Sunday, September 9, 2012

Mutual Assured Destruction

One of the early doctrines of the U.S.-Soviet Cold War was the concept of Mutual Assured Destruction (M.A.D.).  This took root during the great armament build-up of the '50s and '60s when both sides were trying to outdo each other on the size and quantity of megaton warheads.  By the end of the build-up phase, combined they could destroy the entire planet many hundreds of times over.  So you could say that M.A.D.  was a crude if not automatic doctrine for that era.  Eventually it yielded to softer doctrine such as detente, to alleviate the underlying tensions.

Not to belabor the history lesson, but the key implicit benefit of the M.A.D. doctrine was that it would prevent a "sane" nation from going all in against their opponent, knowing full well that if the other side had nothing left to lose, they would blow up the planet.  During that M.A.D. era (~1950-1980) there were many skirmishes between both sides - aka. proxy wars (Korea, Suez, Vietnam, Six Day War, Yom Kippur War etc. etc.); however, both sides were very careful to avoid direct military confrontation.  The Cuban Missile Crisis was close enough.   

M.A.D. Class Warfare
Now apply that same doctrine to the stealth class warfare that has been ongoing in the U.S. for the past 30+ years.  Apparently the history lesson was not assimilated by today's 1% wealthy/political class, because they appear to be under the delusion that class warfare is a figment of the imagination and/or commie leftists.

All denialism aside, the fact remains that the 1% already went all in against the middle class, short of the burial ceremony.  In other words they already crossed the point of no return.

But of course they are obscenely oblivious to that fact.  How else to explain the Obama campaign touting its 3+ year "recovery" that buried the middle class in debt, outsourced 5 million jobs and otherwise only benefited top wage earners.  They can't even do basic fucking math.  And how about the Republicans running with a mega-millionaire candidate who made his fortune "right sizing" the middle class, keeps most of his money offshore, and only pays 15% tax on the money he keeps in the U.S.?  Totally oblivious.

(What's Left of) The Middle Class Doesn't Need the Job Destroyers
Given that this system still retains some vestiges of democracy however diluted by special interest groups, the fact remains that the 1% "job destroyers" still require the implicit buy-in of the middle class, especially in the event of any future "adverse" market events.  Yet, under the doctrine of Mutual Assured Destruction, they have foolishly left the middle class with only one remaining rational option - which is to wait until the next "event" and pull the plug on this entire shit show.

P.S. on the subject of QE 3x (or whatever version we face currently), there has been a lot of debate as to whether or not the Wizard-o-Bernank is finally out of bullets.  ZH had a couple of articles here and here and I saw a similar discussion in Barron's.  I will just inveigh with some basic math that if the Federal Government is going to continue running $1.3 trillion dollar deficits (aka. new bond issuance), then Fed monetization programs equal to that amount are not stimulative, they simply prevent new bonds being issued into the private market.  Any amount of monetization less than the deficit would in fact be contractionary, as new bonds will enter the private market and "crowd out" other investments.