Bearish

Bulls and Bears. They’re animals – I almost wrote wild animals but bulls (male cows with testicles, and maybe also horns?) are domesticated, despite their reputation for violence. They’re also sports teams in Chicago, where they are refered to as Da Bulls and Da Bears. It was kind of exciting to me the first time I heard someone in Chicago say “da Bears” in that unconcious, this-is-really-how-we-talk kind of way.

Bulls and Bears are also representations of market forces – the first time I had this explained to me was standing behind a coffee shop counter in the Cow Hollow neighborhood of San Francisco, by an older man with an Australian accent. A bear market means that prices are headed down, and a bull market is when prices are going up. If you’re bullish on something, that means you think it’s value is going up, and if you’re bearish, well, you’re a pessimist. Bear traders engage in what are called “short sales” – meaning that they make deals to deliver some quantity of a stock at some specified future time at a price lower than the presently prevailing price of that particular stock. The idea is that the price will go even lower than that, and you’ll recoup the difference.

I suppose the bear and bull metaphors are what Keynes meant by “animal spirits” – although I’ve never heard a trader say that, probably because traders hate Keynes.

At any rate, I’m feeling especially pessimistic at the moment regarding the national political situation here in the United States. The recent debacle over the AHCA, the bill that would repeal and replace Obamacare, put forward by Paul Ryan in the House of Representatives, demonstrated that that the Republican party does not even remotely have it’s shit together. They’ve been agitating over repealing and replacing the ACA for seven years. Shortly after the failure of the bill, the word coming out of Washington was that President Trump was ready to just move on to the next thing. Seventeen days into the legislative process, he just said “Fuck it.”

Now, on the one hand, all this might be taken as good news for those fearing the reprecussions of this most recent election. Turns out the winners were all talk, no action. They complain endlessly, but they can’t actually get a plan together, nor do they have the fortitude to carry it out. Eventually something will come up that requires competence, and then Nancy Pelosi will become the de facto head of state. On the other hand, what I think marks the AHCA failure as seriously bad news is that it means that Republicans can’t get their agenda done through the normal process, so they will simply turn to alternative measures. And I think I have a plausible idea of how that might play out.

It’s all pretty simple. The debt limit, which was suspended back in November until March 15th of this year, will need to be raised sometime this summer. If it isn’t, at some point the Federal government will simply run out of cash, and then payments that come due will simply go unpaid. If this happened, it could mean an international crisis the likes of which the world has never seen. That the United States would not pay interest on it’s loans on time and as expected would have untold consequences in international finance. US Treasury Securities – that is, the Federal government’s debt – is the a strategic asset held in banks all over the world. A default on just one particular piece of this debt would necessitate a revaluation of assets held all over the world. But in the meantime, the Republicans in the House would have the bull by the cahones – when the bankers (and everyone else) plead and beg them to raise the debt ceiling, they’d start making demands. Although they wouldn’t be made as demands – they’d simply be stated as requirements for lowering the long term trajectory of US debt obligations. And then they’d butcher the welfare state. Social Security, Medicare, Medicaid – these programs would be immediately and drastically cut, if not abolished altogether. At last the Republicans would put an end to “out of control” entitlement spending in Washington. And they would have a perfect alibi – they would say that those cuts were necessary to put the country on a secure footing. Meanwhile, the “dismantling of the administrative state” (quote from White House chief strategist Steve Bannon) would proceed, and much of the apparatus of governance would disappear. The EPA, the BLS and the BEA, the NIH, the CDC, the SEC, and so on and so forth. Economic data would become the property of private banks. Heck, the economy itself would become largely privatized, and democracy would become little more than a dumb show.

The important thing is that all this would be accomplished outside of the normal process, as quickly as possible, and on account of the crisis.

Now, that might sound really bleak, but in some ways this scenario is not as bad as it sounds. There would still be services for the poor – charities would become larger and more important. And there would still be regulation – contracts would continue to carry legal force, lawyers and the judiciary would still play an important part in the daily operation of business and production. I don’t think it would be as dystopic as one might imagine. On the contrary, I think a lot of people would work very hard at obfuscating the differences, and claim strenuously that nothing had really changed. The so-called developed world become more like the developing world. It’s only a move of tense – from past to active. Surely that’s the way forward?

As far as I know, I’m the only person even suggesting that this could happen at all. So if you’re worried about it, don’t be. I’m a nobody, and if all the smart people out there aren’t sweating this, it seems reasonable to say that this is probably just me being too pessimistic for my own good. Nevertheless, I maintain that a course of action such as that described above, is not all that far outside of the realm of possibility.

There would be, I suppose, a brief period of terrible suffering. People who currently dependent on government to support medical treatment, housing, food, and so on, would lose their support, and many people would probably die as a result. But a year or two later, it would simply be a memory, to be reinvented as morality tale about the dangers of dependence on government. The real losers in this case would be the middle class, the great majority of whom would be transformed into paupers. The collective memory of their former affluence would be a subject of the bitterest resentments, and would render political cooperation impossible for a generation or more.

But hey, what do I know?

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