Late Cycle

Category: Unreality

A characteristic of our society that has only grown and deepened as the Empire slides into Decline. It provides a modicum of insulation from a reality that threatens to encroach upon our life and spoil The Party.

  • The Mirage and a Tale of Two Economies

    Chart from Creative Planning (investment manager)

    This graph (recently created by Creative Planning) sums up the current state of affairs. The stock market is at all-time highs, and as such appears to reflect a vibrant, even red-hot economy. Meanwhile surveys, such as that by the University of Michigan, along with less-publicized stats and a blizzard of anecdotal evidence (such as can be found on social media), point to an economy in which a substantial portion of the population is at best struggling to keep their head above water in an economy beset by rising and increasingly overwhelming costs as well as other challenges. Record highs… and lows.

    This situation is captured by the term “K-shaped economy,” leading to the famous quote by Charles Dickens found in the first sentence in A Tale of Two Cities. It was the best of times: a fantasy economy built on hype/speculation and what amounts to be a hope for miracles (AI)… as well as a ton of debt. The “real” economy meanwhile shows signs of a slowdown and widening cracks (including fallout from that shitload of debt). The mainstream stories deflect from reality with presentation of metrics that prop up an optimistic mirage narrative, that on closer inspection depict a much less rosy view of things.

    It was the best of times…

    If there is one thing that the cheerleaders love to point to is the spectacular rise of the market. The S&P 500 for instance has seen a phenomenal surge of 26% in the last 12 months. It marches up despite all sorts of headwinds, in particular the recent conflict with Iran (which triggered an elevated price of oil). Then there are the ongoing tariffs and the huge deficit. Other items include concerns over private credit and a moribund housing market, which has languished for… years. All of this met with either a shrug, or a temporary panic leading to a dip that is soon followed by a new surge. Since the onset of the Iran conflict a yo-yo behavior has occurred based on the weird performance of the OG, who has repeatedly declared a “deal” was “really close” (causing optimism with “investors” and a decline in the price of oil), only to be followed by the reality of fresh exchanges and bellicose talk from Iran (markets then dipping). The ensuing selloff would then be “saved” by renewed declarations of a deal close at hand, sending stocks up again. Rinse and repeat. But some slack could be given to these “investors” who, to be charitable, were distracted: the largest IPO in history was looming! History was going to be made… Update: has been made, as at the time of writing the IPO has indeed taken place, where quite a few millionaires were minted and Elon Musk became… a trillionaire. Truly a fantastic state of affairs!

    Then there are a number of related stats that suggest the economy on the whole is doing quite well. Q1 GDP came in (initial estimate) at 2.0%, a pretty respectable reading. Employment in terms of recent BLS report also looked pretty good. In recent months there has been a “surge” in hiring, leading some to declare a “thaw” in a job market seemed to be going nowhere (no hire-no fire).

    And they’re still spending! March for example saw a 1.7% increase in real retail sales. A pretty decent number and was the fastest increase in three years.

    So why are so many down on the economy? Of course there is inflation, but then consider all that spending. The consumer, and economy, are “resilient” (a favored description). Other cheerleaders go further, such as Kevin Hassett (National Economic Council Director), who has, echoing the OG, proclaimed the great news that we are experiencing a new “golden age.” Hassett also stated that as a sign of consumer confidence “credit card spending is through the roof.” Right. Everything is just wonderful (for the majority of the population).

    It was the worst of times.

    And now comes the mass of countervailing stats and evidence. None of it hidden, just neglected, or pushed aside, in a perfect illustration of the dynamics of The Mirage. Btw, I see a combination of deliberateness and simple laziness (as to the latter – I have to wonder what the salary/income is for these reporters and commentators who hype a headline number but completely leave out the details).

