Don’t Think This Can’t Happen in America Too

Civility isn’t built from concrete. It’s built from dandelions—its structure wholly dependent on the rage of a passing wind.

I make note of this because of what’s going on in Iran these days relative to comments I’ve received over the years in emails sent to me.

To be clear, today’s dispatch really isn’t about Iran. It’s about the US, and the West in general, and the challenges we face in the years ahead. Iran is just a warning shot over the bow.

So was Greece, circa 2015.

First, those received comments…

Over the last 15 or so years, I’ve warned that the West isn’t so advanced that a crisis wouldn’t cause local rebellions. Americans have often taken offense at that, letting me know—in sometimes colorful language—that I might wanna go do things to myself that are anatomically impossible.

The offended insist that US culture, in particular, has progressed well past the barbarism of lesser economies where violence still rules.

I mean… really?

I could run through a fairly lengthy list of protests that turned violent in America over the last 15 years. But I guess that biggest “ummm… you really wanna go there?” is Jan. 6, 2021, and the post-election attack on the US Capitol Building.

But back to Iran…

Iranians have been going street-rat crazy in Tehran and elsewhere across the country because the local currency ,the rial, has plunged to literally nothing—and I mean literally. At the time of writing, 1 rial is worth 0.0 US dollars. That’s the thing: When people see their life savings—their ability to afford the cost of daily living for themselves and their family—evaporate because of boneheaded government policies, civility dies quickly.

Rage ensues.

Rioting erupts.

Fires, protests, calls for government to be effectively (if not literally) neutered.

Government, per usual, freaks out and starts beating protestors.

And shooting protestors. (Minneapolis, anyone?)

Which gets to my concern about America and the dollar and preparing for the possibility (probability) that at some point, sooner rather than later, Americans of all stripes rage against the death of personal wealth.

I’ve typed some version of these words too many times over the last year, but just as a kindly reminder, Uncle Sam owes the world more than $38 trillion dollars. This year, because of the clowns running the circus in DC, another $1.7 trillion in deficit spending will pile atop America’s mountain of debt.

And that’s before Trump adds another $200 billion to the pile by having government snap up mortgage-backed securities (MBS) to artificially—and temporarily—suppress mortgage rates.

He also wants to add $500 billion to defense spending, which is another $500b in additional deficit spending.

So this time next year, Sammy’s debt will sit at or above $40 trillion, more than 125% of GDP, while debt repayment costs will push well past $1 trillion annually, the third-largest government expense.

This level of financial recklessness doesn’t happen in a vacuum.

Ramifications rear up.

Namely: The ongoing decline in the US dollar relative to the rest of the world’s currencies.

I know a lot of people will think “so what? I earn in dollars and I spend in dollars, so who cares what happens in the currency market?”

Truth is, a dollar on the downslope hits American families in different ways.

• America must import lots of raw and finished goods that it cannot grow, mine, or make. As the dollar declines in value, the cost of imports goes up (and that’s not including the impact that tariffs have on US consumer prices).
• Increased costs of borrowing. Overseas buyers of US debt are less inclined to buy Uncle Sam’s IOUs because the weak dollar is a drag on their returns when converted back to whatever local currency they use. That forces the US Treasury Dept. to pay higher interest rates when selling new debt in order to attract enough buyers. Those higher market rates on US debt push up lending costs in America on everything from mortgages to auto loans to credit-card rates.

The biggest potential risk: Government at some point has no other option but to find a solution before global financial markets impose a nasty solution on government.

History screams loudly that governmental solutions to financial and monetary crises always—always!—hit the citizens while benefiting the administration.

Which brings us right back ‘round to Iran and Greece.

Iranians are revolting against a financial crisis wrought by government.

Greeks revolted against austerity back in the early-to-mid 2010s hen the southern European debt fiasco slammed the birthplace of democracy and prompted the government to impose a “bail-in” that stole wealth from average Greeks to save a banking sector that had shot itself in the foot—and in the hand and the head.

Greeks weren’t allowed to take from their bank accounts more than €60 per day. Pension funds took massive haircuts that slammed local retirees who saw their monthly incomes slashed. I was in Athens at that moment. Anger among the hoi-polloi was thicker than Greek yogurt. Protests, many violent, were near-daily events.

Tell me that can’t happen in America…

Congressional Republicans have been harping on Social Security reform pretty much since the day after Social Security was enacted in 1935.

Imagine a crisis of confidence in the dollar tied to extreme US debt and extreme US debt repayment costs. Would Congress sharply slash benefits to save a large portion of the bajillion dollars needed to save the government?

Seems probable.

And what would happen to the dollar if the dollar was the center of the storm?

The obvious answer is that the dollar tanks, and that government gins up a fix to save itself. That was precisely the playbook when FDR confiscated gold in 1933, and when Nixon forced the dollar off the gold standard in the early `70s. Government saved itself by screwing the populace out of their wealth and transferring it to government coffers.

America today is a very different country.

Civility is dead, or at least on life support. Middle-class anger is far deeper after the last 50 years of losing ground and losing the American Dream birthright.

How would modern Americans respond to a future crisis (which I keep saying is inevitable)?

I mean, we Americans are a violent lot when pushed too far. That’s history speaking, not me. We’ve had all kinds of rebellions and revolutions and civil war in our past.

If American households suddenly feel they’ve lost their financial power, or are losing their ability to feed, clothe, and house themselves and their families because of DC’s fiscal foolishness… would Americans sit on their hands and say, “Oh well, I have to bend over and take it because Uncle Sam needs me to” … or are Americans going to go “full Iranian” and start burning down the joint in protest?

You know where I stand on this.

The wind is blowing.

The dandelions are soon to lose their civility.