Fire’s on Fire

By Marc Salomon (with help from Brian Eno)

Editor’s Note: Mr. Salomon wrote this article December 29, 2007.

November 23, 2008

Baby’s on fire/Better throw her in the water/Look at her laughing/Like a heifer to the slaughter

The year 2008 represents potential for a moment of transition for the world as the economic and political fundamentals created by US policy are conspiring against its originators in a way that seems both irreversible and globally beneficial. Whether 2008 will rank with 1848, 1968 or 1989 as grand moments of global change remains to be seen, but 2008 will see the beginning of the end of the US as a global superpower as we know it. The only real question is how far and how fast with the US empire fall?

Baby’s on fire/And all the laughing boys are bitching/Waiting for photos/Oh the plot is so bewitching

Considering the political chicken after the economic egg, the implosion of the FIRE economy, the persistently rising price of energy and the very real prospect that the Euro will become more attractive than the dollar as global reserve currency systematically undercut the bases by which North Americans have been able to enjoy the domestic benefits of superpower. Combined with the global political trend away from superpower polarity, these economic determinants bode further ill for the future financing of the unitary superpower.

Rescuers row row/Do your best to change the subject/Blow the wind blow blow/Lend some assistance to the object

Finance, Insurance and Real Estate segments of the economy are so interrelated that they are considered as a single economic sector and as rise together, so they decline in unison, especially when incomprehensible designer investment vehicles are linked across segments. The generation of interest from home loans, premiums from insurance on those loans and homes, and rising valuations of was the vapor off of which the FIRE economy has run since Reagan killed the manufacturing sector and Bush I outsourced it at the altar of “free trade.” Currently, all three sides of the triangle are in troubled times. The the intricate interrelationships they share exacerbate the risk and expose them all to each others’ faults. Financial institutions cannot tell the good loans and incomprehensibly connected boutique financial instruments from the bad, and along with the insurance companies appear under-capitalized in the face of a declining real estate market with its multi trillion dollar ARM crisis, amounting to a huge rotten egg which what is left of the economy will need to swallow somehow.

Photographers snip snap/Take your time she’s only burning/This kind of experience/Is necessary for her learning

Economically, with the failure of the tight money monetary toolkit as a reliable lever of control, the US economy is at a moment similar to the introduction and failure endpoints of the Keynesian era in the early 1930s and late 1960s, or the endpoints of the Bretton Woods era of fixed international exchange from the mid 1940s to the early 1970s when Nixon de-pegged the dollar from gold, moments where failing old tools and techniques must be replaced by newer, more effective approaches to keep the economy from running aground. The problem is that the economy is so complex, interrelated and enormous, with capital so liquid that any approach would require massive amounts of centralization, coordination and flexibility, heresies under current economics. Ticking the interest rate up or down every few months is no longer sufficient.

If you’ll be my flotsam/I could be half the man I used to/They said you were hot stuff/And that’s what Baby’s been reduced to…

Probably due to our presence on the down side of the peak oil curve and both instability and uncertainty caused by the oil war fueled debt, the price of energy has risen to historically high levels. Yet domestic inflation figures do not tend to reflect the true bite because the “volatile” elements, the ones that reflect inflation, are always stricken from and are not reflected in official publications. Economic decisions made based on faulty data lead to inefficiencies and needless risk. What is reflected, on the other hand, is the plummeting value of the dollar which doubles the whammy when domestic buyers are paying historically high prices for imported goods with an historically devalued currency and this puts added strain onto an import economy. Had the US retained a manufacturing sector, it would counter those strains by selling goods for hard currency, but as per “free trade” and globalization doctrine, the free market made that policy decision for us and we are rid of a high value-added manufacturing economy.

Juanita and Juan/Very clever with maracas/Making their fortunes/Selling second-hand tobaccos

The ability to project economic, military and political might has been the main reason why the dollar has remained the currency in which most international trade in key commodities (petroleum) is denominated since the decline of the Soviet Union and the appearance and rise of the Euro opened up other options. A significant portion of the value of the dollar has evaporated, the military is pinned down by low-tech desert clans and tribes, and the US is viewed as increasingly out of touch with its own allies and trading partners politically due to Israel/Palestine and arbitrary aggressive oil wars. Amidst this, a space is opening for key holders of US debt such as China and petroleum producers who fear the US as having designs on their independent future to put their own interests first and begin to denominate transactions in Euros. If this were to happen, the US would not be able to finance its lavish consumption by floating infinite debt, rather would have to repay existing debt in hard currency and “pay as it went” forward in Euros and we would need to consume less as a result.

Juan dances at Chico’s/And when the clients are evicted/He empties the ashtrays/And pockets all that he’s collected

Politically, the US has squandered its advantages after the end of the Cold War and post-9/11 to the extent that multiple poles of power have developed in direct challenge to US designs. The US habit of using military, political and economic power to coerce extraction and importation of raw materials, especially energy, has proven an equal opportunity antagonist. Thus, the US has successfully united its enemies against the further pursuit of what it views as its entitlements of birthright through economic and military force. An independent Russia is resurgent. China’s economic ascension is apparent. Latin America is in open revolt, although it appears the CIA continues to be active in Mexico, Venezuela and Bolivia. Disingenuous intervention in needlessly brutalizing the Israel/Palestine conflict unilaterally on Israel’s side, combined with ruthless petrol politics, has alienated much of the Islamic world. These antagonistic international positions are generally supported across what passes for a domestic political spectrum, irrespective of mainstream political party. China, Europe, Russia, the Islamic world and Latin America are rapidly homing in on a loose coalition generally supportive of a multi polar world, developing regional development and cooperation institutions in direct challenge to US impositions. What form all this takes remains to be seen, but it is clear that the US will be end up as one of many, nowhere near the first amongst equals.

But Baby’s on fire!/And all the instruments agree that/Her temperature’s rising/But any idiot would know that.

Who knew that the greed and entitlement hubris of the conservative corporate elite would do more to hasten the decline of the American Empire than any gaggle of leftists or anarchists could ever dream? But from this vantage point, it appears that the fundamentals in the domestic economy – and the global political realm – are cooperating to decertify the US as a military and political superpower while leaving us with the speculative frothing which has passed for a functioning domestic economy over the past two decades, slitting the throat of future military resource grabs. When the cost of importing raw materials rises and can no longer be paid in debt, the standard of living will decline here and military intervention abroad will become much less sustainable. And that is good, because the mindless consumption paid for out of fantastical appreciation in housing values has driven the economy into the ground, while threatening the ecology and US gunboat diplomacy, required to sustain consumption, has mauled and enraged the world. As the US declines, one might imagine it a chronic inebriate, pissing himself, living on a layer of cardboard in a doorway, drunk, angry at what was but is no more, only armed with tens of thousands of thermonuclear weapons.

FCJ Editor

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