    As for the stock market, a longer and deeper analysis will occur in later writing. One thing to bring up that gets to the core of the true state of the markets is breadth. As in, the markets are seeing a very narrow (and concerning) breadth. As the S&P 500 makes new all-time highs, less than 60% of components are above their 200 moving day average. Without going into technical details, this is not good. It means only a small number of stocks are behind the surge. Of course, they are all part of the AI trade. To put it succinctly, the market is fired up by a mania: the AI bubble.

    Also, it should be noted that the top 10% (income tier) holds something like 90% of all stocks (I have seen figures ranging from 88% to 93%). There is a kind of dribble in retirement plans and the like, as well as some participation by retail investors, but the majority of Americans simply are not whooping it up at The Party at the markets.

    Besides concerning details of the AI trade, including the phenomenon of “circular financing” (again, to be further discussed at a later times) which gives rise to the appearance of a kind of economic frenzy (that justifies the nosebleed valuations of the hyper-scalars), there is concern over private credit. In this sector an increasing number of investors want out, but a lot are meeting a wall in redemptions. This is occurring as some of these funds are getting into trouble over defaults.

    The spectacle of the markets appears to overshadow and deflect from the true state of the economy and the consumer:

    GDP

    That initial 2.0% growth reading has been revised down to 1.6%. Not huge but significant. This revision came in the wake of the last revision for Q4 of last year: 0.5%. The initial estimate for Q4 was 1.4%… so stayed tuned.

    Update! A second revision has it at 2.1%! Wow. No matter that along with this revision it was determined that consumer spending had… stalled.

    Labor Market

    This is supposedly a bright spot. Unemployment remains historically low at 4.3%; but don’t get too excited because one factor that is behind that decent rate is a decline in the participation rate, stemming from a steady exodus of potential workers (or those looking for work) from the workforce. In the last several months the number of new jobs has gone up – maybe not spectacular in number but enough to give an appearance of a kind of recovery. Except… the devil is in the details (again, the reporters and commentators for whatever reason don’t bother to read the report by the BLS). It turns out the majority of these new jobs are in the healthcare and leisure and hospitality sectors. The common thread of these sorts of jobs is low wages (see real wages further on).

    And then there is a lot of anecdotal evidence that can be found especially in social media. Many workers who have been laid off report difficulty finding new work, describing frustration over sending out 100s of resumes leading to few or no interviews; the long-term unemployed number has been elevated for some time. Then we hear from college graduates who in general are finding increased difficulty in landing that first job (that actually relates to their area of study – and this includes computer and technical related degrees).

    We hear of a lot of layoffs, such as from mega tech companies such as Meta and Oracle, involving 1,000s. That these are not spurious is based on mandated WARN notices. Note that many such jobs are accompanied by nice severance packages.

    Overall, the picture is mixed, or rather muddied. As of this writing it is being reported that manufacturing jobs have fallen at the fastest rate since the pandemic. Hmm, not exactly reassuring news.

    The Consumer

    • As for retail sales, most mainstream sources leave out that a large portion of recent good news numbers is based on gasoline sales. In fact, 2/3rds of the sales increase was based on elevated gas prices. Let that sink in. That is hardly the story of a “resilient” consumer.
    • Real wages – recently, has turned negative (from the BLS: real hourly earnings for all employees decreased by 0.1% from April to May)
    • Consumer debt – $18.2 trillion
    • Credit card delinquencies are marching up
    • Savings rate – rock bottom at 4% (update: 3%)
    • Many living paycheck-to-paycheck
    • Home sales – languishing
    • Warnings from CEOs of companies ranging from Home Depot to Dave and Buster’s concerning consumer behavior
    • Purchasing power – left out by most everyone most especially the Cheerleaders, but there has been a steady erosion (see the graph at the end)

    At the Edge

    Cheerleaders paint a picture of a booming economy.

    While others experience an economy that is on the edge, and even in the process of slipping into recession… or worse.

