ARROYO GRANDE, Calif. (MarketWatch) — What is next? If the “Great Depression 2” scenario plays out, what’s after 2011? Recovery? A new bull? How can you protect your money? Or are we all helpless victims of the raging winds of fate and Wall Street’s self-serving brand of capitalism.
Let’s review several scenarios in the bright lens of Akira Kurosawa’s classic 1950 film, “Rashomon,” at once an ancient Kabuki morality play, a tense modern courtroom drama, and a revealing documentary on human psychology. In “Rashomon” we witness the murder of a Samurai warrior and a rape through the eyes of several witnesses, each swearing they saw what “really happened.”
We “see” these tragedies in a forest through the eyes of a Woodcutter, Priest, Samurai’s Wife, the accused Bandit, and the Samurai, speaking through a Medium. But as “the facts” unfold, the lies and contractions of biased minds are exposed and the truth becomes increasingly blurred. In the end, we are still wondering: What really happened?
Similarly, today we’re asking; “What really happened to America, so fast?” With Bush, Paulson, Bernanke and their Reaganomics ideology? To my 401(k), my CDs, my kid’s college fund, my retirement nest egg. To the great American dream? What happened?
Nightmare scenario No. 1: No exit, a never-ending disaster
Remember former Goldman Chairman John Whitehead? He “sees” a tragic ending: This Reagan Deputy Secretary of State and former New York Fed chairman “sees” America burning through trillions, over many years: “Nothing but large increases in the deficit … worse than the Depression.”
He worries that “tomorrow is the day Moody’s and S&P will announce a downgrade of U.S. government bonds.” Politicians and public are delusional, promising huge new programs plus tax cutting: “This is a road to disaster.’ Like Sartre’s existential tragedy, “No Exit,” he says: “I don’t see a solution.”
If this dialogue emerged in “Rashomon,” deep in the forest, I could “see” Whitehead pointing a finger at Treasury Secretary Henry Paulson, accusing him of terrible deeds.
Nightmare scenario No. 2: Washington’s unsustainable deficits
True to the “Rashomon” narrative Warren Buffett “sees” America sinking in a swamp of unsustainable debt to justify our excessive spending — government, consumer, corporate.
Remember Buffett’s famous farmer’s story: “We were taught in Economics 101 that countries could not for long sustain large, ever-growing trade deficits.” America “has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than they produce, that’s the trade deficit, we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.”
Like his farmers, we borrowed $700 billion a year to live high on the hog, selling off American assets. Now foreign sovereign funds own trillions of our assets. Today Uncle Warren’s story is less a children’s fairy tale and more a “Rashomon” tragedy.
Nightmare scenario No. 3: The endless 100-year bear market
Robert Prechter’s a brilliant market forecaster and editor of the Elliott Wave Theorist newsletter. As early as 1978 he predicted the “raging bull market of the 1980s.” Many laughed. Then tech roared and he became “Guru of the Decade.”
In the “Rashomon” cast he’s credible. And ahead again: He “saw” the future in his “At the Crest of the Wave: A Forecast of the Great Bear Market.” Today’s darkening markets ride his “wave” theories: Rapidly unfolding, accelerating and intensifying economic cycles. First the dot-com crash, then the subprime housing bull, the credit meltdown, now the coming “Great Depression 2.”
In the ’90s, Prechter had another vision from deep in the forest. Again we ignored him. No more. The same wisdom that let him “see” the 1980’s bull years before it took off, may accurately predict the coming 100-year bear market well ahead of time.
Nightmare scenario No. 4: Pentagon ‘warfare defines human life’
In “Rashomon” they see all, we nothing. In courtrooms, lawyers deceive, suppress the truth. Paulson and Fed Chairman Ben Bernanke are masters of deception in the courtroom of public opinion, as descendents of former Defense Secretary Donald Rumsfeld.
One intentional leak (obviously designed as a tactic to stoke public fear and create budget support for the DOD’s war machine) surfaced in the early days of the Iraq War. Fortune analyzed a classified military report, the Pentagon’s “Weather Nightmare:” “Climate could change radically and fast. That would be the mother of all national security issues … massive droughts, turning farmland into dust bowls and forests to ashes … by 2020 there is little doubt that something drastic is happening … an old pattern could emerge; warfare defining human life.”
