Suddenly, people have no faith in capitalism… the books have been checked, and it all turns out to be lies. A bank goes bust, then another bank goes bust… there is nothing you can put your faith in.
Going Broke with Money
“People just have no idea yet” said the businessman on the other side of the lunch table from me. “They don’t know what a recession or a slump really is. Sometimes I drive along the Long Island Expressway and look at all those people rolling along in their big cars. And I think, ‘You people don’t know what it’s going to be like.’ I remember those films of French refugees clogging the roads after the start of the Second World War. Imagine all those middle-class families fleeing the city when the big crash comes. Little carts piled high with Miro prints and parsons tables, and big house plants. Can you imagine it?”
We had been talking about inflation and recession and slumps. This was at the end of the summer, and the big rise in stock prices that people had expected to come with the arrival of Gerald Ford in the Oval Office had not taken place. The Dow Jones average was below 700. Interest rates were at an all-time high. Everywhere one looked, the sky was black with evil portents. Albert Sindlinger, one of three top pollsters in the country, whose polls are bought by top corporations and the White House, reported two things: first, nearly 60 percent of his daily polling sample across the country believed that bank collapses and large-scale bankruptcies would occur in the near future. The second thing Sindlinger reported was more personal: he was moving all his money into cash.
I asked my friend, a vice president of a large corporation, what he was doing with his money. “CDs,” he said. “I sold all my stocks and started buying ninety-day certificates of deposit. You get a 12 percent interest rate on your money.”
“What happens if those people in the Sindlinger poll are right, and the bank where your certificate is deposited goes bust?”
“Nothing much you can do about that,” he said. “Just don’t go to the same bank with all your CDs.”
We started talking about whys and wherefores. “I can’t see any specific reason why capitalism seems to be going on the rocks,” he sighed. “I mean, we all know about the energy crisis and the world shortage in raw materials and all that. But I still don’t understand it.”
This was my opening to tell him all about Kondratieff. When people start talking about downturns in the economy, recessions, and going broke, they start talking about cycles: the business cycle, the building cycle, the trade cycle. The Kondratieff cycle is in the cyclical big league. It lasts approximately fifty years.
Kondratieff, a Soviet economist who was executed in one of Stalin’s purges, analyzed European and American prices, wages, interest rates, and other indices from roughly 1780 to 1920. He found a pattern. To be exact, he found that what went up also went down. For 140 years, slump had followed boom and boom had followed slump. He found that the rises occurred from 1789to 1814, from 1849 to 1873, and from 1896 to 1920. The falls came in between.
No one has ever said that Kondratieff was wrong. No one, on the other hand, has come up with any really convincing explanation of why these ebbs and surges in the world economy should occur. But they do. And 1971, just like 1921, marks the beginning of a downturn — into Hard Times.
Ideally, the Kondratieff cycle should permit us to get a grip on things, brace ourselves for the worse that is yet to come. As Professor Geoffrey Barraclough of Brandeis University wrote in the New York Review of Books in the course of ruminations on the coming world depression, Kondratieff “forces us to view the current world situation in historical perspective, not as the outcome of a series of historical accidents caused by a glut of footloose Eurodollars, the greed of Arab sheiks, the cost of the Vietnam war, or the machinations of over-mighty multinational corporations (though al I these and other things enter in), but rather as a particular phase in a recurrent phenomenon, which has its parallels in the past.”
But then Barraclough gets to the nub of the matter: “If we accept the Kondratieff cycle, it conveys the frightening warning that we are only at the beginning of the ‘lean years’ and that we must suppose that things will get worse before they get better. To that extent the parallels often drawn between 1971 and 1931 are misleading, and so is the conclusion that, as things did not turn out as bad when the dol lar went off gold as they did when the pound went off gold in 1931, we are out of the woods. On the contrary, the parallel, if there is one, of 1971 is with 1921, when the boom which began in 1896 ran out and our comparative place in the cycle today is 1924, not 1934. Evidently there is still time, as governments fiddle and inflation grows, for another Hitler — or worse.”
Hitler or worse? Barraclough thinks so. Democracy is balanced on the premise that the bulk of the voters are satisfied enough with their lot to put up with existing social arrangements. If they start going broke, they get turbulent. They go on strike. They start to tear up all sorts of existing social contracts. They start to turn to strong men with answers to all of life’s terrible problems. In Germany in the Thirties, they turned to Hitler. In Italy they turned to Mussolini. Fascism did not simply go out of fashion at the end of World War II. No one needed it for a while, as the long postwar boom roared prosperously along. But now we are turning the corner into times of trouble. We haven’t, quite yet, arrived at the slump. We’re still inflating.