    One way to understand the contradiction that we witness is how the AI-mania is propping up the market, which then leads into the “wealth effect”: that top 10% who own the bulk of stocks appear to be doing nicely based on phenomenal stock market gains. This effect then explains why spending has seemingly held up. Namely, it has been found that approximately half of all consumer spending is from the… top 10%. So… the economy is being propped up by irrational exuberance (Greenspan) over AI and big tech, which are the basis of extremely high valuations, and of the “wealth” being enjoyed by… a relatively small segment of the population.

    Does this not sound like a house of cards? And there is a potential big problem with the preceding. It appears that instead of the stock market being reliant on the (real) economy, it’s the other way around. As the wealthy prop up spending, they are essentially propping up the economy – an economy that if AI-related activity is taken out (CAPEX) is at best barely growing.

    Another Divergence

    Here’s another image embodying two diverging tales. Diverging, but correlated. Remember, for a substantial portion of the population the decline in purchasing power is increasingly being directly felt. For the rich? Those assets are surging in value, more than compensating for the dollar’s decline.

  • Descent into Delusion – Overview

    The previous post ended up becoming quite long, so the various points and topics are being summarized here (along with some related notes).

    The trigger for this discussion is the war that the United States entered into with Iran (that some of us believe was really at the behest of Israel). We hear all sorts of bluster and boasting from a “leader” – a person who is essentially a parody of a leader – whose main accomplishment had heretofore been the host of a popular reality TV show – by itself an eye-rolling instance of unreality. His performance has been unhinged: we won the war early on, Iran wants a “deal” (akin to the bogus deals he is well known for), we’re going to take a strategic island in the Straight of Hormuz, we’re going to end the war and let others deal with Hormuz (“get your oil”), and so on. The whole performance is absolutely unreal given the posturing and spewing of bs (and falsehoods). But with all sorts of major repercussions, not least of which is the bs treatment of what had been our allies. And then you add behavior of “investors” launching into manic buying on bs pronouncements of this “leader” (bs talk of the war being at an end, even as the destruction from both sides continue).

    So following is a list of points and topics found in that previous post, all describing the myriad of elements that collectively give rise to the current miasma of unreality that envelops the empire, in roughly the same order:

    • The aforementioned unhinged performance of the “leader of the free world”
    • The portrayal of the United States no longer hearkening to a vision of a “City on the Hill,” but to a brute force to be reckoned with (before which everyone, including so-called allies, need to tremble and prostrate)
    • Bs pronouncements of our exceptionalism, that includes:
    • America’s economic might (in many ways a Potemkin economy) and
    • Military strength (we’ve been here before: we bomb the hell out of [Vietnam, Iraq, now Iran], but no decisive victory ensues (oh wait, we “won” in Venezuela, so there’s that)
    • The unreality of the situation where the greatest military on the planet seems completely on board with one person thumbing his nose at Congress, the body that should be deciding whether we go to war or not
    • Not to mention ending up looking like a plaything of the OG
    • The portrayal of the economy as exceptional – no matter the eyebrow-raising deficits, and renewal of money printing (“reserve management”) to boot
    • The bs nature of much of America’s wealth, based on intangible assets that have very indirect or even no connection to anything real (assets whose prices are largely the result of speculation – akin to betting behavior)
    • How the top tiers use this wealth to enjoy a privileged status that is completely out of reach to the majority of the population
    • The huge disparity of wealth among US households, with attendant disparity in power
    • Bs “happy talk” concerning the economy based on retail sales – leaving out that the top 10% account for approximately half of all spending (along with tons of anecdotal evidence as to how low- and most middle-income households are struggling financially)
    • The eyebrow-raising disparity between the stock market and the “real” economy
    • The “gimmicks” that prop up this “wealth machine:” stock buybacks, option trading, the “yen carry trade,” margin-based trading, as just the top examples
    • The incredible torrent of bs from the media, in all its forms, leading to a distracted and stupefied populace
    • The bs deference the media gives to celebrities (add a good portion of the population)
    • The time so many spend staring into the small screens of their “smart” phones – unable to pull away, even upon learning of the addictive nature of this technology
    • The lack of skepticism over all this technology that behind the scenes has such a major effect on our lives
    • The AI mania with belief in “miracles”

    Yeah, it’s overwhelming. You can’t blame so many wanting to find a way to shut off all this crap. But in many cases the means to do so involves… retreat into unreality.

