One of the most impactful things I've ever done is to visit the Holocaust Museum in Washington D.C. I was a young adult and for some reason was a little on edge about the thought of being guilt-tripped with gruesome images and a healthy dose of America-bashing in a narrative of how we failed to stop it. What I got was something more chilling and eye-opening than I had ever been prepared for.
The part that has lingered with me to this day -- the part that truly terrorized me -- was not the images from the liberated camps, as terrible as they were. It was the events leading up to the camps; The long and slow history of Germany between the end of World War I and the beginning of World War II. This is a story of the slow unwinding of a not-quite-defeated people, subjected to huge reparations, robbed of stability through runaway inflation, incompetent government and predatory industry.
The anti-semetism was a small part of it....at first. Germans did not wake up one day and decide to try and exterminate the Jewish race. The transformation that allowed a Hitler to come to power -- and then to unleash such terror -- was long, slow and complex. To overlook that complexity is to misunderstand what took place. To misunderstand, is to run the real risk of repeating. And I believe that was the point of the exhibit -- the journey of a thousand miles begins with one step.
There is a common theme that runs throughout the stuff I have been reading and listening to lately, and that is this: While history can be summed up in a paragraph, events take place in real time. We're living through events right now that will someday be someone else's history lesson. They will have the good fortune of knowing how this all ends. We have to live through it, and the day by day drama of it all. I, for one, find it an utterly fascinating time to be alive.
Some days that fascination is the awe-type. Other days it is the car wreck type. The heart-wrenching drama of an earthquake, tsunami and nuclear meltdown in Japan is a recent example of both.
The collapse of global markets in 2008, in the midst of the subprime crisis, is another. It was March of 2008 that the Treasury Department and Federal Reserve pressured JP Morgan into buying the failed Bear Stearns. Disaster averted, until September when Lehman Brothers failed, interconnected markets spun out of control and we had to spend nearly a trillion dollars ensuring there would be enough capital in the system to keep food on the shelves the next week. We see these as one event now, but they were separated by half a year of good news and bad news.
I can't help but feel that right now we're in this same zone with Greece and the European Union. Last week, the European Union, European Central Bank and the International Monetary Fund opted to "delay" the latest payment in a larger bailout package for Greece, giving them time to adopt further austerity measures designed to get their budget under control. Of course, there aren't enough austerity measures in all of Greece to put them on a path to actually pay back their debt. We can see how this ends -- default -- but the path to get there is fuzzy.
And Greece is just the next act in this larger fiscal drama. When the Irish, Portugese, Spanish and even the Italians see the Greeks saying no to austerity, what will they demand of their politicians? A Greek default won't be without pain for the Greeks, but look at that person you know that has gone through a bankruptcy. Not fun, for sure, but at the end of the process they are essentially free to start over, albeit with vastly restricted access to capital. Is that a bad thing when the main reason you are borrowing money is to pay back the money you previously borrowed?
And if overleveraged sovriegns start to default in an age of shaky banks, underfunded pensions and over-obligated governments, what happens then? The Economist speculates on financial contagion and even on the potential of an American default. It just seems crazy to even talk about it, but as we've pointed out, it would not take much to push the U.S. fiscal situation over a cliff. Such is the fragility of systems with huge levels of debt.
One of the books I am reading right now is called When Money Dies: The nightmare of Deficit Spending, Devaluation and Hyperinflation in Weimar Germany. I'm not done with it yet, but I'm already struck by the slow way in which the dramatic history unfolds. You have years of changes in government, rallies, treaties, currency shocks, temporary shortages....all the tremors leading to the ultimate earthquake. There is a story early in the book of a banker warning a family friend to get their currency out of the country, to buy Swiss currency, which was illegal to do at the time. The banker saw what was coming, or at least what was possible (not unlike many of our bankers today -- if you get a chance to have a frank conversation with one, take it).
And just for context, here is a forgotten fact in our history: Did you know that it was once illegal in the United States to own gold, that gold was actually confiscated by the government? It happened in 1933 by Executive Order of President Franlin D. Roosevelt. Hard to believe.
Podcaster Dan Carlin has been going through the fall and decline of the Roman Empire in his soon-to-be-concluded series from his Hardcore History podcast. The story selection is brilliant and timely, and his telling of the tale superb, because it captures this slow-motion train wreck feeling we are experiencing today. In Rome, you see these unresolved issues put off and put off and put off to another day. Each time they come back around, they are more intense, the ramifications more severe, the solutions more draconian.
We are in the midst of monumental change. Some people were frustrated by my inability to predict the future at the end of our series on the Growth Ponzi Scheme. I'm sorry, but you shouldn't trust people who pretend to know the future (especially when they have a long track record of being wrong about their predictions). All I know for sure is that the underlying financial structure of suburban America cannot be sustained. Becuase it cannot be sustained, it will not be sustained. How that slow motion history works itself out, I don't know precisely. We'll find out in time.
But with a Strong Towns approach, we don't need to know with any precision. We don't need spreadsheets predicting the rate of population growth for the next 50 years. We don't need to hit GDP targets. We don't need compounding returns. We don't need to zone a certain percentage of our property for commercial growth. Or more ridiculously, we don't need to establish a specified amount of R-4 Multi-Family Residential zoning to accommodate our projection for that niche of the housing market. A truly resilient system will accommodate a tremendous range of possible outcomes. And most importantly, it won't collapse when stressed.
We've just gone through 25+ years of unprecedented prosperity, as measured in the standard economic metric of GDP. If this were real, genuine growth and not some illusion of a Ponzi-scheme system, why are we in such dire straights now? Why are so many of our financial systems on the verge of collapse? Why are our governments at every level struggling to meet basic needs and obligations?
We can't bring back what we never really had.
- Too Big to Fail by Andrew Ross Sorkin
- When Money Dies: The nightmare of Deficit Spending, Devaluation and Hyperinflation in Weimar Germany by Adam Fergusson
- Why they call it "Going for Broke" featuring Mark Blyth on Radio Open Source (audio)
- Hardcore History with Dan Carlin (audio)
- Our Unfaithful Partner (April 11, 2011)
Thank you to our friend Jack Shelton for his donation to Strong Towns. We appreciate the support and I hope we can grab coffee again sometime soon. If you'd like to donate to Strong Towns, or if you are driving by and would like to grab coffee, we'd love to hear from you.