Opinion

The Edgy Optimist

How conspiracy theorists want to steer us towards the cliff

Zachary Karabell
Dec 6, 2012 12:24 UTC

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…

When did America get so pessimistic?

Zachary Karabell
Nov 15, 2012 15:46 UTC

Barely had the counting ceased in last week’s presidential election when the news took a somber turn. Two of the next day’s headlines read “Back to Work, Looming Fiscal Crisis Greets Obama” and my favorite, “America has Sown the Seeds of Its Own Demise.” Politicians either celebrated or decried the results, but regardless of party affiliation most warned of formidable challenges and a perilous future.

How did it come to pass that even the resolution of a contested election brings almost zero relief from the relentless focus on problems and threats? How did a country that for much of its history exhibited a (sometimes naive) willingness to ignore obstacles and plunge forward become a society that struggles to turn its gaze away from the dangers that loom just ahead? In short, how did the United States become so pessimistic?

Some of it surely has to do with how the past decade has unfolded.  Without question, this has been a challenging time for America and much of the Western world. We can all recite the crises, disasters and failures: Y2K, the bursting of the Nasdaq stock market bubble in 2001, 9/11, Iraq, Afghanistan, Enron, WorldCom, the bursting of the housing bubble, the Wall Street implosion of 2008, the euro zone’s troubles, chronically high unemployment, anemic growth, the continued emergence of China as a global economic force. I could go on.

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