Tuesday, January 07, 2014

We're living the good life on "death bets," says Ian Welsh, and the IOUs may come due sooner than we gamblers thought


The difference between a "death bet" and this kind is that at least with roulette you've got a shot at winning. With the death bet, you know the debt is going to fall due; you only "win" by dying before it does.

"In its pure form, the death bet is just that, a bet that when the bill comes due, you’ll be dead. If you live a good life and die owing millions, well, what do you care?"
-- Ian Welsh, in a new post, "The Death Bet"

by Ken

Ian Welsh has been doing a fair amount of wide and deep looking at the way societies fit together, and I haven't known quite how to chronicle these rich posts here, and so I would encourage you to do some browsing over at ianwelsh.net. But now he's served up a piece that could hardly be clearer or more straightforward, called "The Death Bet," an elegant look at a subject close to my heart: that there's always a price to pay for foolhardy or predatory social behavior; the bill is just all too often handed to people who had little or nothing to do with racking up the debt.

I know I will lose readers as soon as I dare mention opera, but for anyone who's seen, heard, or heard about Richard Wagner's operatic tetralogy The Ring of the Nibelung and wonder what the fuss is about, I would say that that staggering quantity of staggering music, while deployed in the service of a number of basic human themes, comes down more than anything to this very one: that while the malefactors may pay a price of sorts, it's nothing compared with what they deserve -- that price is shifted to far less deserving others.

The Death Bet

By Ian Welsh

Posted: 06 Jan 2014 02:09 AM PST

The horizon is as far as we can see. A time horizon is as far as we plan for, as far as we care about. The ancient Greeks had a proverb which runs as follows: “A society grows great when old men plant trees whose shade they know they will never sit in.”

The middle aged and old run society. They make up the bulk of senior executives and the bulk of powerful politicians.

The men and women who lived through the Great Depression always planned for the future. They built power plants which produced more power than needed, bridges which could handle more traffic, water purification plants which produced more water. They made sure infrastructure would last for decades, and then built it so well it outlasted even their specifications.

Their heirs, the Silents and the Boomers, thought this was absurd. Why not party now, and let the future take care of itself?

Call this the “death bet”. In its pure form, the death bet is just that, a bet that when the bill comes due, you’ll be dead. If you live a good life and die owing millions, well, what do you care?

But someone will pay that bill. Maybe it will be your creditors, who might even go out of business, unable to collect what they are owed. Perhaps it will be your heirs, if the millions adhere to property. Perhaps it will be someone you don’t even know.

But someone will pay. The good life, bought by debt, is always paid for.

The death bet is why we are not dealing with climate change, even though we know that it is coming and we know it will kill hundreds of millions and might even destroy our entire society. The death bet is why our governments make huge tax cuts today knowing that either taxes will have to be increased in the future or spending will have to be drastically cut. But in the meantime the government can borrow, or print money, so who cares? The politicians who make the tax cuts won’t be in power, and many of the people who receive the cuts will be dead, so what do they care?

The death bet is why America had a 2.4 trillion dollar infrastructure deficit as of 2009. It is why Californians voted in 1978 to disallow property tax increases of more than 2% per year. And it is why tuition rates have increased by hundreds of percentage points more than inflation in many countries.

A death bet always come due. It just isn’t always paid by those who made it. The GI generation who voted Reagan in are mostly dead, they won the death bet. Most of the Silents will win as well.

Only about half of Boomers are going to win the bet, though, and if you’re a Gen-X’er or below, unless you die young, you might want to stop taking death bets.

No society will remain prosperous if the time horizon is only so far as our grasp. rather than so far as we can see. The future always arrives, and the bill we’ve put off is always paid by someone.

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