The main thing inflation does is diminish people’s belief in money. In the simplest way, they find that things just don’t add up the same anymore. We should take a look at what one of the greatest economic thinkers of the twentieth century, whose economic ideas Western governments have been using since the 1930s, thought about that.
Late in the autumn of 1919 John Maynard Keynes sat down in a pessimistic mood to write The Economic Consequences of the Peace. He was gravely disturbed at the outcome of the Versailles Peace Conference, where the Allies had exacted enormous reparations from Germany for starting and losing World War I. He thought these reparations would bankrupt the German economy and that out of the bankruptcy would come not only economic but political disaster. In a spirit of rational pessimism, he found it appropriate to evoke the views of the most successful enemy of capitalism.
“Lenin,” he wrote, “is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and lottery.”
“Lenin was certainly right. There is no subtler, surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which not one man in a million is able to diagnose.”
How we progress.
Intimations of economic catastrophe come in two guises: the unpleasantly particular and the menacingly general. The exact nature of the unpleasantly particular depends, naturally enough, on one’s station in life. For an old person in a ghetto, it comes in the sharp realization that the only form of nourishment he can afford is a tin of cat food. (And indeed, it was recently estimated that one-third of all the pet food sold in ghettos was bought for human consumption.)
For a middle-class couple it comes in many forms. To start with, everything goes up: food bills, school bills, fuel bills. A young couple tries to buy a house and finds they can’t get a mortgage, because banks are lending money out at 12 percent or 14 percent or 16 percent, while the legal limit that can be charged on housing mortgages by the banks is lower. Why should a bank lend money at this lower rate? Further, how can the builder afford to build the house in the first place? He’s had to pay more for his materials and more for labor. He has to borrow money, too, and that costs him more money. That’s why the building industry is in a shambles.
Another unpleasant particular: people find that their savings have dropped in real value. As Roger Kennedy, a vice president of the Ford Foundation, recently wrote in the Atlantic Monthly, a large part of the savings of many Americans has been taxed away when they weren’t looking, and it isn’t coming back. It’s been taxed away because, thanks to government spending, the money in the saving accounts just isn’t worth what it was when it was deposited.
Starting in the middle Sixties, the government printed money to pay for its debts that accrued from the costs of the Vietnam War and Lyndon Johnson’s Great Society programs. The dollar was devalued twice. This means that people had to pay more dollars for the same thing, more dollars for the same imports from abroad. The ripple effect in this downturn in the fortunes of the dollar spread through the stock market, where the price of the average stock on the New York Stock Exchange is now worth about half what it was in 1968, and then into the bond market. Bonds are the means by which corporations raise that part of their capital they have not raised by offering shares. When the interest rate on the bonds seems to be attractive, people rush out and buy bonds. But if government’s financial policy is to cut back on business expansion and investment and try to “cool down” the economy, money is made scarcer by raising the prime rate at which money can be bought or lent. The interest rates on bonds then seem less attractive and people stop buying them.
Worse and worse: savings-and-loan banks, by law, are pegged to a low rate of interest on the money they can lend. Depositors realize that they’ll make more money if they take their deposits out of savings-and-loan banks, where they may be getting 6 percent, and put them into certificates of deposit in a commercial bank, where the same money may earn 9 percent.
There are plenty of particular intimations of Hard Times. After a while the reader of the financial page will become familiar with them: the Gross National Product down 7 percent; housing starts down from 2.5 to 1.5 million. (This is the catastrophe in the construction industry we were talking about. Think of all the raw building materials that are not being bought; all the builders out of business; all the money that is not being lent; all the people who are not buying the houses that have not been built; all the offices that are not there for people to lease.) Then the prime interest rate goes up another half percent; short-term interest rates creep up toward 20 percent; the Dow Jones Industrial Index staggers down toward 600. Remember, too, that the Dow is merely the average of the earnings and share price situation of only thirty very large companies. It is no true reflection of the price collapse in hundreds of ordinary stocks. The typical stock has dropped 70 percent in value since the end of 1968. And when an ordinary stock collapses, it means that somewhere there is a business that is not able to raise the money it could in better days.