Today, as a “Great Depression” and a “100-year Bear Market” become more real than a “Rashomon” sequel, ask yourself: Are there too many people? Too few resources? Too many competing special interests? In America? Worldwide? Are we all too greedy to compromise? Are we then left vulnerable to Paulson’s multiple Reaganomics “weapons of financial mass destruction,” land mines surviving his exit in bailout “sleeper cells,” left to sabotage government budgets, taxpayers and the future of America?
Nightmare scenario No. 5: Too many people, too few resources
The Earth supports 6.5 billion people. The United Nations predicts there will be 9.1 billion by 2050, all competing against 400 million Americans for ever-scarcer resources. The L.A. Times says that a U.N. report “paints a near-apocalyptic vision of Earth’s future: hundreds of millions of people short of water, extreme food shortages in Africa, a landscape ravaged by floods and millions of species sentenced to extinction.”
Today’s news suggests we may already be there, for the population explosion is the mother of all bubbles, a “nuclear” bomb that will explode all other bubbles, ushering onto the “Rashomon” stage a reality far beyond a 100-year bear, on a desolate, post-apocalyptic WALL-E planet Earth.
Nightmare scenario No. 6: Star Trek’s bold new ‘end of days’
One “Star Trek: The Next Generation” episode haunts me, much like “Rashomon.” In it past and future collide. Set in the 23rd century, “Inner Light” gives us a brief end-of-days look at the star-crossed future of two civilizations, one boldly exploring new worlds, the other leaving behind but a small sad trace of its mysterious disappearance. Two planets, which is our metaphor?
The Enterprise encounters a probe floating in space. Suddenly an energy beam zaps Captain Picard. He wakes up on an alien planet. Recovering from a fever he is “Kamin,” can’t recognize his “wife.” Friends think he’s delusional, mumbling about being a starship captain. Trapped in this parallel universe, time passes. Memories of his prior life fade. He falls in love with his wife, raises a family, kids, grandkids, lives the peaceful life he only imagined in space.
But his new planet’s resources gradually disappear. Temperatures rise. Water scarcer. Desert lands spread. The Pentagon scenario? Near the end, he watches a missile soar into space, an intergalactic time capsule, a final record of a once-great civilization.
Suddenly the probe turns off. Picard awakes on floor of the Enterprise bridge. Twenty minutes passed. Engine power returns. They continue boldly going where no one has gone before, left with memories of a simple life on a dying planet that vanished eons ago. Ask yourself: Are we boldly going anywhere? Will someone, someday be reading our probe?
Nightmare scenario No. 7: No-Growth Economics vs. Neo-Capitalism
While Goldman former Chairman Whitehead gave up, there is still a solution, one way to dodge the “Great Depression 2,” the “100-Year Bear.” I reviewed this scenario in a recent issue of Adbusters magazine, where legendary economist Herman Daly was recently named “Man of the Year.”
The Center for the Advancement of the Steady State Economy” says this new greener economic theory calls for “stabilized population and consumption. Such stability means that the amount of resource throughput and waste disposal remains roughly constant.” In this theory, all systems are in balance.
“The key features of a steady state economy are: sustainable scale, in which economic activities fit within the capacity provided by ecosystems; fair distribution of wealth; and efficient allocation of resources.”
This new economics may be what sustains the Star Trek culture in the 23rd century, but unfortunately, it is unlikely to get broad support in today’s free market Reaganomics capitalism, let alone support from America’s political parties or any sovereign nations in today’s highly competitive international arena … at least not until we’ve gone past the point of no return, like that mysterious planet recorded on the probe discovered in the 23rd century by Star Trek’s Captain Picard.
As in “Rashomon,” we “see” many competing scenarios, “seen” through many competing “eyes.’ Yet, for the victims, the end game is always tragically irreversible. We may, however, find some comfort in the “wave theory,” for all waves emerge, ripple, oscillate, accelerate until they inevitably self-destruct and fade.
Earth appears destined to accelerate to 9 billion … exhausting Earth’s resources … in a self-destructive Pentagon global warfare scenario … driven by another Great Depression … and 100-year bear market. In the end Whitehead said it all: “This is a road to disaster … I don’t see a solution.”
Probe dims, fade to black. Or will we finally wake up … and take command of our starship?