Reality Check

July 15, 2015

By: Kelly Diamond, Publisher

I was watching some sort of documentary on space. Fascinating stuff! I’ve never been much of a science person, but when laid out in simple terms, I do find it enthralling. Anyway, turns out space is incredibly brutal. Nothing about it says, “Life is welcome here!” No. It’s not welcome. In fact, by all accounts we really shouldn’t be here. The conditions under which life is possible – never mind sustainable – in this galaxy are so precise and so unlikely to converge, that the fact that we are here on this soaring ball in space protected by nothing more than several layers of gases is quite unbelievable.

So somehow not only did life take hold… animals and people happened.

I watched another documentary on animals in the wild. Seriously, I watched a lion eat a zebra while it was still twitching. Earth’s life is only slightly more forgiving than space, but not by much. And let’s be honest, if lions eating twitching zebras is gentler than space, it kinda sets the tone for what we are dealing with here.

Human beings are, as a species, weak. We are relatively hairless, we are small, we certainly aren’t the strongest or the fastest, our teeth and claws are dull. We’re physically pathetic and have no business being here, save ONE thing: our ability to reason. We have the gift of foresight, we understand cause and effect, we can create plans because we can anticipate, we can create contraptions that can supplement or replace our own brute abilities (or lack thereof).

And so, here we are, living in a galaxy that wants nothing more than to suffocate us, on a planet that would otherwise have us for breakfast and never think twice about it.

People then organized themselves into civilizations. And we graduated from the bear and lion being our greatest predator to ourselves being our greatest predator.

But with every sophistication the human race has introduced, it was, and always will be, subject to the laws of reality. And the reality is, there are consequences for the things we do or don’t do; not necessarily bad ones, but effects just the same.

Economists have figured out, for instance, the relationship between supply and demand, what causes boom and bust cycles, and the consequences of central planning and central banks. 10 year olds figured out that if they don’t have enough money they don’t get the toy. (It would seem some 10 year olds grow up only to forget that invaluable lesson from their childhood and oddly wound up in politics.)

I watch various countries’ headlines cross my feed and read about their governments’ respective activities and policies. It is either like watching a bratty 13 year old or an unhinged ex-boyfriend. The former is just annoying, while the latter is scary… but neither are operating in anything resembling reality.

In one ear, I’m listening to Greece say it’s not fair they should have to pay their debts; in the other I’m hearing about China trying to manipulate their stock market in response to the drop they saw a week ago.

Greece should be embarrassed it resorted to calling the terms they agreed to “onerous” and making an attempt to circumvent their debt obligations through that loophole. For some reason it doesn’t want to be held accountable for what a different administration obligated them to. THEN it has the nerve to hold today’s Germany accountable for reparations from 1940’s Germany.

The EU has been far more tolerant than I could be as a private individual or business having lent out such a large sum of money. I actually heard someone argue that the EU doesn’t “need” Greece to pay back the debt as it is rich enough to absorb it. They are already making something like 3 or 4% interest off the money.

Reality check: Anyone with a credit score as piss poor as Greece’s getting anything other than a payday loan at 500% is unheard of, so the mere fact that Greece got a second bail out, at some paltry interest rate, unto itself is unreal. That it wants to be forgiven that debt takes more than imagination but a special kind of mushroom.

Greece will eventually need to learn that it cannot have the toys if it doesn’t have the money. Life doesn’t work that way… at least not for very long. At some point you must pay the piper.

As for China, I expected better. But pride got the better of them, and they thought they could keep up the act. I say I expected better because despite the economic disaster ahead of her, they had a tremendous boom in industry and overall development.

No sooner did its supporters finish saying how wonderful China is handling its economy – heralding it as a paragon of controlled free markets (LOL!) – did the rug get pulled out from under their central planning manipulations. They were playing a sophisticated game of Go, but it would seem their pieces are, as they say, “Atari” – or having limited options on how to get out. It is the equivalent of “check” in chess… but the game isn’t with anyone other than market forces.

America had its Industrial Revolution, a stock market crash, and a Great Depression. They will have to decide whether to continue to emulate America or not. America dragged out her depression unnecessarily for 12 long years trying to manipulate its way out of their situation through various market interventionist polices that failed – and continue to fail, I might add.

China will need to get into the ring and do a few rounds with reality as well since it refused to read one history book on the American economy. She isn’t the slowest wildebeest in the herd. That’s why other countries are being picked off first. But at some point, the lion of reality will catch up. Monetary expansionism isn’t sustainable. Keeping interest rates artificially low, increasing liquidity, and high levels of spending can only go for so long. And China knew this, which is why it sold off its US Treasuries and slowed down buying US Treasuries. It couldn’t continue its cheap presence forever. It deflated too much, and needs to re-inflate.

Politicians and dictators might be above their own man-made laws, but they aren’t above the basic laws of cause and effect. They aren’t above the cyclical nature of the market. They aren’t above the consequences of contrived and artificial manipulations. Greece can no more continue to write checks from a bankrupt account than China can keep up with its intricate web of shady dealings and jimmy rigging. (This link is an elaborate explanation of China’s precarious situation, and well worth the read.)

I don’t say this from a position of exception or exemption. Hell, I’m reliving the 90’s right now with a Clinton running against a Bush for the presidency again! Alternatively, we could be looking at our own Alexis Tsipras in Bernie Sanders! The US is being propped up by a petro dollar and a large debt based army. The US will also have to contend with reality and stop kicking the can down the road. If it can ever learn its lesson, and when their day of reckoning will come is yet to be known. For now, the US witnesses the folly of Greece and China, and waits for its number to be called.