Denial

July 10, 2010

by Jim Deeds

Is America in denial? Denial quickly sneaks up on any of us, and can stand in the way of desperately needed adaptation to change. Even more importantly, denial can destroy our chances for future success and happiness. Looking back, some apparently intelligent, successful, and famous people ended promising careers prematurely in denial.

Richard Nixon, after winning his lifetime dream in re-election as President in one of the most lop-sided wins ever, must have said to himself: Since I’m now really important, I need to save all my White House conversations on tape “for my place in history.” No way can I ever destroy my Oval Office tapes!

Nixon’s predecessor LBJ suffered the same final misery from his own arrogance and denial. He must have said: We’ll end that little Vietnamese War quick! As soon as my buddies at Brown and Root build the mammoth airfields and harbors we need, we’ll overwhelm all those little North Vietnamese with a blast of American military know-how!

The lesson? Denial and arrogance are a lethal combination!

More recently, when perhaps the world’s greatest golf player went into solitary denial, he said next to nothing about his “private” life or entertainment interests when he was away from home. When you are as skilled and world-famous as Tiger, who needs to explain anything to anybody?

Then there’s the two-time super-bowl-winning quarterback who’s now a two-time loser in instant love with the opposite sex. Big Ben said, “I got caught up in being “Big Ben” the whole time. I lost track of who Ben Rothlisberger was.” Does fame bring arrogance and then denial? Pride comes before the fall.

Sometimes denial becomes our response to a no-win situation. Is America in denial today?

Here are some facts that might help us decide:

One out of seven American homes is now either in foreclosure or more than a month behind in mortgage payments.

One out of five American workers is now unemployed or working part-time at a job below their previous employment level.

Forty million American people are now on food stamps.

What do these facts imply about the financial well-being of the average American?

Do American people represent our nation’s illiquid indebtedness as well?

Our government’s current debt just reached $13 trillion (equal to over $119,000 per taxpayer), and is growing at a trillion-and-a-half more each year under Obama/Geithner/Bernanke monetary leadership. Today, a couple of producing nations with a national trade surplus are the only significant buyers at our nation’s weekly treasury auctions. Each week, multi-billion-dollar Treasury bill and bond sales support the debt habit of the greatest debtor nation on earth. To “sop up” the giant surplus of U.S. debt offerings each week, the Treasury and the Fed have dreamed up the magic of quantitative easing (QE), where we create billions of new dollars to buy our nation’s own debt. Only Obama and his club could do it on today’s scale – a perpetual motion monetary machine!

DOES DENIAL EVER END?

Denial, for most Americans (from Obama down to over 40 million people on food stamps), becomes a way of life. “What other choice is there?” But in real life, there truly is an end to every road, no matter how far away the final destination may seem. On vacation, our four kids riding in the back of our Chevy station wagon always used to ask, “are we there yet?” To them, it seemed like we would never reach our destination, but we always did.

Our entire American financial system and economic model have been built on ever-expanding growth and ever-ballooning national and personal debt since before we were born (FDR’s “invention” to escape the Great Depression). And when a credit (debt) boom won’t solve unemployment and depression, War becomes the final solution to a nation’s otherwise huge unemployment and insolvency.

As debt pyramids continue to be built higher and higher today, how high is too high? No one ever knows for sure – until the week after. But when we see all the restaurants packed on Friday and Saturday nights, and a line always there for a $4 Latte at Starbucks, we know one thing for sure: Americans today are in denial.

When we fall off the financial cliff someday soon in America, will you and I go “splat,” or will we bounce? Our understanding in our personal lives of the difference between the risk of debt and the reward of assets could spell the difference.