It is not difficult to find precise or dramatic illustrations of the dark days that have come. Let’s take the most famous symbol of vigorous American capitalism: General Motors. Roughly 300 mi Ilion shares in this business are held by the public. They are not held largely by institutions, but by a great many people. At the end of 1973 there were 1,306,000 million stockholders in GM. The shares are held in every state in the union and in ninety other countries besides. Of the preferred and common stockholders, 69 percent are individual accounts, and 20 percent are joint-tenant accounts. Seventy-eight percent of GM owners hold 100 shares or less. About two years ago the stock stood at eighty dollars a share. At the time of writing, it stands at forty dollars. This represents a loss to the stockholders of $12 billion. These people were not holding GM stock as a speculation, but as security. That’s a lot of security to lose.
After a while, the newspaper reader finds that particular bad news is qualitatively changed into a general portent of disaster. Prices no longer rise, they “rocket up,” stock prices no longer fall, they “plummet.” Interest rates “spiral.” Inflation no longer “creeps up” but rather indulges in a kind of frenzy of verbal gymnastics. It “boils,” it “soars,” it “gal lops,” it becomes “a run-away.” In short, it loses all control.
People start talking about confidence, and we discover that the stock market is all a matter of confidence. But confidence cannot carry one too far forward. It was predicted that on the day of the inauguration of Gerald Ford as president the market would rise thirty points. Actually, at the start of the following week, it fell ten points. Confidence was of little avail against the hard information that because of the midwestern drought, grain prices were going to rise, and because grain prices were going to rise, meat prices were going to rise and so on up the inflation chain. In such an agony of apprehension, people start looking round for reasons why times have got so bad.
We have all sorts of causes and prime movers available — some of them divine, and some of them human. Let’s take one fairly well-known eco-system of catastrophe, which can be laid squarely at the feet of Providence: the thoughtless behavior of the Peruvian anchovy. Year after year the Peruvian anchovy appeared in vast shoals off the coast of Peru, where it was promptly harvested by grateful Peruvian fishermen. Then one day, about eighteen months ago, the Humboldt Current (a cold, Pacific Ocean current, flowing north along the coasts of Chile and Peru) decided to go in a slightly different direction. No more anchovies. Even the CIA got worried enough to look into the matter, but it found that the anchovy migration seemed to be the work of some malign supernatural power. The net result was still no anchovies and a lot of bankrupt Peruvian fishermen.
But this meant that there was no anchovy fish meal to feed to chickens and cows in the United States. So those chickens and cows were fed on soybean. And so the price of soybean meal went up and up. All the fault of the anchovy — or rather the fault of God for mucking about with the Humboldt Current. The anchovies have since come back, but in smaller quantities than in the past.
But meanwhile God was busy on another front — in the Soviet Union, to be precise. What He did there, in 1972, was to cause a drought, and so the Soviet leadership, rather than indulge in normal procedures — telling the people to eat less — bought a great deal of U.S. grain. It was called the Great Grain Robbery. So soybeans, in the United States, had to stand in for grain. And because of the anchovy, or anchovy-lack rather, soybean was expensive. All this divine activity added up to one thing: inflation.
Last summer God struck again. He produced the worst drought in the Midwest in forty years. As the farmers looked at their burnt-out crops, and as the commodity traders looked at grain futures, and as meat dealers looked at the price of beef, they could foresee a whole series of unpleasant events, stretching all the way from bankruptcy to scarcity to rising prices to inflation.
Do these miseries have to afflict us? Naturally, the authorities would like to say no. Their speeches are littered with statements to the general effect that cloudbursts need not occur in high summer. For example, in 1965 an economic report by President Johnson said that “no law of nature compels a free economy to suffer from a recession or periodic inflations.”
But all you have to do is look out of the window and watch the rain. We do seem to be having something that looks like periodic inflation. We can, to be sure, produce a lot of reasons for it. Richard Nixon had his problems for a couple of years and in the meantime the economy went to pot. The king of Saudi Arabia decided to hoist oil prices. The oil companies decided to hoist oil prices. Al I over the world, countries started charging more for bauxite, coffee, sugar, and crucial materials.
Besides all these short-term causes that analysts drag from their sleeves to explain inflation, you have the fall-out from all those peasants who came tramping down the Ho Chi Minh Trail in the Sixties. Remember them? The U.S. spent over $100 billion attempting to drive them back up the Ho Chi Minh Trail. This expenditure abroad sent the U.S. trade balance into deficit for the first time in the twentieth century.
