I used to believe the bankruptcy of the Federal Deposit Insurance Corporation would have substantial implications. The FDIC officially ran out of money last Friday when they shuttered the usual handful of banks. When they close another handful this Friday — conveniently out of the media’s not-so-watchful eye — they’ll have exactly nothing with which to back up the deposits. Since backing up deposits in failed banks is the FDIC’s entire mission, this should cause the financial system to fail overnight. The FDIC claims to be working magic to solve this problem, but they’re simply trying to gloss over a monumental problem, as even the Wall Street Journal seems to notice.
Any decent math book has an explanation: In theory, there’s no difference between theory and practice. But in practice, there is.
In theory, the failure of the FDIC to shore up the otherwise-imploded accounts for John and June Sixpack means the industrial economy should seize up, at least in this country. In theory, by this time next week there should be no food at the grocery stores, no fuel at the filling stations, and no water coming out the taps. In theory, we shouldn’t even make it through the next few weeks to see another 150 banks fail. In theory, we should be foraging for food in picked-over dumpsters by Labor Day. In theory, it’s time to launch the lifeboats.
But, as we’ll see, practice will be somewhat different. In practice, commerce will keep lurching along, ensuring a steady supply of cheap, corn-based crap lining the aisles in the grocery stores. In practice, stock traders with insider knowledge will keep dumping stocks in anticipation of the market’s inevitable decline, planning for and helping create the classic “double dip” recession. In practice, the rich will keep rewarding themselves despite their performance, and the rest of us will keep getting jacked around. In practice, there will be no perceptible change in our imperial lives.
How can this be?
As usual, hyperinflation solves the apparent dilemma. All we have to do is print money to cover the expansive and ever-increasing losses. Money is merely a fetish, anyway, with no value of its own. As long as the Sixpack family keeps showing up to buy cheese doodles and soda pop, industrial humans will get to keep on killing every living thing on the planet in the name of progress.
As usual, the “field” of economics has no legitimate explanation for recent or ongoing events. Little wonder, that. Economics isn’t so much the dismal science as a non-science, or nonsense. On the other hand, The Guess Who had a pretty good idea where we were headed back in 1971 when they were singing about ecological collapse. We should’ve listened to them instead of the economists.