[I gotta make this quick. I lifted Ace's key while he was sleeping one off in the alley behind Seamus's Irish Pub. Before I start going through his shit to see what's pawnable and what isn't, I wanted to post a little piece that was prompted by Doctor Zero's essay "The Dreadful Equation". Anyone who narcs me out gets his ass busted.]

Evolutionary biology adopted the metaphor of Lewis Carroll's "Red Queen" in Through the Looking-Glass to explain the necessity of organisms adapting to ever-changing environments. Every organism must evolve to keep pace with other organisms in their ecosystem to maintain their evolutionary fitness. In other words, you have to run very fast just to maintain you evolutionary position. Losing your evolutionary "fitness" means losing out to (or becoming lunch for) fitter organisms.

This concept works in economics as well. Money (and other financial instruments) are really only batteries, a way of storing energy -- if that energy is not husbanded carefully, it can "bleed away" and be lost to entropy. But since additional energy is required to maintain that existing store of energy, it becomes a problem of efficiency and scale: how you do get more out of the system than you put in? What makes it all worthwhile? "Invisible hand" free-marketeers believe that maximum efficiency in the financial system is gained when masses of people, acting in their own self-interest, make the myriad of small decisions that drive the economy. It leads to the wisest and most efficient use of the energy available to the system. But no market can be "pure"; at some level regulation must be enforced to prevent fraud, abuse, or systemic "illnesses" that could take down the system. These regulatory systems are net-energy consumers -- they do not add to the system, but only feed off of it. If they make the system more efficient so much the better; that leaves more to be returned to the investors. The hard part is making sure that your regulatory system does not overwhelm the returns-generating capacity of the system.

In other words, if you can't get more out than you put in, what's the point?

Money, like life, is a wasting resource -- if you don't use it, you lose it. It degrades over time. Put five dollars under your mattress for ten years and it will be worth much less when you take it back out. Put it in a bank where it gain gather interest as a result of being productively invested, and you can double or triple your money. In finance just as in life, you cannot beat the Red Queen's justice: you must run, and quickly, or lose out to those who will run.

But you can only do so much; your ecosystem must be able to process your inputs efficiently as well. This is the problem: when the ecosystem fails, all the individual energy and ingenuity in the world won't help much. When an ecosystem fails, the energy is lost to entropy (or redirected to some other, worthier, enterprise).

This is the problem confronting the American (and much of the developed world's) economy right now. We are trying to draw far more power out of our battery than we actually stored. But we are able to perform a feat of legerdemain that Mother Nature cannot. We can draw on future energy to serve the needs of the present. This future energy is called debt. We have found a way in essence to pull energy back in time and feed our voracious financial batteries with it.

Many technocrats in the government apparently believe that this energy is limitless and can be drawn at will from the future. To them, debt (future energy, or potential energy) is just as good as real money (actualized energy from labor and ingenuity in the past and present).

Except it isn't. Debt isn't money. It's a promise of future money, to be paid at a reasonable rate of return. It's a burden put on the future to serve the needs of the present. It's a wager that the future will have the capacity, the ability, and the will to cover the deficit. In terms of energy, debt is a lien put on the labor and ingenuity of future citizens.

In an honest society, debt is sometimes a prudent thing: debt allows for investment that builds even greater wealth. This kind of debt is an investment that society makes in the producers. (This is a contest of skill more than chance; so gambling is the wrong term.) Sometimes the investment fails, but more often it pays off splendidly. The system ends up with far more energy than it began with, and that's the name of the game. The Red Queen is defeated (if only for awhile).

But the debt our government is accruing is not that kind of debt. This is a drunkards' debt, the debt incurred by a spendthrift and wastrel.

The Drunkard is the dissipated scion of a wealthy and respected family, which is why his credit is still honored in the town. But the scion is not the man his father was. He drinks. Drunk, he lies and cheats and steals and is generally an embarrassment. Money was loaned to him out of respect for the family, but the publicans and tradesmen begin to wonder if the debt will ever be repaid. No one wants to be the first to point the finger of blame -- the family name still rings out -- but many are privately wondering what will happen.

