Jared Diamond in "Collapse" argues the case that serious fiscal problems brought on by corporate (business) malfeasance that harms the public, are ultimately the public's own creation (hence the sub-title 'How societies choose to fail or succeed').

Currently the American public remains blinded by the Dem/ GOP divide-&-conquer strategy. The debate on our financial problems center around the notion that we should capsize our own society. Talks of recovery through any means other than austerity often end with infighting between people that want to drive the Gov of a cliff & those that don't.

Assuming Diamond's theory is correct - What hope of recovery do we have when state of the public is as such? Even if we convince the GOP to stop trying to self-destruct, we'd still be stuck with all the dead weight & a huge hill to climb (And that's the best case scenario)...

How f---'d are we??

[Twitter: @DiceyLee808 ]

It's often said that people, especially the young, learn by example. The US touts itself as a nation under 'the rule of law,'

Let's see - - -

Powerful interests arrange for deregulation of vital parts of the economy, and then cause it to blow up -- triggered by writing mortgages for the fees rather than than to generate reliable loan income. These are packaged into toxic securities that are rated AAA by the leading rating agencies. The government allows all of this to happen even though it's charged with protecting the nation's interests.

Nobody is prosecuted, at least not so far. The laws are written to legalize much of this fraud and deception, and only wrist-slaps are delivered.

The instigators are bailed out, made whole and are prospering, while the middle class is ground down , and will be asked to pay up for the austerity measures that will be necessary. Banks are tying to foreclose based on absent or faked documentation. (Why aren't they arrested for faking the mortgages? I'm sure the law has been adjusted so this isn't criminal) Stay tuned.

Fake financial reforms have set us up for another big collapse.

Now, a minority has refused to compromise and has created still-unfolding damage. Reasonableness is obviously not the way to get what you want.

The logical lessons:

If you are well-connected, you'll never be punished. In fact, the powerful write the laws. However, powerlessness will be punished. Obedience to the laws is a matter of risk balancing rather than morality or patriotism. That will go for most rational people now, who are likely to see themselves as entitled to that approach as the rich and powerful.

The discoveries yet to come -- how many more of the powerless there are than the oligarchs and how vulnerable a society like our is to disruption. Advanced, interconnected societies are especially vulnerable to disruption, as S&P just demonstrated. .

How'd that old song go? Freedom's just another word for nothing left to lose.

Welcome to the global uprising. The youth of the world know they have been screwed out of a present and a future.

No sense of history, making old mistakes cause newer problems. If we allow stupid people to do stupid things, the result is things will ge worse. So far, No Hitler on the scene. Until the fundamentals change, I see nothing good coming.

There are similarities in global financial problems/panic and developed governments' seeming inability to coordinate intelligent responses to these problems. Generally, I agree that Western developed nations are headed for trouble, the exception being that I think it will happen a lot slower than it did in the late 20s/early 30s.

For one, governments are more willing to implement Keynesian macroeconomic policies which mitigate the shockwaves from, say, a complete collapse of the financial sector from CDS's. That's not to say that those policies are smart long-term, or that they fix the structural problems that created the economic shocks in the first place, but in the short term the willingness to strategically inject capital, cut interest rates, and so on dulls the pain, so to speak.

Second, there are more institutions that fulfill these roles post-Depression and WW2. The Bretton Woods system, as well as the EC/EU, fulfill these roles and, in the case of the sovereign debt crises in the EU, give insolvent states a place to go. Such a system did not exist in 1931. It was much much harder to secure extra liquidity outside of your domestic currency system that didn't cause disastrous inflation (only slightly horrible inflation instead).

Third, the shadow of WW1 that caused the US, UK, France, Germany, and so forth to be so blindingly incapable of interacting with one another in any functional manner only worsened the already rather lacking international fiscal regimes, if you could call them that. No such rifts that deep and fundamental exist between these nations now. This is squabbling by comparison. When I see France/Germany occupy Greece, Italy, or Ireland to get natural resources to balance out their bailouts, then I'll start to be concerned.

As a side note, I don't know anything about the holdings of banks in all these countries in 1931. Were they as internationally exposed as they are now? It'd be interesting to find out, but my instinct is no.

Is there going to be an enormous fiscal crash? It's entirely probable. However, I don't think that it will come in the same way. I don't think the preconditions that made the United States and Europe so inhospitable to cooperation OR coordination exist now as they did then. Given what we know at this moment, I see a slower and less aggressive descent into chaos than the 1930s.