To pay for its debts abroad, the U.S. printed a lot of paper money, which did not reflect the real financial and trading situation of the country, and pi led it up in the central banks of the countries to which it owed money. After a while these countries started to complain that the U.S. was financing its war in Southeast Asia with worthless money.
So on August 15, 1971, President Nixon abandoned official convertibility, and currencies were permitted to float. This meant that the value of one currency against another was not fixed, and that they could rise and fall freely — within certain limits — according to assessments of the strengths of these various currencies. But this did not stop the outflow of dollars from the U.S., and central banks in foreign countries had to continue hoarding them since the alternative was to allow overvalued paper to circulate and weaken the local economy.
Imagine a forger with a bag full of dollar bills wandering up and down Fifth Avenue and occasionally rushing into a store and buying every luxury in sight. The storekeeper, watching the pile of bills transfer itself from the forger’s wallet to the till, would imagine himself to be enjoying the fruits of a good trading relationship — until he discovered that the forged bills would not buy much for him. Soon the forger would wreck the financial security of all the shops in the street. The avenues of the world economy are metaphorically crowded with forgers of various nationalities jostling and shoving their way through the crowds. The result is a depreciation of accepted values, and, eventually, inflation.
In the Sixties, one of the most assiduous forgers was the United States itself. In the end, President Nixon devalued the dollar and Mideast oil kingdoms suddenly found they were getting less money for their oil: so much less, indeed, that they began the embargoes and fuel cuts that resulted in the Great Energy Crisis of 1973. You may recall that, and how a great many prices shot up. You may also recall the actual increased cost of oil to the consuming nations — it came to around $90 billion, paid to the oil-producing nations. That did not help world trade or world inflation.
Of course the oil kingdoms had to do something with their huge new mass of money. There were, to start with, some simple things to do, like buying a lot of arms, but soon the pleasures of this began to wane, and such kingdoms as Saudi Arabia, Iran, and Kuwait began to look for sensible places to invest their money. Kuwait bailed out the British by agreeing to deposit billions in the Bank of England; Iran did the same for France. Then Iran said it was prepared to bail out Grumman, the American aerospace firm that makes planes which Iran might buy; at the same time Iran bought a piece of Krupp, the famous German steel firm. Within a short period of time we discovered that the Middle Eastern kingdoms had a lot of money invested in Britain, France, and the United States. This should be comforting, since it means that they have a serious stake in the system, but somehow it isn’t.
“Democracy is balanced on the premise that the bulk of the voters are satisfied enough to put up with existing social arrangements. If they start going broke, they get turbulent. They go on strike. They tear up all sorts of existing social contracts.”
First of all, those Arab billions tip the already shaky balance of the world money markets and financial structure a little more off-center than is comfortable. Secondly, it just doesn’t feel good to have the economy in hock to some Middle Eastern potentate. Americans begin to feel that things are going to hell in a handcart just that much quicker. They see the price of gas has gone up, so they don’t buy new cars; then the car companies raise their prices. They find that the price of airline tickets have gone up because airlines pay more for fuel, so they don’t take a plane ride; then the airline has to get bailed out by the government. In the end the average American thinks that the Depression has come back again after all -and this general feeling trickles right through the whole social and economic system. Meanwhile the government goes on printing money and suddenly we find that in terms of the 1940 dollar the 1973 dollar is only worth thirty-one cents.
There are two images etched in the historical consciousness of twentieth-century man. One is the picture of Germans wheeling their salaries around in wheelbarrows in the inflation of 1923; the other is of an anguished crowd beating on the doors of the local bank. The doors are closed. In his book The Great Crash John Kenneth Galbraith wrote: “When income, employment and values fall as the result of a depression, bank failures could become epidemic. This happened after 1929. Again, it would be hard to imagine a better arrangement for magnifying the effects of fear. The weak destroyed not only the other weak, but weakened the strong. People everywhere, rich and poor, were made aware of the disaster by the persuasive intelligence that their savings had been destroyed.”
