Plus ça change, plus c’est la même chose


 When Donald Rumsfeld, a practical imperialist
if there ever was one, took over the Pentagon,
he commissioned a study of how
ancient empires maintained their hegemony.
Might he more profitably study
how they lost all they had gained?

—Thomas Cahill

Dear Maridel, Dave, Martha and Jack,

America, by my reckoning, is fifteen years past its peak as a global hegemon. The important question is whether or not we will repeat the history of other imperial nations in other eras: The British at the end of the nineteenth century, The Spanish in the seventeenth century, Rome in antiquity, Athens, China, Persia, the Babylonians. You may argue that our nation is not an empire. Tell that to the citizens of  nations whose politics we have “managed” and whose resources we have exploited for the last hundred years.

Now, at our zenith, the comparisons with past hegemonies abound: Hyper-concentrated wealth, power and privilege. Political and corporate governance skewed with policies that magnificently enrich the elites and marginalize the rest. And the Achilles heel of all hegemonies: debt unimaginable. Without exception, our predecessors have ultimately succumbed to the burdens of empire and undergone massive restructuring and downsizing, imposing severe economic hardship on its citizens. I have no doubt that the same will happen here.

The two factors (intertwined) that guide my thinking are politics and inflation/debt:


A friend once told me she ran for student body president when she was in high school. At her dad’s suggestion, she told the students that if she were elected she would see to it that there was free pizza for all on Fridays. I don’t recall whether she won or not, but it is clear that her dad understood politics.

Government programs to improve the life of its citizens are good. They just tend to go on too long or expand too much. Eventually, they become unaffordable. I don’t know when the tipping point will be, but we are long past the day when entitlements, special interest programs and the inevitable “bridge to nowhere” political pizza parties are tolerable. The battle to eliminate these things is now joined. However it is resolved, there will be a lot of pain. Just look at Greece today. That is the direction we should expect to go in.


 Inflation, classically defined, is an extraordinary expansion of debt. The effect is to flood an economy with the wherewithal to buy stuff. This has happened in our time through the actions of our central bank-the Federal Reserve System. The U. S. Treasury issues bonds, the Fed buys them and, with the sole power to print money, pays the Treasury for them with printed dollars (deposits to the Treasury Dept.’s accounts) which then flow into the economy to pay for government expenditures. An expansion of government spending promotes a general expansion in the private economy, including private borrowing to expand businesses. Fine, if the economy is growing enough to produce growth in tax revenues to ultimately pay off the debt.

It has been a very long time since economic growth produced enough revenues to keep the government from operating at a deficit. The combination of growing government spending and growing debt, both government and private, has exploded of late (the charts are downright scary). An over indebted economy is struggling, too. To try to make things better, the Fed has lately bought bonds (mortgages) in the private sector, making deposits into the banks so that there would be liquidity to boost spending in the economy. It’s not working-businesses are too worried to expand, and are contracting instead. The result has been low interest money for speculators to run up the stock market. This is not likely to end well.

Deflation, the collapse of a debt bubble, is like a monster steamroller that flattens everything in its path. It is a fearful thing. That is why the Fed and the central banks of the world are trying so hard to stop its arrival. But, it’s too late. At this stage of the cycle, all their money printing is no more effective than pushing on a string. Deflation is coming, no matter what they do. We need to be aware of this.

What can we do? Not be surprised, for one. Be prepared to be resilient, determined to survive no matter what. The irony is that what we yearn for: certainty, security, abundance, tends to produce narcissism, entitlement and dissatisfaction. Do you know what a billionaire’s worst nightmare is? The guy that moves in next door has two billion.

Well, we don’t have that to worry about, so we should be grateful. I just want us to get through the next few years in good enough shape to leave the legacy of love to your kids.

Passing the Baton

Do you want to improve the world?
I don’t think it can be done

—Lao Tzu

All my love,


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