Guest Post: Habituating to Contraction

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Habituating to Contraction  

The Savior State has pulled out all the stops to prop up the Status Quo. Its gargantuan borrowing and spending have fixed nothing. Contraction is replacing expansion as the new normal.

For the past 67 years, Americans have been conditioned to expect expansion and more of everything: more income, more stuff, more opportunity, more benefits, more medical care, more government entitlements, and so on.

As a result, Americans have habituated to permanent expansion. The concept that contraction--less of everything--is the new normal simply doesn't register; it is rejected, denied, or decried as a great tragedy. The notion that it is simply reality does not compute with a populace habituated to permanent "growth" that is at worst interrupted by brief recessions.

U.S. politicians have learned that Soaring Rhetoric (TM) about "morning in America," "the New Frontier," "hope" and other ritualistic appeals to permanent expansion win elections, while accurate descriptions of reality lose elections.

The voting public's demand for "permanent good news" promising permanent expansion has spawned a feedback loop of officially sanctioned manipulated statistics and media spin (a.k.a. propaganda) that expands with every administration, even as the real economy visibly weakens. Though the Obama Administration has perfected the techniques of presenting "permanent good news," the divergence of the real economy and the official "story" that "we've returned to permanent expansion" is widening.

The real story is the "expansion" has cost the taxpayers trillions of dollars in new debt and trillions of dollars of backstops, shadow purchases and money-printing by the Federal Reserve. Roughly speaking, $6 trillion in additional Federal borrowing has been blown to simply keep the Status Quo from imploding, and around $13 trillion in guarantees, backstops, asset purchases, and losses made good have been issued to keep the Status Quo's financial sector afloat and in charge.

By any credible, unmanipulated measure, for example, the number of people with fulltime employment or household income, the economy has yet to recover to 2007 levels.

This reality must be denied, both by the power-obsessed politicos who fear the truth like vampires fear garlic-garlanded crosses, and by voters who fear a reduction in their personal share of the swag.

Humans habituate quickly to a wide range of conditions and expectations, but once they've settled into the new habitat, they are resistant to new conditions. Needless to say, humans prefer a future in which there will be more of everything over one with less of everything, as permanent expansion means there will be few if any troublesome cost-benefit analyses, hard choices or painful triage, and little need to adjust to new realities.

Changing conditioning is difficult and often arduous.

Americans have been conditioned for three generations to expect the Savior State to "do something" during downturns to "make it right." The idea that systemic problems are now beyond the reach of the Federal government does not compute; there must be something the government can do to "fix" everything.

This notion that the Central State is effectively omniscient and all-powerful is central to the belief system of Americans now. The concept that the government cannot fix the problem, or that government central-planning has made the problem worse, is anathema to everyone conditioned to believe government intervention will "save the day."

The basic reality is the Federal government has already pulled out all the stops in the past four years to "make the economy recover," and all its unprecedented actions have accomplished is to maintain the Status Quo via unsustainably gargantuan borrowing, spending and backstopping.

If we scrape away the rhetoric and bogus statistics, at heart the current fantasy that the U.S. has "decoupled" from the global economy and will remain an island of "permanent prosperity" in a sea of recession boils down to this belief: the Federal government "won't let us stay in recession." In other words, it's within the power of the Central State to make good every loss, guarantee every debt, maintain the Empire, solve every geopolitical challenge and find technological or military solutions to potential energy shortages. All we need is the "will" to force the government to use its essentially unlimited power to "fix everything."

A people conditioned to this expectation will have great difficulty accepting that their government has already done everything possible, and that these stupendous debt-based expenditures are simply not sustainable going forward. Some problems are not fixable by more government intervention; indeed, government intervention in the marketplace is like insulin: the system begins to lose sensitivity to Central State manipulation and intervention.

2012 is looking like the year that the American public will have to face up to the fact that the Central State's massive efforts to "fix the economy" have failed, and that Central State support of the Status Quo cannot fix what's broken.

We will have to habituate to contraction, and the belief in a god-like Savior State with unlimited powers and money will fade as the economy's systemic illnesses--extreme concentrations of power and wealth, corruption, financial leverage, excessive debt and so on--reassert themselves.

All that has happened for four long years is systemic problems were papered over to benefit the Status Quo. Everything that is broken awaits real repair.

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Vincent Vega's picture

Gargantuan...there's that word again. Twice in one week. I'm impressed.

nope-1004's picture

You know what's coming, don't you?

