The fiscal cliff is a harbinger of the earthquakes to come

Fri, Jan 11, 2013, 00:00

For a few days there, we heard nothing but fiscal cliff. The phrase sprang suddenly out of nowhere but seemed like it had been around for an aeon.

Economics reporters loved it, and deployed it in a way that implied its meaning was obvious and universally understood. The listener was left with a sense of having fallen asleep, perhaps for years, and awaking to a story that had moved into its final chapter.

“Fiscal cliff” has connotations of apocalypse, but also a sense of realism. It seems to summon up a fundamental truthfulness about where we have spent the past five years, evoking a system at the end of the line.

Disappointingly, it turns out to have a more restricted meaning, particular to the US economy. It is as if, from some instinct of self-preservation, the system deliberately concocted the phrase for the purpose of disposing of the ideas it brings to mind – like a winter bug vaccine which provokes minor fever for a day or two while inoculating against the deeper implications.

Here, the talk is mainly of green shoots. Another year, another narrative. The calendar clacks on, so it must be time for Act Three, when, as we know, the cavalry comes over the hill.

But there is no cavalry. There is only another hill, and behind that another, and not a horseman in sight to cast a cold eye on our situation.

From the outset of the present crisis, there has been a determined effort to perpetuate a misdiagnosis. Most of us, most of the time, swallowed whole the idea that what was happening was a cyclical dipping – hence “recession”, “depression”, “slump”, words oddly comforting because they seem at least to place the problem in a diagnostic history.

But there persisted this deeper feeling that what was happening was unprecedented, was neither cyclical nor run-of-the-mill, but was instead a profound systemic failure deriving as much from the hearts and minds of human beings as the rattle and hum of the system.

Occasionally, someone would say: this is not an economic crisis, but an anthropological one. But no one seemed to know what this meant, or to have enthusiasm for pursuing its logic. Because the problem was regarded as the preserve of economists and accountants, the focus remained on the system as understood hitherto. Months became years, and the same discussions and arguments recurred as though on a loop. If we did as we were told – we were told – the green shoots would come.

But reality cannot be cheated. There are certain iron laws that must be obeyed, like “One plus one equals two”. Economics equals arithmetic. My granny, Mary McGrath, understood that she either had to produce something herself or, failing that, produce something someone else wanted so as to conduct an exchange for the things she didn’t have. All economics is barter in one form or another. Magic it is not.

But our age has tried to deny this, seeking to cheat the iron laws of reality, stealing from the future while insisting that there’s a painless way of satisfying the misplaced and misunderstood desires of the present.

For these purposes, it created a money system without grounding, in which the means of exchanging and storing wealth were farmed out to private operators, who generated what purported to be money but was really an alias for debt, offered cheaply to the public in lieu of escalating incomes.

This caused the financial costs of existence to become inflated out of all proportion, while economies lost virtually all capacity to store value against the vagaries of the future.

Every euro minted in the European economy comes into being as a debt, which, from the moment of its generation, is subject to interest, taxation and other incidental charges. Since there is no way of generating financial resources other than this money-as-debt model, it is impossible for all of these escalating charges to be met by everyone upon whom they are levied.

So, all of us scramble around competing to scrape together handfuls of money to pay ever-increasing tariffs from a diminishing pool of money. Wealth, we awake to realise, has become nothing more than an ongoing capacity to keep your debts paid up, which becomes harder and harder. This is not merely unsustainable, but terminally so.

The politicians who preside over this scenario come in many guises, ideologically and temperamentally. But they have one thing in common: they know they won’t be around all that much longer, relatively speaking, and therefore have no motivation to replace this disintegrating apparatus with something even marginally less insane.

They share with the bankers and stock-jobbers a simple desire that the present system, however derelict, splutter onwards for another while.

The game is to avoid going over the fiscal cliff while refusing to face the possibility that eventually we’ll have to run for our lives as the ground disintegrates beneath our feet.

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