Banks collapsing? Could this happen in 1975? It could indeed. Here is one reason: at the moment, a vast amount of money, estimated at around $130 billion, is floating around the world looking for a profitable home. This is money that multinational companies are moving from one nation to another to take best advantage of exchange rates. It is money that countries with surplus earnings — like Kuwait — are putting out to earn even more money. It is the juice of the international money market. And, of course, banks trade in it, borrow from it, exchange it, reinvest it, and in general do what all banks do in the end, which is to carve their share from the middle.
Some banks, such as the Franklin National Bank in New York and the Herstatt Bank in West Germany, make mistakes. Both of them were operating in foreign currency markets in the following manner: they would buy, say, a billion dollars’ worth of French francs in the confident expectation that the value of the franc would rise, and that therefore they would be able to sell these billion dollars’ worth for an extra two or three hundred million dollars.
But then, because fixed exchange rates are a thing of the past and currencies are able to shoot up and down, the franc did an annoying thing — it fell. Net result: long, very long faces at Franklin National Bank and Herstatt. Herstatt actually went broke, and since it was dealing for many American banks, including the Chase Manhattan, the Chase ended up losing a lot of money, too. That’s called a chain reaction. The Franklin Bank had to be bailed out by the Federal Reserve, in the largest rescue operation in U.S. banking history.
The reason for this was simple: since it was no secret that the Franklin Bank was in trouble, a good many people who had their money on deposit there quickly thought of a great many other places where they would rather put their money. like under the bed or in the little piggy bank on the mantlepiece. Some people call this a panic, although you might think of it more reasonably as common sense. The Fed doesn’t like panics, because once people get the idea that their money is not safe in banks, then the whole credit system gets unstuck. Banks lend out, or guarantee, more money than they actually have available. So if all a bank’s customers arrived in front of the counter at the same moment shouting for cash, a large number of them simply could not get their money. The bank does not have it.
Last fall a brokerage house, the First Albany Corporation, ran a series of statistical tests on fifty major banking corporations. On the average, between 1964 and 1973, these banks increased their deposits by 186 percent. They increased their loans by 241 percent, but their net worth only went up 116 percent. Put simply, this means that the banks did more business but lent out nearly twice as much new money as they got in; and their real value, in terms of the assets they actually held, lagged behind. Worse still, the aggregate amount of short-term borrowing by the twelve largest banks rose, between 1968 and 1973, from $5.3 billion to $30.8 billion.
The First Albany Corporation arrived at this conclusion: “It appeared to us that an increasing number of banks, over the last decade, have pursued the conglomerate objective of constantly increasing their bottom-line earnings per share, which they sought to attain by diversification into ‘bank-related’ businesses, and in their banking operations, by lending money first and then buying money to support the loans.”
If this doesn’t make the hair rise on the back of your neck, then nothing will. Clarify things for yourself by imagining a bank not as a solid-looking structure with solid people hoarding your money behind solid doors, but as a rickety-looking storefront where a shifty-eyed type gets money off you by promising to give you your stake back ‘plus a little extra. Then he lends your money out to another fellow who promises to give it back to him plus a little extra. Then you come back and he has to borrow the money from someone else because your money by this time is just about as far from the bank as it can get. Meanwhile the second fellow goes broke, and your bank has to borrow a little more, and one day it all goes pop… and the little storefront falls down, and the shifty fellow goes to jail and everyone else goes broke. Big bankers don’t go to jail, of course. But their clients still go broke.
Some people — many people — hear about the Franklin Bank, or even the Herstatt Bank, and they get the Great Fear. Suddenly they think of their bank as that rickety-looking storefront. When Albert Sindlinger rings them up, sixty out of every hundred tell him that a bank collapse is what they are really worried about.
And as the Great Fear rages, the search for security becomes like the medieval search for the philosophers’ stone. For instance, people feel happy enough in a blue-chip stock, like Polaroid. Then Polaroid drops from 143 to 18 — within a year. So they hear about stocks in gold companies and they find that the price of gold stocks has doubled and that they can’t afford them, so they have to buy shares in a marginal gold company, where the shares may go up. But the broker says that the shares may go down, because this marginal gold company has not actually found any gold yet. Then they buy 9 percent Treasury bonds, and this seems safe. But inflation appears to wipe out any actual profit. In the end an anxious nation comes more and more to resemble that couple in Hawaii who thought the end of the world was coming through pollution. They had all their teeth removed to avoid dentists. They had their appendices removed to avoid doctors. They traveled to a small atoll with ten years’ worth of canned food. And stayed there to sit it out.