A new proposal by Geithner and Benocide.  It will be a "solvency fund" by the Fed and Treasury, aimed at backstopping and bailing out the US Government.  No joke.  They'll sell the concept to the public, and most will buy it.  A bailout fund BY the largest gov't to bailout THE largest gov't.  Ass backwards, I know.  But as you stated above, 67 years of conditioning is hard to throw away.

 J6P wants to believe that Superman is coming to save this pig.

MillionDollarBonus_'s picture

Don't be ridiculous. This fund already exists - its called the Federal Reserve Bank of the United States of America. Their balance sheet is unlimited and is being strategically leveraged for maximum impact on interest rates and growth. This is the genius of the elastic money supply.

Commander Cody's picture

I'm with you buddy lemming.  Let's go!

Cheesy Bastard's picture

All hail Obama, our benevolent dicktaster.

Vaiman's picture

How soon they forget the housing meltdown.  The govt hasn't done much still to this day to fix the mess created by that.  And they think while we're still reeling from that storm....that the Fed will be able to deal with another dose of reality check?  

The Alarmist's picture

What housing meltdown ???  The houses are still there, and are being kept out of the hands of truly deserving families by greedy capitalists like Mitt Romney.

sitenine's picture

Define truly deserving families.


Perhaps you're referring to the ones who can't afford to pay back the loan it would take to purchase said house?  Too much debt.  Maybe you're referring to the 'investors' who bought like 12 houses or so to 'fix up' and resell?  Too much debt.  Maybe it's time to start settling for less, otherwise you're going to be very disapointed near term.  Seriously, I don't mean to be an asshole here, I really would like to know your definition of the American 'deserving family'.  That might provide a useful frame of reference.  Thanks.

StychoKiller's picture

The only families that are "deserving", have been doing the right thing all along, and DO NOT need Govt handouts!

prains's picture

Judeo Gucci exponentialism MDB it's all yours hope it fits

StychoKiller's picture

All that has happened for four long years is systemic problems were papered over to benefit the Status Quo. Everything that is broken awaits real repair.

Guess Bob Dylan was right; "Everything's Broken." :>(

LULZBank's picture

Fo sho maan!!

Even god could not have created this much money!

AC_Doctor's picture

MinionDumberBoner will more Socialist wet dreams as usual...

Papasmurf's picture

It's not a balance sheet.  A balance sheet has assets.

trav7777's picture

I guess people thought I was joking when I said Peak Oil implies sustained global recession

DoChenRollingBearing's picture

If the Peak Oil thesis is correct, then you are right.  We will have a long global recession.  We have to DRILL here as well as find ways to conserve our energy use, work on sustainable energy technology, everything.  But, what does a Bearing know, really KNOW?  Not enough...

LULZBank's picture

Its not about Peak Oil. The world, the empires, manipulations and the tyrannys have existed before oil and will exist when the oil will be gone. What we need is an oil freely traded in whatever currencies, so no one country or group of countries can use it to enslave and manipulate other countries.

Perhaps traded in gold and silver (bitches!!!!)

Arabs can get gold for their oil, but they will be willing to pay even more gold for water and food. Water is more expensive than gasoline in some Arab countries!

Nature has a balance, only humans interfere and fuck it up.

Seer's picture

It has EVERYTHING to do with Peak Oil (peak oil exports).

Those who believe that Mr. Market will resolve it all is in for a BIG surprise.  You're all predicating it on the System that you know, the one that WON'T exist when Mr. Market is truly free.  There will no longer be these propped up "economies of scale;" that which isn't sustainable won't be a road traveled.  That oil infrastructure won't, despite your desire to be able to throw you puny PMs at it, be able to work when the overwhelming majority of humans cannot also participate.

Perhaps oil will be traded in food (and or water), which is, after all, one of THE fundamental NEEDS (not PMs or anything else excuse that those who are too lazy to do the work today often hide behind).

Fukushima Sam's picture

The Market will still succeed and thrive.  It will do so through demand destruction.  If things get really bad the Market will create wars and pestilence to force the demand destruction.  After all, what is the Market but the human ecology?

We suffer from human folly, which begets peak oil and other symptoms of our collective stupidity.

Winisk's picture

The balance you see in Nature is the result of brutal uncaring forces that impose limits to growth.  We are no exception.

StychoKiller's picture

Time to break out of the petri dish -- The surface of a planet is NOT the correct place for an expanding, technological civilization.

Cloud9.5's picture

We have done a marvelous job of substituting bubbles for growth for the last forty years and convincing the ME to sell us their oil for large bundles of green cloth.  Our hegemony has allowed us to convince the entire world that these little pieces of cloth have intrinsic value.

