Major League Pessimism

... comes from James Kunstler, via Paul Kedrosky. Dig this:

I don't remember any period in my own longish life, even the Vietnam uproar, when the collective sense of purpose, intent, and self-confidence was so muddled in this country, so detached from reality.

That's a good start. Let's see where it goes.

How dysfunctional is our nation? These days, we lie to ourselves perhaps as badly the Soviets did, and in a worse way, because where information is concerned we really are a freer people than they were, so our failure is far less excusable, far more disgraceful.

Ouch! Is it as bad as all that?

2009 was the Year of the Zombie. The system for capital formation and allocation basically died but there was no funeral. A great national voodoo spell has kept the banks and related entities like Fannie Mae and the dead insurance giant AIG lurching around the graveyard with arms outstretched and yellowed eyes bugged out, howling for fresh infusions of blood... er, bailout cash, which is delivered in truckloads by the Federal Reserve, which is itself a zombie in the sense that it is probably insolvent. The government and the banks (including the Fed) have been playing very complicated games with each other, and the public, trying to pretend that they can all still function, shifting and shuffling losses, cooking their books, hiding losses, and doing everything possible to detach the relation of "money" to the reality of productive activity.

Uh oh. I'm getting a bad feeling about this. How does it end?

The net result will be populations with less income, arguably impoverished, suffering, and perhaps very angry about it. Welcome to reality. Will Washington bail the states out, too? I wouldn't be surprised to see them pretend to do so, but not without immense collateral damage in everybody's legitimacy and surely an increase in US treasury interest rates.

It gets worse. Violence and doom and economic chaos as far as the eye can see! Oh, please. Surely it can't be as bad as all that, can it? Err, how about this from the WSJ:

After two years of crashing banking systems and economic recession, the euro zone enters 2010 with a full-blown debt crisis.

The European Commission warns that public finances in half of the 16 euro-zone nations are at high risk of becoming unsustainable. Governments will spend the next year and beyond balancing the urgent need to fix public-sector debt and deficits -- without imperiling what appears to be a feeble economic recovery. Even the staunchest optimists in Brussels and Frankfurt see a rocky process, with rating firms poised for more downgrades and bond markets meting out daily judgment over how governments are doing.

Gulp.

In all of this, however, the prognosticators don't see human society as a living organism - one that adapts and changes to the world around it. Yes, the world around it is about to get smacked upside the head with a 2x4 of monstrous debts, but I would bet that we'll somehow muddle through. We almost always do.