How conspiracy theorists want to steer us towards the cliff
Consumers are feeling optimistic; sales are up; employment hasn’t much improved but neither is it getting worse; Washington is as dysfunctional as ever; and housing is showing significant life. Not the best of times, by any means, but not the worst. Yet, for some, that very calm says a storm is brewing, one of epic and perhaps even biblical proportions. Their opinion may not be a dominant chord, but it is prominent. And it may explain in part why our public debate about fiscal cliffs, taxes and the economic future can verge so quickly into dark, deep and destructive passions.
If you’ve turned on talk radio to pass the time driving from store to store for Christmas shopping, you may have heard an ominous voice jarring you from otherwise anodyne thoughts about the state of economic affairs. “Something bigger and more devastating than the credit crisis of 2008 is about to come our way. … Fail to heed this final warning at your own risk.” This isn’t a public-service message, though it comes with that patina. It is an ad from CritcalWarning6, which has also festooned financial websites with its banners, urging you to click and find out just what lies ahead. So I did.
We are, says Michael Lombardi, the man behind the campaign, headed for a collapse that will make what happened in 2008-09 look like a pallid warmup, plunging the U.S. and the world into a new Great Depression whose long-term effects could be much worse. The U.S. government is bankrupt, says Lombardi, and the Federal Reserve’s policy of “artificially low interest rates” has reached the end of its utility. There are no arrows in the proverbial government quiver, and in conjunction with an imploding euro zone, massive underemployment and far more debt than can be paid off, we are on the precipice, a cliff much more dire than the upcoming fiscal one. Stocks will plunge well below the lows reached in March 2009, and unemployment will make Spain today appear to be a safe haven.
It’s easy to discount these currents as a paranoid fringe, but the lure of bullion and the warnings of financial Armageddon aren’t fringe enough to be harmless. The melodrama of CriticalWarning6 actually shields the degree to which such views are nearly mainstream in the financial community, which has more than a fair share of influential investors who believe that various degrees of implosion are likelier than not. Famed investor
James John Paulson* has invested and lost billions in gold this year with a similar, though surely better reasoned, philosophy. Marc Faber, who pens the Doom & Gloom report from his haven in Hong Kong, is of a similar mind. And they are by no means alone.
Such views also undergird the Tea Party fervor that debt must be dealt with NOW! The fiscal cliff is a sideshow, and any delay in dealing with the debt will mean one step closer to the financial collapse that we have been holding back as effectively as that little Dutch boy with his finger in the dyke. Sooner, or later…
Conservative radio especially has been festooned with apocalyptic financial warnings, which often take the form of urging people to invest what assets they have in gold coins and gold bullion. Glenn Beck, the most prominent advocate of this approach, has been a major voice for Goldline, a company that specialized in selling gold coins as a primary investment strategy. Goldline has faced legal scrutiny in California for duping investors and charging egregious fees and commissions, but its success is testament to how easy it is to connect various dots of fear and discontent to end up with an investing philosophy that dictates placing all your liquid assets in Gold American Eagle coins.
This movement is hardly a product of our times alone. Goldline and other “gold bug” companies offering to melt your jewelry down in exchange for bullion are part of a longer legacy. It’s one that began at least with a Franklin Roosevelt executive order in 1933 recalling gold coins, in effect making it illegal for an individual to own certain types of bullion and coin. That lasted until the end of the gold standard in 1974.
Even before that, fears of the central government overreaching and “confiscating” the hard-earned wealth of the people extend back into the 19th century with populist rage and fear, and even further back to the fierce opposition to the Bank of the United States as a tyrannical power grab by the federal government.
Today, those older currents are strengthened by a newer note: that the entire financial system, supported by “fiat” currency detached from gold and backed only by government printing presses churning out dollars, is on the verge of collapse. Hence, CriticalWarning6 and a constant, hushed worry in the financial world that the next black swan is the implosion of the U.S. currency system.
Added to the mix is the generalized paranoia that has always coursed through American society (and indeed most societies). The historian Richard Hofstadter famously wrote of the “paranoid style in American politics,” and for good reason. From “The X-Files” to the current fixation on the Mayan calendar, there has always been a school of thought that says the entire system is a scrim concealing darker forces and disturbing truths. These currents are prominent enough that NASA actually has a page on its site debunking the Mayan myth of a planet called Niburu hurtling toward earth scheduled to collide and end life as we know it on Dec. 21.
There are real structural issues we face, but there is a difference between challenges we must confront and impending collapse. Challenges can energize and mobilize our creativity and ambition to solve and meet them; fear of collapse has a paralyzing effect, or worse ‑ it leads to a “burn, baby, burn” nihilism that knows no compromise and dismisses measured responses as meek and useless. It fuels radicalism of the most unhelpful sort rather than energizing a collective response to shared issues. And regrettably, this kind of thing is likely to be part of the mix even after Dec. 21 comes and go with nary a dent to the planet.
*CORRECTION: This piece originally misidentified John Paulson’s first name.
PHOTO: REUTERS/Toru Hanai