As a copy editor, I must mention this.

Drezner's page banner reads: "Global Politics, Economics, & Pop Culture."

A series comma should never appear before an ampersand.

Can we delete?

Thanks,
Zach

The argument for continued stability is simple. If he were alive today, Mark Twain would have something to say about the death knell being rung for American hegemony.

First the economics. The S&P downgrade had the laughable result of driving up demand for treasuries and likely will not last long, especially if Moody's sides with Fitch. Additionally, while some economies like Britain's spent the recession in arrested development, America's has become increasingly more labor efficient. As the recession subsides (as it will eventually do), America will thus have a surfeit of latent production potential at full employment equilibrium. Though austerity will be difficult, the continued stability of the American dollar will prevent the failed states and hyperinflation of the 30s. The global economic system centered on American hegemony is shaky, but by no means has it, nor will it, collapse like the gold standard regime of the 1920s.

The more important point, however, is military. America's military has gotten a bad rap recently, as commentors ignore that it has done something no other country has seriously undertaken; attempt to build two modern nations as a benevolent occupier. The difficulties they encountered in policing a country as a foreign occupier have been perceived as weakness and, extrapolated on a global stage, appear to indicate a smaller footprint. This is not the case. America's military, restraints removed, could undertake almost any strategic task asked of it. For that reason, the power void which allowed Hitler and other authoritarians to gain a foothold in post WW1 Europe simply does not exist, and will not in the forseeable future.

The day will come when America is no longer able to do the remarkable task it has given itself in the past 50 years - when American power alone is no longer able to maintain stability in the developed world. However, that day is not today, and barring some catastrophic event, I have some difficulty picturing it on the horizon.

As your chap Franklyn Delano Roosevelt said: the only thing we have to fear is fear itself...

Don't get me wrong, things are bad but they're not quite that bad... yet.

I was interested to read that "Britain is burning". I live in Britain and today I drove my non-burning car to my non-burning workplace and enjoyed a non-burning latte at my non-burning desk. But seriously -

I think Merodriguez's points are very good. There are far more mechanisms and there exists a great deal more willingness for countries to cooperate now than there ever was in the 1930s - whether this will actually amount to real solutions remains to be seen, but I will remain touchingly and absurdly optomistic until proved otherwise.

I'd also like to lob this one into the mix if I may. There doesn't appear to be any great ideological standoff today. People forget that the fear of communism polarised much of Europe during that period, which set us down the road to... well we all know where that road led to.

Which brings me to my original point, we can get through all of this if we keep cool heads. Nationalism, protectionism, partisanship and tribalism are all products of fear. OK, a lot of us are facing an uncertain future (my current contract expires next month and no word yet of a renewal) and we're all going to take a hit in some way or another, but hey, maybe it's time to take an interest in what's going on in our communities, maybe there are people less fortunate than ourselves right under our noses. Who knows?

Y'know, maybe it's time we learned to stop worrying and become human beings again.

The company named above as Standard & Poor names itself Standard & Poor's.

Separately, underlying many of the world's problems today is that people in many nations are finding they can't afford as much food as they could a year or two ago. The sort of problem that tends to slide beneath the radar of those who comment on global affairs, but assuredly a very powerful one to the hungry.

Third, none of the current crises arrived unheralded. In most cases, all we see is that the facts do not comply with the doctrines. The problems are foolish doctrines. They arrive because smug authorities have not recognized the value of plentiful earlier warnings about how foolish the doctrines are. Excellent example: Michael Lewis's 1989 bestselling memoir, Liar's Poker, about crooked stock trading he and his pards had done during the Eighties. Many people read and enjoyed it. Nobody seems to have understood it.

The question of the day: what's going on in the stock market? Answer: it's flopping about like a chicken with its head freshly cut off. Unforgettable sight with such chickens, and evidently much less memorable in the stock market. The NYSE has experienced several major sell-outs in the past half century bigger than that very bad week in October 1929, and well-funded investigating bodies take years to examine them. The resulting explanations seem to be that explanation is not exactly possible. When crises come, the stock markets become irrational. Protecting their own livelihoods, most market observers don't care to say that.

