There is an important difference between deficit spending to bail out the financial industry, which adds no value to the economy — and is in fact parasitical upon it — and deficit spending to support badly needed infrastructure projects, which is an investment in the future. However, we are at a point well beyond anything encountered in the past that could serve as a useful precedent. Thanks to the Iraq and Afghanistan wars, plus huge tax cuts for the wealthy, plus general mismanagement of the economy by the Bush administration, we were already running a huge deficit prior to the current meltdown. Now, with plans in place to extend the deficit into the trillions, and no end in sight, there is a very real danger of reaching a point of no return that would precipitate a tsunami of runaway inflation such as the world has never seen.
Even under present conditions it is beginning to look very much like the whole concept of a money-driven economy no longer makes much sense. When a single individual such as Bernie Madoff can burn 50 billion dollars into thin air, all that money begins to look more and more unreal — and irrelevant. Is this a monumental disaster or a moment of truth? Is money in fact real, which would make this a true calamity -— or unreal, which would make both the money — and the calamity — some sort of grand illusion. In other words, are we facing disaster simply because we feel impelled to perpetuate a fundamentally primitive faith?
When I see phrases such as “we have to get banks lending to one another again,” or “we have to get consumers buying again,” the utter folly of the situation becomes all too clear. What other recourse will there ever be than simply re-inflating the same old credit balloon that led us to the present impasse? Isn’t it clear that what is needed is a complete restructuring of the economy under radically different lines?
The following proverb keeps running through my head these days: “When money becomes God, we will discover that, like God, we can do without it.” I’m not sure exactly what that means, but there does seem to be some truth in it.