Amid the blah, blah, blah of Bernanke's response was this:
"The tendency of financial systems to boom and bust …is a very long-standing problem… but I think it’s very important for us to try to put out the fire…then you think about the fire code."In his 1988 book, The Collapse of Complex Societies, Joseph Tainter argued that all societies—like all organisms—are doomed. Tainter studied ancient Rome as well as the Mayan civilization. He noticed that problems always blaze up. Each one—climatic, political or economic—rings the fire bell. And each solution (read: "bailout")—brings more challenges and takes more resources. Finally, the available resources are worn out.
Tainter observes that when the costs become high enough, people seem to give up. By the end of Roman era, the burdens of empire were so heavy people sold themselves into slavery to get free of them. So many people did so that the authorities came up with another solution—they outlawed the practice. Henceforth, Roman citizens were required by law to remain free!
Even as late as the early '60s, John F. Kennedy could still appeal to heroic urge without drawing a laugh. "Ask not what your country can do for you, ask what you can do for your country."
But 11 years later, Richard Nixon began the process of debasing the country's money. That was a solution too; the U.S. had spent too much. Nixon could worry about the fire code later. First he opened up with the fire hose; he defaulted on America's promise to exchange dollars for gold at the statutory rate.
Barack Obama tried a Kennedyesque appeal to civic high-mindedness last week. We need to "insist that the first question each of us asks isn't 'what's good for me' but 'what's good for the country my children will inherit,'" he said.
We are in the 21st century now. Barbarous reflections rise up like swamp gas. The golden age is over. In the space of 40 years it passed from gold, to silver, to paper. . .and is now somewhere between plastic and navel lint.