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The Unsustainable Has Now Stopped; It’s Pay Back Time

For a generation, a very few of us warned of the worsening and unsustainable US dependence on soaring debt and ever more grossly inflated assets. Now the unsustainable has stopped leaving most Americans -- and the world -- increasingly vulnerable in large and small ways that many never even considered before now.

It is despicable for failed (but very rich) debt industry chieftans like Robert Rubin to claim now that no one saw the current crisis coming. For decades, he and others used their massive, ill-gotten wealth and (therefore) political power to marginalize and ridicule warnings that soaring debt and asset inflation could not continue forever.

Daily, we catalogue the quantifiable measures of the $ Trillions in fantasized networth “lost” and the far larger amounts in debt that continue to soar. We also quantify the loss of production, jobs, wages, profits, homes and businesses along with the rising numbers of bankruptcies, homeless, uninsured, the massive losses of industry and technology to net imports and outsourcing, and more.

But beyond the quantifiable elements, there were severe qualitative changes in recent years that undermined core competences of our once generous, pragmatic culture. Citigroup’s recent CEO, Charles Prince, captured the spirit of those changes when he correctly explained that his bank needed to keep dancing -- writing bad loans -- so long as the music was playing and everyone else was doing it. Indeed, it would have harmed or ended Mr. Prince’s career and Citigroup’s stock price to have acted otherwise when those in the system around him were making vast piles of easy money on mortgage scams.

Just as the current crisis has been 30 years in the making, it extends far beyond the marquee crooks like Michael Milken, Ken Lay, Jack Abramoff and Bernie Madoff. The systemic crony capitalism stench runs wide and deep. As regulatory oversight vanished -- by law or merely in fact -- actual expertise gave way to the most eager "yes" men and facilitators in finance, accounting, law, public relations, media, "think" tanks and, indeed, in every business-related profession.

Of course money has always meant power, but over the past 30 years money has become so massively concentrated and unchecked by the ever-more cynical and extreme anti-government culture promoted by those with this concentrated power, that objective expertise -- the “reality-based” world -- has been widely undermined.

This broad, honest division of labor -- along with its wide availability -- is the essential infrastructure of any modern, productive economy and prosperous living standard. Its loss is at least as important as all of the quantitative business and financial factors that we track and may be even more difficult to restore.