    As an update, the OG (“leader of the free world”) is suggesting that the US will soon exit the conflict, with all kind of crap left in the wake: the fate over the Straight of Hormuz left undecided, the demonization of so-called allies (including the threat to leave NATO), the elevated price of oil, among other things. Each of which has serious repercussions.

    Here’s unreality: on the same day of the Artemis II launch the OG gives a national address concerning the war with Iran and… well, in a few weeks it will all be over (furthermore it’s all their fault – Obama, etc), and gas prices will come down! And we’ll be more prosperous than ever!

    So… we see the cracks forming in the facade… we note the accumulation of “slippage”… we hear the bs and outright falsehoods from this guy who holds the most important position in the world (our economy is going at full blast, inflation has been conquered, prices are down, the opposition are a bunch of terrorists, etc etc etc)… if we pay attention, we can feel our footing begin to slip…

    But the key phrase is “if we pay attention.”

  • Descent into Delusion

    “And we’ve won let me tell you we’ve won.”

    This was Trump’s victorious proclamation early on in the war that has recently been opened on Iran. After a number of days we then heard a somewhat more modest, “We’re winning.” And many days after that, at the time of writing, the war has entered its fourth week and Iran is sending sophisticated missiles into Israel, and not all of them are getting intercepted. In short, we launched an undeclared war (along with Israel) with a maximum of military might, but also with a maximum of overweening optimism and bravado (at least on the part of the administration). The term hubris comes to mind.

    Unreality As a Symptom of The Decline

    A major theme of American society is unreality, which here refers to the tendency to retreat into fantasy and delusion. It can be argued that this trait has been a salient feature of America for quite some time; as Kurt Andersen writes in Fantasyland – How America Went Haywire, it was there at the very beginning of the country’s founding (forget Pilgrims and religious freedom, at first it was all about gold and riches). I would further make the case that this trait becomes heightened during the phase of Decline, as the “good times” of the Rise and Top begins to slip away and fade into “image” (i.e. to become a simulacrum of “good times”). It’s a sort of “digging in one’s heels” against encroaching reality. A process that is currently unfolding.

    This unreality pervades all aspects of life in America, from the top “leadership” (in quotes to denote something more like a parody of leadership) to the economy to everyday life. Following is a broad sketch of the scope of unreality in a myriad of guises, organized as a series of topics (each one itself a sketch, intimating much larger discussions). Since the post began with the Iran war, the first deals with various examples of unreality in the American Empire.

    The Unrealities of the American Empire

    Foremost is the belief of omnipotence. This is backed up by the largest and most advanced military on the planet, backed by all manner of technological advances. Yet, despite these advances, limits remain. Going back in time, the US possessed all sorts of major technology in such wars as Vietnam and Iraq (Iraq 2.0), but despite all the massive destruction (and all the people – noncombatants – that were killed), a decisive victory remained out of reach in each case. (Both incurring incredible amounts of money btw).

    Another aspect of omnipotence is the fact that the US dollar is the world’s foremost reserve currency. There are many benefits that flow from this situation, not least being it helps making many goods and services cheaper than they would otherwise be (will not go into this – see Dalio for example).

    The United States used to be framed in terms of exceptionalism. It wasn’t just our military might and gigantic economy, there was a moral dimension to our place in the world. America was, for example, a prime force behind the expansion of Democracy throughout the world. This and other virtuous projects were the basis of the so-called City on a Hill narrative. But there has been a shift over time, and which has accelerated under the Orange Guy. So that our might has devolved into a kind of brutish version, solely in terms of our military and economic might.