Like all cons, this con only works as long as the marks are deluded.  At some point, the bezzel shows through the embezzlement and the trick is over.

What is amazing to me now is that it’s obvious that almost everybody knows it’s a con but the game goes on.  We are like the nobility in the story of the Emperor Has No Clothes.  We know it’s a fraud but we play along to keep our status just a little while longer.

GMadScientist's picture

Water is more expensive than gasoline where subsidies allow.


DaveyJones's picture

How can the most compact form of energy ever discovered not be the most significant factor to the world economy? Everything depends upon it. Everything is built out of it. Most of our food production is tied to it. We go to war for it, lie for it, and turn on our own for it. That should give us some clue to its value. Of course empires have existed before and will long after, but that does nothing to diminsh its mark on human history. The global population exploded because of it along with everything else. So now we have billions of people just entering the petroleum feed trough and production has not only peaked but has entered an irreversible decline. Trav is not the only one saying this will cause an unstoppable depression. You're right we need to develop other forms but we need to recognize a number of serious problems. No energy alternative comes close to its return. The structures we need should have been started decades ago. Because of our leaders stupidity, greed, and dishonesty, they have kept this information from us and delayed this necessary change resulting in astronomically larger costs and suffering in what will now be a brutal transition.           

toomanyfakeconservatives's picture


PEAK OIL IS EVERYTHING! Skip forward to 2:23:43 of Zeitgeist Moving Forward and you'll understand...

Meremortal's picture

Interesting thing, how internal combustion engines can run on natural gas.

Seer's picture

And, they can run on ethanol and wood gasses.  Your point?

Just because something CAN be done doesn't mean that it can be done sustainably OR that it SHOULD be done.

NG reserves, if we switched to them over oil, would then increase the rate of depletion!

Yeah, if NG was available to just ME then sure, I'll go for it!

Teamtc321's picture

Just switching our transportation fleet's from diesel to nat gas would cut opec by 50%. Very sharp move imho. Just for example our food travel's 1400 miles on the average to market. Get our truck's on nat gas asap would atleast give us some breathing room. How many war's would this curve from starting in our future as well? 


We also need sound money period imho. 


Ron Paul 2012

Mitzibitzi's picture

No, no, no, retard!

It is NOT the cost of fuel to move food from one place to another, in almost every inhabited area of this planet, it's the fact that someone wants strawberries  EVERY DAY in a climate zone where strawberries will not grow at this time of year!

And it's the same EXACT story with nearly everything else we do as species. Normalcy bias at it's absolute worst.

Example: NO varieties of chilli peppers grow naturally in the UK. But yet, I manage to have a constant supply of 11 different varieties year round. I grow them on my windowsills.

We've done the diversity thing to the point where almost anything you want can be grown in some degree in your own locality, provided you don't want it every moment of every day.So my locally sourced diet can be enlivened with a bunch of other fun things to relieve it from the monochrome 17th century diet it would otherwise be at any given time of year.

Nothing other than food and water actually matter to you and your family, if you have the skills to do the rest absent 'money'.

GMadScientist's picture

And if you learn to eat what IS good around you, you'll eat less crap that's been Monsanto-farmed by the exploited natives of wherever and taken a ride for hundreds of miles in a flatbed.

Indoor plumbing and refrigeration would be no fun to give up.

DaveyJones's picture

great post. food is the ultimate weapon, the ultimate currency, and the ultimate equalizer.

Papasmurf's picture

Pickensplan is a scam to claim property rights through eminent domain for transfer of water from the ogallala aquifer.  Don't let the old fox fool you.

GMadScientist's picture

Interesting thing, how everyone running their car on natural gas would make it go from lasting 400 years to less than 100.

Tungsten Checks In's picture

My son and I are sick and tired of waiting around for the collapse. I do not have enough time during the day to sit down to learn economic theory, kondratieff market cycles, study charts and read economic world news.  When is the collapse going to occur?
We know the bailouts didn't work, QE was a failure, mark2myth... were just to delay the inveitable FAR WORSE crisis that will now occur in the very near future. The whole Bernanke 'Time man of the year' who saved us from a repeat of the Great Depression was a farce and will be laughed at in the future when this thing blows up epically in everyone's face.
I need your expertise! 
Those willing to devolge the information to my son and I won't go unnoticed. In fact, we will pay you the lump some of 5,000 dollars of which you will receive half up front right now and when the Apoclaypse does finally  happen, you will get the rest of the money. I know many of you junk posts like this often in these threads. My request is a serious one. The doom is really getting the best of me and I am not getting any younger. I want to protect my son, I want to know how long I have left to prepare and get my affairs in order.

