20 January 2009

Politicians Take Up "The Crisis of the Real" ~ Minyanville


"Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Consumer Prices Hit the Wall

And to think, just a few years ago they said it couldn't be done; that declining consumer prices were virtually an impossibility. Yet here we are just two weeks into 2009 and seemingly every day we get news of another area of the economy where prices are deflating as a consequence of demand destruction.

This morning the Labor Department released the Consumer Price Index report, which showed that prices rose just 0.1% in 2008 - the smallest increase since 1980. Prices in December fell 1.7%. Deflation was most severe in consumer discretionary categories such as automobiles, apparel and recreation. But categories that seem immune from deflation saw only modest increases. Health care prices, for example, rose just 2.6% last year, the smallest increase since 1964.

Perhaps most stunning is the demand destruction in the energy complex. The American Petroleum Institute reported that US fuel demand fell 6% last year. Gasoline prices plummeted 43%, the most since 1937.

2. Farmers Cut the Cheese

Relax, I'm talking about prices! They cut the cheese prices! Turns out that the price of cheese has collapsed by 40% over the past 30 days. According to an Associated Press story which appeared in the Chicago Tribune, the decline in cheese prices is impacting Wisconsin's 15,000 dairy farmers who are now struggling with declining milk prices. Why? Because about 805 of the state's milk is used to produce cheese, "so cheese prices largely determine milk prices paid to farmers," the article said.

3. Pressing Question of the Week

Question: How can the dollar rally during a deflationary debt unwind, especially if the central bank is hell-bent on printing dollars to avoid deflation?

It's counter-intuitive, isn't it? The dollar is rallying, up more than 4% so far this year after rallying nearly 6% last year. How can this be? Simple, as credit is destroyed, whether through access due to higher lending standards and credit line reductions, or through balance sheet repair, writeoffs, bankruptcies and restructured loans, dollars become more scarce.

A manifestation of this thirst for dollars actually flew under the radar yesterday via the Richmond Fed portion of the Fed's Beige Book. "Several retailers also said that in recent weeks more customers paid with cash than with credit cards."

4. Now THIS Is a Depression

Yesterday someone forwarded me a news brief from an ad agency commenting on the Detroit economy. Being the epicenter of the automotive world, one would expect the news to be grim, but this was stunning.

The average home price in Detroit is $18,513 and the unemployment rate is now 21%. The crime rate in the city has fallen... but that's simply because of a lack of targets. "Meaning there is nothing left to steal. In fact, even the criminals don’t want to leave jail."
5. Politicians Take Up "The Crisis of the Real"

That means the risks of totalitarianism have risen by many orders of magnitude since the financial crisis began. But let's backtrack for a moment and look at what this "Crisis of the Real" is, and then why its spillover into the political arena means the threat of totalitarianism is rising.

I have argued previously that one social manifestation of debt revulsion and anti-consumption is a conscious attempt to revolt against the precession of the simulacra in fashion, art and culture. This is "the Crisis of the Real."

To understand what this crisis entails, it is useful to look at what this precession of the simulacra entails as it was outlined by Jean Baudrillard in his prescient work, Simulacra and Simulation, published in 1981. Simulacrum, for Baudrillard, is a copy of an original that displaces the original as a sign and becomes real in its own right.

The precession of simulacra that Baudrillard outlined is as follows:

1. Era of the Original

2. Era of the Counterfeit

3. Era of the Produced, Mechanical Copy

4. Era of the Third Order of Simulacra, where the reproduction displaces the original

The revolt against the third order of simulacra in fashion, luxury and wealth is now well underway. Yesterday I ran across this very observation in the Style section of the New York Times, "In the Lap of Luxury, Paris Squirms."

“This whole crisis is like a big spring housecleaning — both moral and physical,” Karl Lagerfeld, the designer for Chanel, said in an interview with the Times. “There is no creative evolution if you don’t have dramatic moments like this. Bling is over. Red carpet covered with rhinestones is out. I call it ‘the new modesty.’"

The designer Nathalie Rykiel told the Times, "“It’s a desire for intimacy, to go back to values. We need to return to a smaller scale, one that touches people."

Gilles Lipovetsky, a sociologist who has written several books about consumerism, noted, "“Since the ancient Greeks, luxury goods have always been stamped with the seal of immorality. “They represent waste, the superficial, the inequality of wealth. They have no need to exist.”

Indeed. Or so social mood now tells us.

But most striking about the Times article is the move of this revolt against the Third Order of Simulacra into the political realm where it becomes most dangerous. Remember, darkening social mood is about closing-off, withdrawing, narrowing and reduction. If postmodernism's ascent under peak positive social mood brought to the forefront the hopes and possibilities of freedom and the play of the non-linear, under a darkening social mood the most subversive and dangerous elements of postmodernism will come to the fore; a fracturing of social norms, the revolt against decentralization, an outcry over the non-essential.

"The political champion for the new economic morality is a recent convert: President Nicolas Sarkozy, formerly known as “President Bling-Bling," the Times observed. "The old financial order ha[s] been “perverted” by “amoral” and uncontrolled capitalism, Mr. Sarkozy said, deploring the fact that, “the signs of wealth count more than wealth itself.” He praised the “return of the state” as a regulator of capitalist excess.

President Sarkozy is, of course, indirectly (at least as quoted) referring to the fact that under a fiat currency regime - the dollar, the euro, etc. - have become more important as signifiers of wealth than wealth itself (the Third Order of the Simulacra), since they are signifiers backed by absolutely nothing.

While these thoughts are not new, what is new is their rapidly increasing appearance in the political arena - the call for injecting moral values into the global economy, for example. If Fordism and modernity paved the way for the linear structure and seeming logic of the growth of cities, both architecturally and politically, ultimately giving way to post-modernism and the fracturing of social order and structure, then the downside as social mood darkens will be the recoil we face as society fights for a "return" to "controlled" capitalism and a "re-institution" of morality, structure, control and authority.

In other words, what society in the aggregate will be asking for is totalitarianism."

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