Wednesday, August 10, 2011

Rioting in London

What's up with that? Conservative, secure England shouldn't have youths rampaging about, burning, looting, and beating in cities and shires. It mostly doesn't seem to be about race, although that was initially the spark that set things off. A lot of it's about plain old hooliganism - bored youngsters see a little anarchy going down and they want to get in on the fun, score a little loot!

But if you listen to these youths, such as the pair of girls interviewed by the media the last few days, it's more about class warfare. Even though merry old England is a might better place to come of age than, say Somalia or Afghanistan, the reality is that a lot of people are hurting there financially. Wages aren't going up, but costs of living are. Young people especially are having a hard time finding work. And just like many other countries these days (e.g. the US, Greece, Spain, Italy) governments are cutting back on their spending whilst contemplating higher taxes. Except, it is believed, on the wealthy.

And so the government of Britain, these youths and probably many other Brits believe, is all about looking after the rich and once again slamming the poor and middle class. These youths hate the government for this, and they smash and burn businesses in their own neighborhoods. Because anybody who can afford to have a little business is, in their minds, "rich". Well, hating the rich has always been a popular pastime everywhere just as it is today, even though there are about a half dozen better reasons for our economic ills these days other than the rich. But I'll never win that argument because hating on the rich is so universal, so let's just move on to the main point here.

It occurs to me that this sort of anarchy and violence, which happened a short while ago in Greece, is likely to become more and more common throughout the world in the coming months and years. The U.S. is more than likely going to be one of the many places this happens, and I'm concerned that the protesting and rioting and class warfare may end up being a lot worse than people can imagine. Call me an alarmist (once again), but here's my thinking.

It all goes back to issues and themes discussed in these blogs over the months. There was "The Party's Over, and People Don't Get It" back in February, which talked about how our excessive spending and our fixation with gross materialism were about to come to a screeching halt, even as power (and wealth) was shifting to other parts of the globe. Another problem, implied there but discussed in more detail in my earlier "Income Inequality in America" blog, was the sense of entitlement so many Americans (especially youngsters) felt. So they're just not going to accept that the party's over; can't conceive of it, won't "allow" it to be over. There arises a potentially very dangerous juxtaposition: unpleasant reality confronting unrealistic oblivion.

In April's "Train Wreck Ahead" I wrote about the near hopelessness of dealing successfully with the nation's debt, and even suggested that defaulting on that debt was no longer unthinkable. That actually almost happened on August 2nd, you surely remember. People would be fleeing the US dollar, getting into gold, silver, and the Swiss franc, sooner or later pulling out of the stock market and sending it lower, I suggested. Sadly, those assessments were mostly correct, with gold and the Swiss franc absolutely skyrocketing since (silver - not so much), and the stock market recently dropping with a vengeance. These are signs of a the wheels falling off of a dysfunctional world monetary system, an unraveling of key parts of the world's financial fabric.

Then in last month's "Debt and Money", the main point was that our government's attempts to deal with the debt issue were bound to be "a big negative for the economy". The big risk was that cutting back on government spending, while raising taxes, could very well push a wobbly economy back into recession - one that could easily be as bad as the 2008-2009 recession. The second point there was that the Fed would do everything possible to fight such a recession, which would tend to (again) push the value of the US dollar down. Translation: higher prices, inflation, even in a weak economy. Yuck!

The latest addition to all this angst is the implosion that is taking place in Europe right now. First, it was just the imprudent, silly Greeks and Irish; OK, maybe Spain and Portugal too. Now, Italy is on the ropes, having just accepted harsh conditions for a bailout by the European Central Bank (a la Greece a few weeks ago). And then today, news that France, formerly one of the stronger European economies, is experiencing financial "difficulties". And Britain itself isn't that much stronger than France these days. The bottom line is that Europe as a whole, about as powerful economically as the US, seems to be in even worse financial shape than we are!

With an unsolvable US debt situation given current political realities, an unraveling of seven decades of confidence in the US dollar, the lynchpin of the world's financial system, and equally daunting economic problems in Europe, more than a few respected economists and market analysts are talking about the possibility of a harsh new recession hitting worldwide. For the most part, this is without even considering the increased rumblings that China's economy, which is suffering from a whole different set of problems than western economies, is poised for a major crisis. Mark Zandi, chief market analyst for Moody's, hardly known in the business as a pessimist, opined yesterday that a recession is more than just an outside possibility at this point. If it were to occur, he added, it could be expected to be even more severe and longer lasting than the horrible recession we just recently stumbled out of, since it likely would involve serious economic issues (of varying types) in all the world's major economies.

