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When the Surreal Becomes Real
06/19/2012 10:30 am EST
It's a scary thing when our reality, particularly our financial reality, starts to become somewhat familiar of a Surrealist film, observes Marilyn Cohen of Bond Smart Investor.
Un chien Andalou is French for an Andalusian dog. And the surrealist short 1929 film of the same name, by Spanish director Luis Bunuel and Salvador Dali, is weirder than weird. The film has no plot, no continuity, no chronology—it’s totally disjointed.
Un Chien Andalou uses dream logic. Bunuel one day shared a dream with Salvador Dali. It was a dream about a cloud that sliced the moon in half. “Like a razor blade slicing through an eye,” he said. And yes, the woman in the cover picture in fact had her left eye sliced with a razor in this ghastly movie. The premise was what the human psyche could create and what underlies suppressed human emotions.
So...two paragraphs into my cover article, you wonder where I’m going with this. I too have no continuity, no coherent chronology, and no plot—just random worries and concerns about our global and domestic predicaments.
First, let’s discuss that little southern European country of 10 million causing the Eurozone such spasms. Greece is estimated to have a $308 billion GDP (but that too may be pure fiction).
Direct, indirect, derivatives, and guarantees amount to approximately $1.3 trillion. Hmmm...that amounts to a 421% debt to GDP ratio. All the calming, soothing words from the European Union and IMF are surreal—just like the Dali movie. Expenses in Greece far outpace revenues—by some estimates as much as $2.5 billion each month.
Both of the actors of this 1929 movie committed suicide. One was by self-immolation; the other took the easy way out and overdosed. Reminds you of the Greeks, doesn’t it?
Another disjointed non-sub-plot of this cover article is the fiscal cliff everyone is verbally frantic about falling over. This combination of spending cuts and tax increases are like Un Chien Andalou’s Freudian free association.
The American Economic Review documents “the strong unfavorable effect of increasing tax rates on economic growth.” They report that an increase in taxes of 1% of gross domestic product lowers GDP by almost 3%. Falling off the fiscal cliff is on everyone’s lips except those that can do something about it.
Last month, I spoke at The MoneyShow Las Vegas. The overriding, daunting question I was asked: “What will austerity in the United States look like?” Difficult to answer, but my attempt was, “It won’t be as bad as Greece, but it surely will be ugly.” Remember the riots and mobs in the Wisconsin state capital?
The unions could not grasp that their collective bargaining power was deteriorating. Labor mobs, teachers yelling, and everyone chanting in their inner voices...I want, I need, gimme.
Without budget cuts and revenue increases, I fear there will be riots in the streets. Produced, directed, and starring public employees whose “come to Jesus moment” happened in the recent Wisconsin recall and will continue when the states, cities, and counties realize they cannot fulfill their absurdly indulgent retirement and health care promises because the money has finally run out.
Austerity will mean our public safety net will not be sufficient to serve the truly needy, the sick, the elderly, the infirm, and our deserving veterans. As in the weird movie, suppressed emotions will be unleashed if there is true austerity in the US. Let’s assume Congress won’t allow such a Dali-esque, disjointed, plotless economic movie to play on a screen near you.
Let’s also assume that we as a country are not at a tipping point where America becomes a socialistic, anti-risk, European-style welfare state. Let’s assume the unsustainable fiscal spending path doesn’t cause the markets to lose faith in the US. Like the two actors in the movie, we in real life will have committed our own economic suicide.
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