When we are in their paths, floods, hurricanes, and
wildfires have a way of getting our attention. The need to evacuate our homes
in the face of imminent disaster brings wrenching decisions. Although helpful,
no amount of preparation can completely eliminate the anxiety, doubt, or pressure
of time. When a threatening situation arises, we are likely to receive warnings
as firsthand witnesses, from our neighbors, or via the media, to evacuate. First
and foremost, we must protect the safety of our family and others in our care.
Next, we may wish to preserve important documents and family photos (which,
these days, may simply be on a digital device). Given a little time and some
forethought, we should be able to take items necessary to our survival (food,
drinking water, blankets, etc) and the kids' favorite toys.
However, we must leave many things behind, knowing that if
and when we return, we may find that some were destroyed or are simply gone.
And as important as they were – the garden we cultivated during years of hard
work, the furniture passed down through generations, and the house we cared for
and which kept us safe and warm – and as sad as we will feel about their loss,
we will be alive to work and rebuild.
Tragedy is an unfortunate risk of being alive, but tragedies
can be compounded by denial. When we fail to recognize the danger posed by the
approaching flood and choose to ignore warnings to move to higher ground, we increase
risk. Of course, it is possible that the hurricane will change course, that the
wind driving a wild fire will change direction, or that a sudden drop in
temperature will slow the snowmelt and decrease the flood danger. However, if we
ignore warnings about high threat and low margin of safety, we increase the probability
of injury and death and of turning tragedy into catastrophe.
*****
To live in America today is to experience warnings of
economic disaster. Is this life-threatening? Isn't there always someone telling
us that the end is near? Why is this time any different? And if we heed these
warnings, aren't we simply giving in to panic? While it may not seem as
dangerous as a wildfire or a hurricane, economic disaster can have widespread,
direct impacts on the lives of many; the Great Depression of the 1930s bears
this out. Warnings of economic disaster are a reason for concern.
Assertion: our country is facing a rising flood of debt at
the personal level, the business level, and the city, state, and federal government
levels. At the personal level, some people are trying, with mixed success, to
service credit card debt, student loans, and mortgages which in some cases
exceed the market value of their homes. Many have been subject to foreclosure,
unable to service mortgage debt. Still others have thrown up their hands and
declared bankruptcy to cut losses and get on with the rest of their lives,
albeit with altered self-images and lower credit ratings. These are signs that
the flood has already arrived for many.
At the business
level, while some companies have kept positive cash balances, many have not.
Some have been reduced in size or simply closed up shop, as we can see from the
surplus of commercial real-estate. And on the "flip side" of consumer
debt, banks and credit agencies are carrying loans on their books that will
never be repaid. Acutely aware of the flood, lenders have turned cautious and
this caution has prevented many credit-worthy businesses from obtaining loans.
City governments, where public unions and city councils have
worked together to establish unsustainable pension and health-insurance plans,
are now running deficits and several (three, at last count, in California) have
declared bankruptcy; take this as another sign of the rising flood.
Many state governments are running deficits making them
unable to help cities in need and forcing them to raise fees for everything,
most notably, to attend college. State workers and students in state colleges
and universities are in the direct path of the flood.
Our federal debt is at legendary levels, so much so that our
federal government is trapped in a low interest rate environment, terrified
that any increase in the prime rate will immediately result in an unsustainable
debt-service requirement that will crowd out many other forms of federal
spending. This part of the flood
threatens to sweep away services and jobs and to spill over to join other parts
of the flood.
I have stayed away from statistics in this discussion, but
if you doubt that the flood of debt is rising rapidly and that it is time for
us to move to higher ground, you may want to invest a little time examining
your own finances and those of your company and your local, state, and federal
governments. You might also want to check out the situation in Europe to
imagine how a debt flood like theirs might play out here.
I submit that, if we fail to recognize the dangers of the
flood of debt, we are in denial and we risk turning tragedy into catastrophe. The
opposite of denial is acceptance, not panic. If we accept the need to move to
higher ground, we empower ourselves to make the rational decisions that
evacuees make when faced with the need to save their lives and to leave behind
things they cannot carry. Once we accept that we face potential catastrophe unless
we move to higher ground, we must next decide what to keep and what to leave
behind.