More notes on the deleveraging economy…
The leverage we speak of is that set against your free time, your time to be human, your moments on this Earth which can either be spent enjoying your life or sitting in a meeting discussing the synergies arising from the company’s relationships with its vendors and customers, given rapidly changing technological interfaces.
You know: bullshit…
The leverage they speak of is also this choice, but couched in the obscuring discussion of consumer confidence; household, corporate, and public debt; and, complex financial instruments.
In fact, in all of this discussion of leverage there is only your free time.
Everything else can be measured in the moments you can be diverted from enjoying your free time to focus on your confidence as a consumer, your debt, and how you might be convinced to take on more of the latter to boost the former.
As we stated, our concept of leverage differs from that of economists in that they assume the debt incurred in a transaction whose completion is delayed indefinitely will eventually be paid in full with worthless, valueless, pictures of dead presidents.
Bear with us a moment as we peer into this dubious assumption – really, it will only hurt for about the rest of your working life.
Inspired by the Messiah, I decide it is time to trade in my clunker for a spanking new 2009 Toyundai Skeezer, which gets 44 mpg, and has a factory installed diamond-laced-thingamajig-doohickie-where-am-I-now, with built-in turbo-thrusters, and a halo ring.
Thanks to the debt guy at the dealership, I incur only $20,000 of debt for this new monster of fuel efficiency, and, thanks to the Messiah, the Federal government incurs an additional $4,500 of debt, which, according to economists, I will pay in taxes over time.
Of course, both my $20,000 and Washington’s $4,500 merely exist as dancing electrons on some computer in the basement of the Federal Reserve – but, no worry! I am good for it.
You see, I have a job: Every day I rise from bed, and commute an hour to a desk, where my job is to inhale oxygen, and exhale carbon dioxide – break for lunch – and continue the process in the afternoon until exactly 4:15 pm.
Rinse and repeat for five years, and the car is mine.
The economists are satisfied with this transaction, so I am satisfied as well.
There is, however, a small problem: I have just purchased a 2009 Toyundai Skeezer, which gets 44 mpg, and has a factory installed diamond-laced-thingamajig-doohickie-where-am-I-now, with built-in turbo-thrusters, and a halo ring, in return for five years of shallow breathing – interrupted by trips to the water cooler to discuss this weekend’s football game.
I get a car, the economy gets a lot of carbon dioxide.
Every week in return for several thousand shallow breaths, my employer gives me dancing electrons which exists mainly on some computer in the basement of the Federal Reserve.
I, in turn, send some of those dancing electrons to the bank which financed my loan, and they accept it as payment for the car loan.
On any normal planet – or previous period of human history – where people would not elect Sarah Palin as governor, nor blow up Afghan wedding parties to make a political point – the exchange of a bit of dancing electrons for a 2009 Toyundai Skeezer, which gets 44 mpg, and has a factory installed diamond-laced-thingamajig-doohickie-where-am-I-now, with built-in turbo-thrusters, and a halo ring, might seem like fraudulent transaction.
People on those planets, or, in those periods of human history, might object that the exchange is not only fraudulent and unacceptable, but also indicative of an unbalanced mind.
They might strenuously object that the exchange of some part of five years of shallow breathing for a 2009 Toyundai Skeezer, which gets 44 mpg, and has a factory installed diamond-laced-thingamajig-doohickie-where-am-I-now, with built-in turbo-thrusters, and a halo ring, is an economically unsustainable transaction; and, that an economy built on such exchanges is doomed to collapse.
At this point, an economist would step in and explain:
So long as this incurred debt is replaced by another, larger, quantum of debt, the chain of transactions where something is sold for nothing can continue indefinitely.
If corporate debt is not enough, we can rely on consumer debt, and, after that, international debt, and finally, government debt.
And, when we have exhausted all the sources of debt, we can rely on that little computer in the basement of the Federal Reserve, which creates money out of dancing bits of electrons…