They had an atoll. But most people do not. Most people have to listen to government spokesmen calling for “restraint.” This means nothing. They hear more talk about “shake-outs,” and “bottoming out,” and “taking up the slack in the economy and letting it out again,” of “turning on the monetary tap and turning it off again.” They hear talk about old time religion and leaving the economy alone.
Things are getting worse, and all this talk adds up to one simple thing: no one knows what to do. Everyone has his little list of panaceas, or his little set of theories.
Alan Greenspan, for example. Greenspan is the Chairman of the Council of Economic Advisors. He is a devotee of Ayn Rand, who believes that capitalism is not only sound, but a sound moral system; and the less tinkering around with it you do, the better. When the rhetoric is removed this means Greenspan has no clearcut solution.
It used to be commonly agreed by economists that things would steadily get better, that “growth” would feed the hungry, clothe the poor, help the aged, sustain the jobless. That was before there was a crisis. That was when we had “growth.” You don’t hear so much now about growth. What we are left with is inflation and the threat of huge unemployment. So what those economists are really trying to say, without provoking a positive stampede to the gangplanks, is that things are not, foreseeably, going to get much better, and may well get worse.
When things got bad in the past, people used to talk about socialism, or some form of control of business. That was before the age of the military-industrial complex and the multinational corporation. These two fine emblems of our present social arrangements are simply too large and too powerful to allow that kind of light-hearted talk. They do not tolerate strict controls over their actions; the arms manufacturers are not going to beat their swords into plowshares and produce useful goods. Rather more likely is an unemployment rate of 8 percent as the economy deflates.
There have been two obsessions in science fiction and spy fiction of the last few years. One was the kidnapping or disappearance of the president of the United States. These premonitory fears and fantasies finally came true in the actual disappearance — in terms of resignation and disgrace — of Richard Nixon. Another image was of a country devastated by the irruption of beings from another planet. The science fiction films used to show abandoned towns, cracked pavements, weed-clogging gardens, with no human presence but the hero. In the midst of the boom of the Fifties and Sixties this disturbing image of disaster cropped up with frequency. It was thought that this devastation might be wrought by a nuclear bomb.
Now, as we inch our way along the Kondratieff cycle, we can see that the enemy might not have been anything so simple as a nuclear raid. It was rather the skull beneath the skin of our own system. One day, when things have got really bad, you might be able to drive down the New Jersey turnpike and see the smokestacks of the largest concentration of capital on earth standing clean, over cold furnaces. You might drive along an ordinary highway and see just the rusted signs from the quick-food joints and all the fringe paraphernalia of late capitalism that will be the first to go.
This is a vision born out of the Great Fear, to be sure. Nothing so dramatic is likely to occur. The cold smokestacks are more likely to appear first in South Korea, or even in Japan, where things will get worse quicker. Things won’t just steadily go downhill. There will be little upturns along the road. Besides, one thing Keynes took from Lenin as a model has not come true yet. Keynes said that “profiteers” who do well in times of crisis become objects of hatred to the bourgeoisie no less than the proletariat.
How different from here, where we may be living on the edge of the Great Fear, but not — as yet — on the edge of any Great Anger. What do you think will happen when that comes, too?
Is all this meant to scare you? Yes, indeed. As with most things, Western capitalism runs to a large extent on credibility: banks working, people paying up on time, people keeping their commitments, people not lying about their financial figures.
Then suddenly people no longer believe. A big corporation has fixed its books to make its balance sheet look good and keep people buying its stock. Suddenly someone else looks at the books and it all turns out to have been lies. A bank goes bust. Then another bank goes bust. Suddenly there is nothing you can put your faith in. The big balloon bursts, or at least it shrinks to the size of a small apple, just about the same size as the ones people used to try and sell on Wall Street forty years ago.
As you may have noticed, this article appeared on the Penthouse pages in December of 1974. As you may remember personally, the whole “Wall Street Thing” nearly crashed and burned in 2008, requiring nearly a half-a-trillion dollar bailout by the government. Nearly twenty years after that debacle we now have a national debt of over $36 Trillion, and a new administration coming in that may well add heavily to that. Should you wish a bit of graphical bravery, take a look at the U.S. Debt Clock and watch the numbers move. More scary than any Halloween movie, that. … Then we suggest maybe getting a fancy ice cream as you ponder the per taxpayer debt of over $270,000 — as of this writing, of course. So are things really getting better?
