Препечатвам това есе на Чарлз Хю Смит и мисля, че ние българите не трябва да влагаме много емоции в условията на острата политическа криза, след оставката на премиера Б. Борисов, защото няма лесни решения при тоталната липса на читави политици в България.
Don't Worry, Be Resilient (February 14, 2013)
Charles Hugh Smith
History offers few examples of major nations that prospered by borrowing vast sums for consumption and speculation. The same holds true for households.
At some point, absorbing more information about the unsustainability of modern society yields diminishing returns. It becomes emotionally draining and thus counterproductive.
Part of this exhaustion results from recognizing our powerlessness within the Status Quo, where independent thinking and structural innovation are intentionally winnowed out as threats to existing institutions and industries.
Another part arises from the burden of knowing that the supposedly permanent Status Quo is far more vulnerable than generally believed. I have described the psychology of knowing what lies ahead in The Burden of Knowing.
A related factor that is never publicly discussed is the negative impact on our mental health of all the propaganda that we are force-fed by the Mainstream Media (MSM). When truth is incrementally undermined by massaged data and behind-the-façade manipulation, we lose faith in key State and media institutions and suffer from a propaganda-induced disconnect between what we see and what is reported as fact.
These 'burdens of knowing' can diminish the small but real joys of the present: work we like, a home-cooked meal, and time spent with our friends and family. As a result, many smart, well-informed people consciously refuse to dwell on our systemic problems because doing so “is a downer.” These folks hold the perspective that anxiety about the future should not get in the way of the simple pleasures of living.
This attitude can be described as “don’t worry; be happy.” And it certainly makes sense when life is still comfortable and enjoyable.
But the philosophy of “thinking about the future is a downer, so I live in the present” ultimately rests on a false confidence that the future will take care of itself, regardless of what happens to the large-scale systems of State, finance, and resources.
It overlooks the reality that not all responses to instability or devolution are equally successful. Those who are totally dependent on the Central State and speculation-based markets will have a much more difficult time maintaining their "happy” view if the systems they depend on erode or fail.
Perhaps the wiser response is “don’t worry; be resilient.” The resilient household can be happy not only in the present surplus of energy, entitlements, goods, and services, but can also thrive in a future where the current surplus of cash, credit, and speculative gains has dried up.
What is Resilience?
What is resilience? A dictionary definition is “an ability to recover from or adjust easily to misfortune or change.” In other words, it is on the other end of the response spectrum from fragility, brittleness, and vulnerability.
In terms of individual psychology, resilience can be characterized as being able to roll with the punches, maintaining a positive attitude through difficult times, and focusing on developing successful responses to misfortunes and challenges.
American culture extols individual resilience, and we are taught to think that the individual can overcome anything and everything with the right attitude. But if the Status Quo is vulnerable to disruption on a systemic level, then it is prudent to think of resilience in a systemic way as well.
One way to describe the difference between systemic vulnerability and resilience is to conduct a thought experiment:
What if it didn’t matter to you and your household if the Dow Jones Industrial Average (DJIA) was 14,000 or 4,000? Or if gasoline cost $3.50 or $7.50 per gallon?
What if it didn’t matter to you and your household if Central State entitlements were slashed by half, or vanished altogether?
What if it didn’t matter to you and your household if your land and house were worth $1 million or $100,000?
In other words, what if the machinations of Wall Street, the Federal Reserve, the Central State and, indeed, all of Central Planning’s promises and speculation-boosting had little effect on your life or well-being? Would this make your household more resilient or more vulnerable?
Clearly, the less we are dependent on systemically brittle Central Planning systems, the fewer adjustments we will have to make should these large-scale systems devolve or fail.
The important point being made here about resilience is that it does not require a sacrifice of present happiness. Nor does it profit from the devolution or failure of Central Planning. The resilient household is perfectly able to enjoy the present surplus of energy, credit, State entitlements, and consumerist abundance, but it doesn’t rely on it.
If the Status Quo is indeed as permanent as it is presented, the resilient household has the same measure of happiness as the household that is totally dependent on Central Planning promises and boundless credit. The difference between fragility and resilience is how much security and happiness will be available to the two households should the Status Quo credit-based consumption and speculative wealth turn out to be decidedly impermanent.
Debt, Fragility and Vulnerability
The easiest way to increase resilience is to reduce fragility and vulnerability.
We can understand the dynamics of what we might call anti-resilience—debt, fragility, and vulnerability—with another thought experiment:
Household A’s gross income is $5,000 a month and their net income (less Federal, state and local payroll and income taxes) is $4,200 a month. The mortgage is $2,000 per month, both wage earners have substantial monthly payments on student loans, and the household also has an auto loan. The household’s healthcare insurance is partly paid by payroll deductions, and the household remains responsible for a percentage of any major medical costs. Basic living expenses eat up the rest of the net income; the household saves nothing and has minimal savings.
Household A hopes housing valuations keep rising, as they plan to borrow money off this resurgent home equity to fund a vacation, something they haven’t had for four years.
This household’s financial situation is precarious because its expenses equal its income, and most of these expenses are debt-related and cannot be trimmed. This greatly increases their fragility to financial misfortune; any reduction in take-home pay or any increase in expenses will push this household into default. To increase consumption, they plan to borrow more money once their only collateral—their home equity—increases enough to support more debt.
Household A has a high and inflexible cost-basis. Any significant reduction in income cannot be offset with equivalent cuts in spending.
Household B owns their land and home free and clear; the only housing-related payments are property taxes and property insurance. (Recall that 30% of all homes are owned free and clear in the U.S., so this is not as unusual as you might imagine.)
One wage-earner paid off her modest student loans within a few years; the other never took on student loans in the first place. They own two older vehicles free and clear. They are debt-free. Their gross income is $4,000 and their net income is $3,200. Since they have no mortgage interest deduction, their income taxes are higher as a percentage of income than Household A. Their living expenses total $1,500 per month, so they save 50% of their net income. If one of the wage earners loses their job, the household can maintain its current budget without sacrifice. Their substantial savings protect them from unforeseen medical expenses not covered by healthcare insurance, and they can pay for vacations with cash, not credit.
Let’s say that one wage earner in each household loses their job and must take a job that pays 20% less. Household A cannot cover its expenses and must default on one of their debts. Household B’s monthly savings decline, but they are still saving a substantial portion of their income.
Which household is vulnerable to even modest financial misfortune? Clearly Household A. Will a positive attitude be enough to save the family from insolvency? It will help it transition into and hopefully through bankruptcy, but a positive attitude alone is no substitute for financial resilience.
Though Keynesian economists argue that nations are not like households, in truth debt/financial fragility is scale-invariant, meaning that rising debt, a high cost basis, and zero savings/investment lead to fragility in households, enterprises, communities, and nations alike.
The United States of America shares a lot in common with Household A: It has a high and inflexible cost-basis, and it is dependent on borrowing to fund future consumption and on speculation to create collateral. It is also tied into spending a significant share of its income-servicing debt. History offers few examples of major nations that prospered by borrowing vast sums for consumption.
In Part II: How to Increase Your Financial Resilience, we examine the key strategies for increasing your financial resilience, whether you are an individual, a family or a business. We explore the 5 Rules for Financial Resilience, as well as strategies for the critical goals of lowering your cost basis and creating value that others will pay for.