The Drunkard owes so much money that a default on payment would drive some out of business; to insist on payment would only expose both debtor and creditor to embarrassment. Better, maybe, to just let things float awhile. See what the future brings. Everyone knows this is akin to hoping for a deus ex machina to descend from the clouds and solve their problems miraculously, but it seems preferable to tackling the problem at hand. At this stage, embarrassment is worse than impoverishment.

As time goes by, though, The Drunkards' debt becomes the shame of the town, a millstone around all necks. His wife and children go hungry and without clothes, and are threatened with eviction. The good people of the town give what they can in charity to The Drunkard's family, but this is an additional burden on their own resources. Some will say, "Let the Drunkard and his family starve!", but wiser heads know that the Drunkard's debt threatens the very fabric of the town. If the publican shuts his doors so will the brewer and the baker. The seamstress and the blacksmith will suffer from want of trade. The town will die an inch at a time. No matter that the Drunkard was the agent of disaster; the shame and the blame will fall on every head.

No, the town must be saved. The deus ex machina will not appear. All must labor -- to no very good purpose of their own -- to erase the debt of a sot who neither knows nor cares of the hardship he has imposed on everyone else. It deflates and defeats the producers, and makes them question the very purpose of their lives. Is maintaining the honor of the town worth living in indentured servitude for years and years? Is it worth sacrificing the small comforts of your wife and children? For whom do you labor? For yourself and your family, or for an oblivious drunkard? It seems to be an abrogation of that sacred compact between society and the producers.

And yet...it must be done if the town is to survive. There is no other way.

The Red Queen cares nothing for our troubles. Everything moves: the oceans, the air, the earth itself, the stars in their courses. The Red Queen demands that we move also, change with the times, or die. The word "fair" is not in her vocabulary.

For whom do we labor? For the poor? The poor, as Matthew tells us in his Gospel, will always be with us. For the lame, the aged, the halt, the unlucky, the lazy, the dull, the slow? Each must look at his own conscience and be guided by his own God (or no God at all, as the case may be), but it must be a choice, freely made. Charity extracted at the point of a gun is not charity at all, but theft. Charity cannot be imposed from outside without violating that essential societal compact that a man labors first and foremost for himself and his family. His choices are his own. This compact implies risk and the possibility of failure. There is no upside (wealth, happiness) that does not carry the risk of a downside (failure, ruin). A smart man knows that risk is a fundamental property of life. A prudent man risks in accordance with the possible reward, and generally prospers.

The Drunkard is neither smart nor prudent. He is tired of the Red Queen's race. The Drunkard squanders his wealth. He doesn't invest; he gambles, and often with borrowed money. He loses and borrows more. He incurs debts he knows he cannot repay. He loses the ability to feel shame or remorse, and is prone to a sniveling self-pity at where his own actions have landed him. He beats his wife and neglects his children. To the extent that he thinks or plans for the future, it is only so far as to scheme for his next drink -- who can be squeezed or cajoled for a few more coins. In this way old friends are turned into enemies, loved ones into strangers. No one loves a drunkard, though many are happy to help him spend his money when he has some.

The Drunkard stinks of failure and missed chances as much as he does of alcohol.

America is not yet an irredeemable drunkard, but the drinking problem is getting out of hand. We cadge money from friends and neighbors, blithely promising the wealth of children not yet born, in exchange for more liquor. We still have the capacity for shame, though -- or at least some of us do. We know that it is not too late even yet to pour the whiskey down the sink, clean up, and start to work off the debt. It will take a long time and a lot of thankless labor, but we can do it if we value the lives of our children at all. Or if we do not...why, we can borrow enough even yet to get pig-drunk, surrounded by other drunks singing our praises, until closing-time comes and we stagger out into the cold dark wondering how we are going to get home.

The Red Queen insists that we run, and that we run twice as fast if we want to get anywhere.

The Drunkard cannot run. He can barely walk. To him the Red Queen shows no pity.

Posted by: Monty at 02:57 PM | Comments (146)
Post contains 1780 words, total size 10 kb.

Hide Comments | Add Comment | Refresh | Top