    It could be added that hiding behind narratives of exceptionalism are all manner of examples of the United States acting in aggressive and cruel manner, taking on other countries directly, such as Spain in the late 1800s and Iraq more recently. Or meddling in the affairs of other countries; one prime example being Chile in the 1970s, when we decided nationalizing resources was a threshold we would not tolerate… leading to a bloody coup led by a brutal general. The sort of person the OG seems to show deference toward (Putin, Xi, etc).

    Without exaggeration it can be said the United States is richest nation on earth, and for that matter in all of history. At one point some decades ago we could boast a standard of living enjoyed by most Americans unparalleled in history and among even other developed nations. Included in this was the substantial percentage of households that were solidly middle class. But now there has been a shift. For one, the vast wealth of America is extremely unevenly distributed, as graphed in this chart from Wikipedia (there was a nice chart from Statista that is no longer available without an account). This chart (Q1 2024) shows that the top 10% hold 67% of total wealth in the US. The middle class has shrunk (since the 1970s), and really, given high costs for things such as housing and healthcare, only the upper middle class can realistically be considered middle class (much of the middle class is really working class at this point). Note the bottom 20%’s meager portion. This situation is a segue into the following topics.

    Potemkin Economy

    Besides a “real” economy of production of goods and services there is a kind of parallel economy that is a matter of narrative – the economy as spectacle. In this spectacle economy vast wealth is being created: the “pie” keeps on growing and everyone (households) enjoys a generous portion. This is a version of The Mirage. The truth is, though, we know that many are finding themselves looking at a pretty miserable slice of that “pie” on their plate (see reference to the bottom 20% above). And there are other issues concerning this narrative.

    The common metrics hide the true reality. GDP, for example, is in large part based on consumer spending (PCE – Personal Consumption Expenditures): roughly two-thirds of all economic activity. The first thing to note is that PCE has a larger share than production. But there is a further issue in terms of consumer spending, with an estimated 50% of this spending coming from the top 10% income tier. (TO DO – ref to more detailed analysis, with maybe a link)

    We keep on hearing how the labor market is still considered “robust” and “resilient,” which is taken, with labor used as a proxy for the economy, as proof the economy is in good or even great shape. Look at the unemployment rate! At around 4.3% that is historically pretty low. Except… we know a lot of people are struggling, and concerned about the job market. The Ludwig Institute for Shared Economic Prosperity has an interesting analysis of this situation that includes the notion of being “functionally unemployed.” This is a category that not only includes those currently looking for a full-time job but also those whose income fails to reach an adequate threshold enabling them to adequately pay for basic necessities such as housing and food; in other words a living wage. Currently LISEP estimates that a worker must earn at least $26,000 before taxes to be considered earning a living wage (however, some areas/cities/etc require a higher amount).

    There is another dimension to current economic activity that involves spending on AI; to be precise, spending on AI infrastructure such as data centers. This is not the place for an in-depth discussion, but suffice to say there are a number of problems related to these data centers; energy and water consumption are at the top of the list. But this activity has a misleading aspect, seen in the large amount of circular financing involved, where much of this activity involves an AI-related company pouring money into another one. Big tech companies such as Nvidia and Microsoft invest tons of money into AI firms such as OpenAI and Anthropic, which in turn use that money to buy hardware and cloud services from those investors. This looks good on paper (jacking up the GDP). Also to be noted is the staggering amount of debt involved, so that some companies are now seeing negative cash flow. In recent months Oracle and Microsoft have gotten hammered in the stock market as some investors basically freaked out on the level of debt involved… with no substantial revenue in sight (derived from their AI projects). I could go on, but AI, being touted as a kind of miracle. A miracle that at the moment is not really yielding spectacular results based on spectacular amounts of debt.