Yet, there's hope. Former Senator Alan Simpson described our brightest spot this way in TIME Magazine recently: "We're the healthiest horse in the glue factory". A less politically-correct way to say the same thing is that the U.S. is winning the least ugly girl contest. So our dollar and our creditworthiness ain't what they used to be, but then whose is? Well, there's the Swiss, but their economy is so minuscule that they're not going to be able to accommodate the trillions of dollars of wealth looking for a safe haven. So maybe the US dollar will actually strengthen in coming months, as and if things worsen worldwide, then we'd be somewhat insulated from the economic chaos. And maybe we won't slip back into a nastier recession. Let us pray....

But back to where we started. The dollar's "least ugly girl" status and blind faith notwithstanding, the odds continue to favor harder economic times ahead, and lower standards of living for most Americans, if not the whole world. And to reiterate an earlier blog's judgment, life in this (possible) upcoming Depression will be much harder on Americans than it was in the 1930s. Back then - excuse me for saying so - people were a lot tougher; they had much less to start off with, and many were still only a few years removed from being pioneers or emigrants to this country. They were used to getting by on much less than we are today, so they sucked it up, toughed it out, got through it.

This isn't the 1930s, and Americans aren't the hardy pioneer/emigrant stock they used to be. They are, not to beat that dead horse too much, spoiled by decades of having it all and of being "entitled" to the American way of life as they came to understand it. That way of life had nothing to do with getting by on less, being unable to get a decent job, fending for themselves. Instead, they will look for - demand, actually - that somebody fix things, and take care of them. But there will be no quick fix and nobody to ride in and rescue them.

So many Americans won't suck it up, tough it out, and get through it. They will, I fear, strike out blindly against the injustice of a life without; strike out against the government, against the rich, against people of a different color or religion than theirs. There will be riots, looting, attacks on fellow Americans; leaders who share their anger will come to prominence, and many of them will not be good people with love in their hearts. This is what history tells us is likely to happen.

Once again, you should hope that my pessimistic self is wrong. I do. But at the same time, think about what you can do should these things come to pass. I do.

10 comments:

Anonymous said...

wow that was a great post. I saw a documentary that around 2012 the stock market could possibly crash. What do you think about finding a way to live sustainably in this country and all over the world. We have the technology. Maybe if we stoped using are energy on materialisim and channeld it towards innovative ideas.

Shane Jost said...

I would have to share your alarmist sense about the current economic situation. Our (America's) economy is not any where near in good shape, and I highly doubt it's going to get there any time soon. The most frightening thing that is posited by this essay I think would be the fact that we are doing better than a good portion of Europe. Lets face it, if we are the sharpest blade on the swiss army knife at the moment in an economic sense, then that is one dull swiss army knife. Sure, we might be able to cut a loaf of bread with the blade of our economic situation, but we can only barely do it, and every time we try the blade gets a little duller. The question I am left with most after reading this essay is: What are the Swiss doing that's working so well for them, and is there any way we could use some of these policies here in America?

Alexander said...

Rioting that is taking place in London by its younger population is not an isolated incident. It is occuring everywhere as can be seen int the "occupy" movements across the world. My feeling is that rioting is due to a number of issues: class warfare, materialism, overspending, ignorance. Class warfare is created because of the lack of jobs for today's youth. It's hard for many to accept why they have nothing and others have so much. Materialism and overspending are related. Today's youth, and society in general, is being raised with the "gimme", "it's mine," or "I deserve it" attitude that makes them think they are entitled to everything without even having to work for it. Also, the overspending issue is a non-issue for many because if they find themselves in a situation where they don't have the money to pay their bills, they can declare bankruptcy and be done with them. Lastly, ignorance is a cause because I think that many of today's youth are less infomred about world issues especially when it comes to finanaces. Rather than spending their time rioting, they should be in school learning.

Alexander said...