DoChenRollingBearing's picture

Collapses often take a long time to happen.  Foreplay for years.  Then sometimes BAM!  See the Roman Empire.

You do not need to offer to give away your money.  The answers are everywhere, including (especially) here at ZH.

You want to protect you and yours?  Buy gold.  A little here and a little there will add up.

No one knows how long we have to prepare.  Best get started now.

The Alarmist's picture

Rome's decline actually played out over a few centuries while all the while continuing to style itself as a continuing Republic of the people (SPQR, dude).  You might even say it went on for a millenia or so if you count the Byzantine empire as the natural extension of the Roman empire.  

America will soldier one for at least a few decades, maybe a couple centuries before it becomes clear that the Republic has truly gone the way of history.

DavidPierre's picture

December 24, 2012 = THE END!

Mayan End Time

My 66th birthday

Send cheques to Zero Hedge slush fund.


DavidPierre's picture

As the earth moves through the galactic plane the Earth's magnetic poles will reverse. 

It will take "three days" to re-establish the Earth's rotation in the opposite direction.


Velikovsky argued that electromagnetic effects play the most important role in celestial mechanics.

Planet Earth has suffered  huge natural catastrophes, remembered on a global scale in humankind's recorded history. 

A short summary...

2012: The Polar Shift Explained

Nasa Confirmation 2012 Pole shift

The Alarmist's picture

Magnetic polar shifts play out over a far longer time frame than you let on.  The fact that birds still fly and migrate largely by reference to electromagnetic fields through all these millenia suggest the effects are not as dire as many might think.

DavidPierre's picture

Come on... help me! ... I'm trying to hussle up $5000 for the ZH slush fund here.


Catastrophism is the theory that Earth has been affected in the past by sudden, short-lived, violent events, possibly worldwide in scope. The dominant paradigm of modern geology is uniformitarianism (sometimes described as gradualism), in which slow incremental changes, such as erosion, create the Earth's appearance. This view holds that the present is the key to the past, and that all things continue as they were from the beginning of the world. Recently a more inclusive and integrated view of geologic events has developed, changing the scientific consensus to accept some catastrophic events in the geologic past.

From my corner of the universe...

One day later...

Golden monkey's picture

You will now the collapse is coming a few hours before.

Watch for yellow ribbon around gas station. Cash only 20$ max.

On TV, you will see monkeys saying everything will be OK by the next week.

The extend and pretend game will end shortly after, trust me.


Dr. Kananga's picture

"I need your expertise! Those willing to devolge the information to my son and I won't go unnoticed... The doom is really getting the best of me and I am not getting any younger."

Dude! Keep your wallet in your pocket and listen up (I'm taking your post at face value):

The best advice is to keep your perspective intact.

The gyrations and mechanations of the financial world have been going on for a long time--long before you found this website or even heard half of what you've heard, and it will continue long after we're all dust. That's how that is.

What really matters? If you can sit down at a table with a roof over your head and enjoy a nice meal with people you care about, and go to sleep in a bed with some measure of comfort and safety, and wake up reasonably healthy and with something to do, then you already have all you really need to get by. The rest of it is just drama...

Dr. Kananga's picture

One other thing--yeah, things can get really shitty in ways where having a bed to sleep in or food on the table is tough to come by, but keeping your perspective can only help in worst case scenarios--a mind free of clutter enhances your chances to plan and respond appropriately.

One thing that can help you keep your perspective intact--there's an unstated sense out there that if we suffer an economic armaggedon, we'll somehow end up back in the stone age (however you want to define it.) Not true. Supply chains will be disrupted and we'll see just how little power the nanny state actually has to keep things running all sunny and bright, but we won't suddenly forget how to do things, nor will our neighbors. Most important point there.

For example, Alan Watts (not an economist) pointed out how absurd the role of money can be when compared to how reality actually works. He likened the depression of the '30s to the following situation: A carpenter shows up for work one day (like every other day) but instead of going right to work, he gets called over to the foreman's office.

The foreman says "Well, I've got bad news. We're shutting the site down because we ran out of inches. No more inches--so no work. Go home."

In other words, if we 'run out of money' that doesn't mean that crops can't grow in a field, or that people will suddenly not know how to treat each other. The priorities and methods may change, but the fundamentals remain.

Good luck, and don't be rash.

Dr. Kananga's picture

Yes, there are some essential items to consider keeping nearby, just in case.

Speaking of, I wonder how many people have though of stockpiling basic tools? You always hear about water, PMs, ammo, beans, etc. but what about hammers and saws and such?