Letters @ 3AM

F-USA (Continued)

Letters @ 3AM
Illustration by Peat Duggins

Date: 2107

Subject: The decline and fall of the former United States of America (F-USA)

Subsection: The Wages of Delusion

The people of the former United States persistently saw themselves as idealists. (We will deal with the ironies of their idealism at a later date.) However, in their glory days, others revered, envied, and resented this people for another aspect of their character: relentless pragmatism. At their best, theirs was a principled pragmatism; at their worst, it was otherwise. Either way, their pragmatic "good old American know-how" prospered to an extent the world had never seen. In 1776, the former U.S. was a mere colony of farmers and merchants, confined to North America's eastern seaboard; by 1914, it had spanned the continent to become the richest and most dominant industrial-agricultural power. Their belief systems and idealisms may have been propulsive, goading them to achievement, but that achievement was the result of an unparalleled pragmatism.

How they lost their pragmatic gifts is, perhaps, a subject for psychologists. It's enough for us to examine results of that loss, particularly in the area in which this country was once brilliant: money. In retrospect, it is incredible that so practical a people lost the ability to distinguish between something as basic as two separate economic practices: commerce and speculation.

In the interests of brevity, we'll confine our examples to banks. Until well into the 20th century, most banks in the former U.S. were locally owned and operated. A merchant, farmer, or skilled laborer, using measurable collateral (which might include the banker's knowledge of his or her character), applied for a loan at reasonable interest, then spent that loan locally, benefiting the community. The bank, profiting from the interest, in turn loaned more money locally, also benefiting the community. This was, more or less, honest commerce, which is, in its essence, trade – a means by which work was done and goods and services were made available. Mostly, these goods and services were not superfluous; they concerned the basics – food, tools (in its most inclusive meaning), clothing, shelter. Quality was a value. Materials were durable, and objects of all kinds – from typewriters, say, to houses – were built to last. Work, too, was a value. To do even humble tasks well and responsibly was generally considered worthy of respect. If this portrayal sounds too rosy, we need only remember that every human system from time immemorial has been rife with excess, greed, pettiness, exploitation, and cruelty; this one was no exception. Nevertheless, this form of commerce, at its heart, involved supplying what is necessary to an orderly society, and necessity makes for a kind of baseline of sanity.

Time passed; things changed. How they changed is all too well-known; no need to go into detail here. Suffice it to say that, by the end of the 20th century, the bank was no longer locally owned. It had become a "branch," as it was called, of a much larger tree. The health of the community was no longer necessary to the health of the bank. (We are using banks only as a convenient example; the same became true of many enterprises.) Commerce was still important, for life had to be sustained, but speculation became more profitable. A citizen applied for a loan, but it was no longer the same loan. The banks "packaged," as the saying went, many loans and sold those loans to larger entities; these entities, in turn, used the packaged loans as collateral for grander investments and speculations. In this system, banks (and other enterprises) profited from the debt of the community. It was in the interest of banks (etc.) to keep the community in debt. The more debt the community incurred, the more the banks (etc.) could package and sell that debt to larger entities, and the more the larger entities could prosper by speculation. Gradually, speculation replaced commerce as the central source of wealth.

For large-scale speculation to be possible, small-scale debt had to be enthusiastically encouraged. So-called "credit cards" became available, even to those of humble means. But when one buys on credit, one is, in reality, taking out a loan. More accurately named, a credit card was a loan card. As such cards became common, people were borrowing from banks on everything from groceries to lawn mowers. After loan cards became the norm, their interest rates became usurious – 18% was commonplace; 20-odd% was not unheard of. The citizens of the former United States became, in effect, little profit engines for entities beyond their knowledge or control. Everyone was in debt. The so-called "stock market" became a worldwide system of speculation, which thrived on the average household working incessantly to manage its debt.

This was no longer commerce. This was no longer about necessity. This was, rather, a speculative system that fed upon individual desire to create collective helplessness – a citizenry so mired in financial obligation that a baseline of sanity became a sentimental memory, and they knew only a baseline of anxiety. Anxious people stampede toward any illusion of safety. Thus the brave, resourceful people of the former United States gradually became an easily manipulated herd, always stampeding, fearful, suspicious. Commerce thrives on stability. Speculation thrives on instability – not extreme instability but a kind basic built-in instability, in which, for instance, the workforce (up to its highest levels) cannot count on job security, and even people with high salaries can suddenly be in danger of losing their homes.

To illustrate the difference between their economy of commerce and their economy of speculation, we have only to look at homeownership. When the former U.S. had an economy of commerce, a skilled laborer worked for one company most of his life and could buy and own a family-sized home in a reasonable amount of time. This, in fact, was the prime embodiment of what was famously called (minus the derision attached to that phrase today) "the American dream." As the economy became essentially speculative, home prices gradually rose out of the reach not only of skilled laborers but of many professionals, such as teachers. In this new system, even those with enough credit to buy a home could not pay off their mortgages for many decades. They were not really homeowners; they were home-renters, renting their homes from the bank and vulnerable – for most of their lives! – to losing them through any serious setback. At the same time, they were buying many goods and services with their high-interest loan cards. Which, again, makes our point: An economy of speculation is an economy of debt, through which the few profit hugely and the many live with daily, often intense, insecurity.

It is no wonder that the physical and mental health of this people sank to levels that were among the lowest in the developed world, in spite of living in what they sincerely believed was a "rich" country. In fact, it was anything but. Rather, it was a country in which lofty business entities played with immense amounts of "paper" capital based largely on the ownership of others' debts, while the life of the common citizen (even when outwardly affluent) revolved around the servicing of debt. In their economy of commerce, extreme debt had been considered shameful. In their economy of speculation, debt that any previous society would have considered extreme was (for most) inevitable. Incredibly, the greatest debtor in the world, the greatest debtor in history, was the government of the former United States! By the early 21st century, it borrowed and owed hundreds of billions, and, in fact, by then it functioned only through the financial largesse of other nations. To call such a country "rich" is delusional, yet this was the delusion shared by most of its citizens and leaders.

In possessions, they appeared wealthy. In fact, measured by the extent of their debt, their net worth was much less than zero.

When climate change became too disruptive to ignore, two consequences felled this country: Its speculative economy lost much of its "paper" wealth and could not shift in time back to the commerce of necessities that the crisis required, while its lender nations needed all their resources just to cope – leaving the former United States too broke to meet the crisis. Its central government became irrelevant, able only to decree, but unable to act. Gradually, region by region, people began to realize that they were on their own.

(To be continued, eventually.)

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