Rioting that is taking place in London by its younger population is not an isolated incident. It is occuring everywhere as can be seen int the "occupy" movements across the world. My feeling is that rioting is due to a number of issues: class warfare, materialism, overspending, ignorance. Class warfare is created because of the lack of jobs for today's youth. It's hard for many to accept why they have nothing and others have so much. Materialism and overspending are related. Today's youth, and society in general, is being raised with the "gimme", "it's mine," or "I deserve it" attitude that makes them think they are entitled to everything without even having to work for it. Also, the overspending issue is a non-issue for many because if they find themselves in a situation where they don't have the money to pay their bills, they can declare bankruptcy and be done with them. Lastly, ignorance is a cause because I think that many of today's youth are less infomred about world issues especially when it comes to finanaces. Rather than spending their time rioting, they should be in school learning.

Alexander said...

Rioting in London by its youth is not an isolated incident as can be seen by the "occupy" movements occurring across the world. I believe that the rioting is caused by many issues including: class warfare, materialism and overspending, ignorance. Class warfare is fueled by the lack of jobs for the younger workers. They can't understand why they have so little or nothing and others have so much. I can't understand this either when a Wall St. employee complains because his bonus was smaller this year than last year. Materialism and overspending go hand in hand. Today's youth is being raised with the "gimme," "it's mine, and "I deserve it" attitudes. They feel they are entitled to everything without even having to work for it. Also, overspending is partially fueled by credit cards. Today's society has learned the meaning of "bailout" and how it applies to them. When you overspend, declare bankruptcy and you will be free and clear without having to give up your goods. Lastly, ignorance is also a cause of rioting. Rather than spending their time on the streets causing trouble for everyone else, they should be at school learning the true state of the world's finances or even learning a job skill that will help them become more marketable and find a job. They need to understand that a job isn't going to come looking for them.

mayapapaya said...

The main reason why I enjoyed this essay is because, I rarely ever hear many stories about England’s economy or even just England in general in the news. To hear about rioting in London was surprising because I didn’t have much knowledge as to recent news in London. On the other hand it shouldn’t be very surprising because many other countries that were stated, US, Greece and Italy are facing similar situations because the down fall of the economies. It’s pretty ironic that the your essay was made in August 2011 and a statement was made about how the US will most likely face a similar situation like this one in London and sure enough only a few months later the “Occupy Wall Street” movement occurred throughout the U.S.

Ann Molin said...

Although you have a pessimistic view of how people are reacting/will react to the worsening economy, I like to think that it is possible for people to realize that they need to tough it out through the hard times until things get better. Of course this is an ideological thought, but I really do hope at least the majority of people, if not all, realize this. Maybe they won't change their thoughts soon or even soon enough to avoid a horrible downturn, but hopefully eventually they will. At least before we begin, as you said in the post, electing horrible leaders.

Anna Jandt said...

Your blog “Rioting in London” brings up many key points about the US and world economy and how it will affect everyday people. While reading this essay, I both agreed and disagreed with different things you said. This essay also made me wonder how major economies of the world have shifted since the posting of this blog back in August 2011. While the situation hasn’t gotten much better, many of the worst scenarios you imagined haven’t occurred as of now. We seem to be in a semi-stable position, but it is true that any wrong turn could send us plummeting into a major depression.
I think that we should try to strengthen the US dollar and that weakening it is a mistake. A strong dollar will help bring investment to our country, and stabilize economy, which would in turn strengthen the world economy.
I also think you are overestimating the violence, but I realize you are looking at the worst case scenario. There will always be a few individuals who resort to violence, especially when hard times encourage strife between people of different races, religions, political parties and economic classes. Though I find the worst case scenario to be a dark and unlikely future, it is always better to be over-prepared than under. If the world around us does end up going down the toilet, my advice would be to find a way to be self-sustainable before it reaches that point. Being self-sustainable would mean growing your own food, having your own water and energy source, and investing in all the little gadgets you think you could possibly need now, before it’s too late. Think ahead.

Anonymous said...

I do hope that riots emerge in America, they only seem to cause more problems. Hopefully Americans toughen up and face the economic problems before a depression occurs. An optimistic outlook would be great, yet who knows if it will happen. But one can't run away from the problem, push it to the side, because it will only get worse over time. I am left wondering how the Swiss seemed to be doing well in their economy (when the blog post was written).

Mischeila Scherkenbach said...

I really liked the points made about youth in America and their sense of entitlement, because it is so true. I also agree that it is important for people to realize that as the state of the economy deteriorates more and more, people will begin to act more drastically, even more so than simply protesting (i.e. Occupy Wall Street). It is also important to take note of the fact that solving the countries problems isn't going to happen without making certain sacrifices.