In this last week of summer, the financial-political world is still in the suspended animation in which it began summer.
Recovery aborted by June, the U.S. economy is flying just above stall speed. Options for China trade, and European sovereign debt and currency, are narrowing but not yet closed. We’ll have an election in six weeks but are short of leaders.
August retail sales rose a thin 0.4 percent, and industrial production 0.3 percent, but July was revised down by 0.4 percent. Capacity in use was supposed to crawl up to 75 percent from 74.8 percent (80 percent is the border of health) but fell to 74.6 percent.
The spike in unemployment-insurance claims has fallen from near 500,000 weekly, but settled at 450,000, where it’s been since last year. Today’s University of Michigan confidence index was expected to rise from 68.9 to 70, and instead dumped to 66.6, the lowest in 13 months.
Kids in the ’50s, raised "out West," practiced the eye-squint necessary for proper delivery of this picture-show cowboy line: "It’s quiet out there … too quiet."
So, time out for history.
This odd election is a mask for the public mind, which silently asks, "What has happened to us?" "What should we do and expect?" and, "Who are we, anyway?"
The Democrats answer with more government, the Republicans with less government, and the tea party with an angry hammer-smash at the reset button.
All three appeal to the American myth: adopt our ideas, squash the others, and we will unleash "America the Anointed," back to its predestined dominance and wealth!
The American economic miracle was under way before the time-out for the Civil War, and had eclipsed all other powers long before 1900 — a triumph of fantastic natural resources, social mobility, rule of law, and protection by oceans.
We rose from there to a pinnacle beyond Rome, in largest part because our economic competitors — all of them — blew themselves to pieces twice in the first half of the bloody 20th century.
After World War I, America held in its vaults 75 percent of the gold in the world, and IOUs from all European competitors for billions more in gold.
Even suppressed by Depression, America’s wealth was so great in 1941 that we could self-finance World War II, printing no money, and maintain stable prices — unmatched by any victor of any big war before or since.
After WWII there were no competitors standing: Europe, Russia, China and Japan in smoking ruin, and the rest of the world more in barter than economy.
The great good that America had done, with an unselfishness never found in prior empires, and the good she would do to help the world rebuild — those things fully justified a sense of triumph, and it was real, no myth at all.
That was a long time ago. From 1945 on, we poured out gold and almighty dollars in trade deficits that allowed the world to recover. We began ceaselessly to borrow from ourselves and the world way back in 1963, and in 1971 had to stop the gold flow.
There is no way to identify an instant, or even a decade, in which an empire flips from borrowing as good business to borrowing to support a standard of living no longer justified by its productive effort.
In retrospect, we crossed the threshold sometime between 1970-90. The markers: "jobless recovery" after the 1991 recession; the jobless escape from 2001 recession only by engineered housing bubble (yes, it was partly on purpose); and the attempted escape from the latest economic doldrums.
Somewhere in there we forgot the need to compete, and to live within our means. We still have the great advantages of enforceable contract, transparency, and mobility-opportunity, but natural resources — overcome by consumption and oceans carrying imports — will not support high lifestyle in "global commerce by electron."
I think the people are way ahead of the three parties, fully aware that the 30-year era of free lunch is done. Thus, I hope that this uniquely American, chaotic election will have greater result than it appears right now.
The risk, of course: the decadent refusal of all prior empires to pull up their suspenders, face reality, and adapt.
