial sector, we don’t need new types of money. What we need is to calibrate the money we’ve got more effectively to our economy, applying the principle of conservation of money that we began to understand 114 years ago, with Bryan’s “Cross of Gold” speech.

People who grow things, invent things, make things, and perform services create economic value. Money is just a means of trading in the value they create. It is a tool, not an end in itself. Any nation that makes money an end in itself―let alone ignores its conservation and therefore its relationship to real value―is begging for historical oblivion. And as our recent catastrophe amply demonstrates, such nation is likely to realize its death wish sooner and more suddenly than anyone can imagine.

The President and BP’s Disaster

Some readers may be disappointed that I have not yet commented on the BP Oil Spill. The reason is simple: I have little to say. The Spill is a terrible, avoidable tragedy. The longer it goes on, the worse it gets. The silver lining in the cloud is that it might, just might, get more people to re-examine a stupendously stupid national energy policy that has lasted thirty years too long.

I hate to seem uncaring, but the Spill is at worst a regional tragedy. Failure to solve our financial problems, as discussed in the post above, would be a national or global tragedy. It could put us into a double-dip recession, a replay of the Great Depression, or permanent third-world status. So however much it hurts to see innocent birds dying in chemical goo, whether and how soon we get financial reform right is infinitely more important than the Spill to our collective future.

What did evoke a strong response from me was Charles Blow’s column in the New York Times today, recommending that the President improve his “spin” game by getting emotional. Here’s my reaction to that suggestion:

I am sick and tired of hearing and reading people beat up on our President, even with the best of intentions.

Two months ago I was in a foreign country, proudly telling my colleagues that I thought we might have a chance to avoid becoming a third-world country because bare-minimum health-insurance reform managed to pass the House by three votes. Skilled, well-meaning politicians (including four other presidents) had tried for a century, but only the President’s leadership succeeded.

In the last two months alone, the President has had to deal with the following crises, in rough order of importance:

1. A near financial meltdown in Europe, still ongoing, occasioned by fear of default by Greece, possibly followed by Portugal, Spain, Ireland and Italy;

2. The sinking of a South Korean ship by a sick regime headed by a deranged leader, who has nuclear weapons and appears willing to do anything to insure his son’s succession as the world’s worst tyrant;

3. A clumsy attempt by Brazil and Turkey to insert themselves into longstanding, delicate efforts to solve the “Iranian question;”

4. An increasingly precarious political situation in both Afghanistan and Pakistan, as corrupt, incompetent and extremist elements (including the Afghan president and his brother) push back against progress made with our blood and treasure;

5. The complete systems failure of our electronic securities markets, in the so-called “flash crash,” which after several weeks no one has come close to explaining; and

6. An attempt by an inept, homespun terrorist to blow up Times Square.

It’s not as if the President is coasting along and taking it easy. In a mere sixteen months, his hair has started to turn grey.

And with good reason. Virtually every institution in our nation, with the possible exception of our military, has been neglected, misled or mismanaged for thirty years. Now the bill is coming due. Yet there is still a substantial minority of people (and a filibuster-capable minority in Congress) who think all this is government’s fault, and that everything would be fine if we just drowned our government in a bathtub and turned our affairs over to benevolent and supremely competent corporations like BP.

As for the oil spill itself, Coast Guard Admiral Thad Allen―self evidently the most intelligent and capable on-the-scene, on-screen manager―has said the federal government has no assets and no expertise to stop the oil flow. What part of no assets and no expertise don’t people understand? After thirty years of letting Big Fossil control our nation’s energy policy for their own profit, what would you expect?

And you expect our President, who runs just one of government’s three branches, to solve all this in sixteen months? Get a grip!

Already the President has apologized for not doing the only thing that any president could have done, namely, clean house at the Minerals Management Service more quickly. He apologized even without any strong evidence that his doing so would have made any difference.

The oil spill is indeed a terrible tragedy. But if you want someone to blame (besides BP and MMS), try looking in the mirror. Every one of us is guilty for failing to drive less, refusing to buy more fuel-efficient vehicles, and failing to demand a rational long-term national energy policy, even if it might cost a bit more in the short run.

As for emotional tone, please, please watch a few British movies. Maybe they’ll help you understand that people with reserve, like the President, don’t have to tear the scenery to care deeply.

UPDATE: 5/30/10 Today, the New York Times' columnists all piled on. Maureen Dowd, Frank Rich, and even Tom Friedman (although he had other points as well) all seconded Charles Blow. They all averred that things would get much better if the President would just find his inner Hulk and stomp and shout a bit.

Then the followers of Glenn Beck, the member of Congress paid and threatened to tow the party line, the ideologues who’ve wanted to drown government in a bathtub for thirty years, and the folks who dislike the President (consciously or unconsciously) for no other reason than the color of his skin will suddenly wise up and listen up. Are these pundits serious?

By now it should be obvious to anyone who can think straight that a failure of government to regulate and manage was a primary cause of our economic meltdown and an important contributing cause of the Great BP Oil Spill. Yet Big Banking and Big Fossil want folks to believe that things would be much better if only government were even less intrusive than it has been for a generation.

As far as I can tell, the only people who believe that are people (including Republican members of Congress) who’ve been well paid to believe it, people who’ve been taught it for thirty years and are too old or stupid to think for themselves, or people who tend to follow the guy (it’s always a guy) with the most certitude and the loudest voice. Unfortunately, there are a lot of such people, and the Limbaughs, Becks and Pauls of the world are getting an unprecedented number of them to vote.

For better or for worse, we live in a democracy, and there are no intelligence tests for voting. So the only way to change our rapidly declining national glide path is for more people to wise up. If a global financial meltdown and the worst oil spill in U.S. history won’t accomplish that, then it will undoubtedly take a series of even greater shocks.

The President can abandon his true character and stomp and shout all he wants, but only more hard experience will change these stubborn minds. Unfortunately, the rest of us will have to suffer right along with them.

So get ready for a double-dip recession, whose shape will match the monicker of our worst president and the one who reduced right-wing ideology to patent absurdity for anyone who can think: Dubya.


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