One peculiar aberration of the current Congress: too many current members don't understand that the thing to do when you're in debt, is pay the debt. Act otherwise in personal life, and you get into trouble. Your house is sold from beneath you, you lose your car, bank account and other assets, you are either broken or else you gallantly fight back from point zero. Maybe you go to jail. But the current collection of rich people's serfs in Congress deny the government any right to pay off debts by raising taxes -- a necessity -- and pretend they are acting nobly. Their crackpot achievements have flowered in the FAA standoff this month, and many more such befuddlements are promised. Folks who think that way are loud about the crippling effects of governmental regulations, and don't yet recognize that what they're doing amounts to imposing more government regulations. No reason to believe these new ones will be any less crippling.

Possibly the most surprising event of the week, little noticed: the prime minister of the United Kingdom storming across the narrow street from his official home to announce his determination to wield the terrible swift sword of police and court actions against his own people. What he said amounted to a curse, and while he was delivering it, police officers a mile or two away, their cells already full of people newly arrested, were hitting the phones to plead with other nearby police forces to handle their overflow. Fierce proud prime minister Cameron was the clever national leader who announced a few months back plans to slash Britain's police services. Now the plan is to increase them. And grapes of wrath Cameron seems to have been unaware that he has neither the courts nor to jails to impose the "justice" he was promising. That street where the prime minister lives, by the way, has been restricted to keep the people away from it for some decades, now.

An astute article to be sure, Mr. Drezner, as are all the comments preceding this one. Special kudos to English Bob's closing sentiment despite my inability to allay any worry. While I admit I am in no way intimately familiar with all the particulars involved in The Great Depression, I cannot fathom that the current situation is in any way better.

As was earlier stated, there does seem to be more international cooperation than what existed during the 30's but I wonder if that time really had as much internal political and corporatist divisiveness as we see today, especially in the USA. Furthermore, I wonder if the general population of that earlier time was as ideological and xenophobic as many of my "fellow Americans" seem to be today. I fear I know and have met too many "exceptional Americans" who can't even identify their own country on a satellite photo, name their home-state capitol, or add two numbers with a sum greater than 10 without removing their shoes.

Moreover, were all the countries of the world then contending with the frequency and severity of extreme weather events and impacts of other "natural disasters" (quakes and such) as we are now? It should be clear to most rational people that the climate and the weather are not what they have been over most of the 20th century and before. Yes, there were extreme events over much of that time but they were more temporally separated than they appear to be today. MunichRE has some truly "chilling" numbers regarding insurable loses over the past decade or so. The impact of continued drought and flooding across the central plains of the USA, the so-called Bread Basket of the World, would only serve to exacerbate political and economic "friction." Additionally, it's been recently discovered that the grounding-line of the West Antarctic Ice Sheet has receded by more than 20 miles in the last 3-4 decades. Given the fractured nature of ice-packs, I'm guessing the WAIS is already more destabilized than is generally presumed and a collapse of even just 10% of that mass will have significant, degrading effects on the problems facing the countries of the world today.

I think we are witnessing a conflagration of conundrums previously unseen or unimagined in all of history. As each and every one is surely a "problem," they are just as surely merely "symptoms" of the "real" problem. Like the scorpion told the frog, "it's my nature."

The authors of the working paper attempt to prove that "retrenchment" causes political violence and social instability, do they? Perhaps that is the case, at least in Europe. Oddly enough, there were no violent riots during the Clinton presidency when he implemented his detested (at least by the left) welfare reform policy, and from Canada, where they have greatly reduced spending to reduce their deficit, we have heard nary a peep (the recent Canuck's hockey riot notwithstanding.) In fact, Canada's economy is rolling right along, creating three times more jobs than the U.S. in June, with a tenth the population.

If anything does cause violence here, and social instability, it will be politicians and media shills who insist on enflaming resentment towards the "rich," i.e. those of us earning more than $200k if we are single, and families earning more than $250k. (You would think we all flew around in corporate jets, not to mention owning our very own evil multi-national corporations. Sadly, no.) Fortunately, most Americans have begun to either disbelieve or least tune out our Class Warrior in Chief. Perhaps the yobs, oops I mean "protestors" in England were paying more attention.

Possibly the most surprising event of the week, little noticed: the prime minister of the United Kingdom storming across the narrow street from his official home to announce his determination to wield the terrible swift homeimprovement sword of police and court actions against his own people.

There are three aspects of the current situation that make me fret about this. The first is the sense that developed country governments have already tapped out all of their politically feasible methods of stimulating their economies. how it can be?
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