    Wealth

    America proclaims itself as the richest nation in the world. On the face of it this is true but there are some problematic aspects to all this “wealth.”

    First, there is the large wealth inequality already alluded to. This can be seen in such comparisons as: the top 1% (that’s ONE percent) has a net worth of about $52 trillion, vs the bottom 50% (half of all households) has a net worth of only something like $4 trillion (data from Fed Reserve and other sources). Further, much of that $4 trillion is based on value of the homes owned by this group (problematic given the moribund state of the current housing market).

    This vast accumulation of wealth by the top 10% or so translates into outsized leverage of political power (i.e. see Turchin’s work). In other words this large disparity is a major force shaping American society, in many instances in ways not widely reported on, not least in the media itself; this would include the shrinking number and variety of media venues. It appears there are now just a handful of large corporations – in tandem with billionaires – who control the majority of media (controlling what is, what is not, and how things are, reported).

    But there is a more subtle issue nature of this wealth, and that is much (most) of this wealth isn’t actual money, but assets. Although there are some assets that are tangible, such as real estate and precious metals, much of it now is intangible. It is really a matter of abstractions, numbers in bank ledgers/computer systems. Such wealth can be converted to money. But it is not cash sitting around in bank vaults. This wealth increasingly is the result of speculation – and that is why I constantly put quotes around the word. See Ray Dalio for example for a fuller description of this.

    Magic Money Machine

    Aka the Big Casino.

    Given the already overwhelming territory being covered, only a few points will be mentioned regarding the stock market and the vast “wealth” it represents. The previous description carries over here. With stock prices now at valuations that have become completely disconnected from the “real” economy.

    This disconnection can be seen in various metrics, one of the simplest is the so-called Buffett Indicator. It is not hard to understand: it is the ratio of total market capitalization and the GDP. It’s not fully predictive, but a kind of broad indication as to the overall state of the market. It shows to what degree the market is outpacing the economy. And currently, this ratio is seeing values that have never been seen before. With recent values at 215% to 230%, the market is well above double the valuation of the actual economy. It means there is a large amount of speculation, rather than production of actual goods and services. The economy quite simply is not yielding monetary returns that come close to current valuations.

    And central to this speculation is of course the current mania over AI. This has already been alluded to. But again, a large group of overly optimistic “investors” have been throwing a ton of money into a relatively small number of big tech companies. In anticipation of… well, miracles. That simply aren’t manifesting at least in the way and extent to justify all this expectation of creation of great wealth. I’ll just mention the looming specter of disruption, especially in regards to the labor market. Some folks are concerned, and watching the situation closely. For now, the worst thing that has occurred are a growing number of investors becoming nervous over spectacular valuations with no huge results (involving profits) in sight.

    I call the market a wealth machine (again, it’s “wealth”), given how it is treated. Make the right bets, and you are rewarded, sometimes handsomely. But the bets can be quite technical, based on trends that span at times very small intervals of time. And in fact is propped up by a number of gimmicks: stock buybacks, margin debt, option trading… and add to this list the reality of something like over half of all trading is now performed by computers.

    It is a democratic system… as long as you have enough money (including access to debt). And ends up being a matter of a relatively small section of the population that is involved (and able to benefit). It is estimated that the top 10% of Americans hold up to 90%, or even higher, of all stocks. For the top 1%, the percentage is something like half of all stocks.

    The Mirage

    This is the unreality of the dominant mainstream narrative, directly and indirectly presented via the media and statements by the government and elite. Although this narrative is diffuse, without a fixed form, it is based on a kernel that goes something like things (the state of affairs of society, of America) are fine. Things are fine, nothing to be overly worried about, go about your everyday life without concern. If there is anything to be concerned about it’s how to spend one’s time and how to spend one’s money – involving choices in the context of a consumerist society.

    And so it appears, despite a myriad of warning signs and worrying trends, that things in America are ok. Perhaps there are more “bumps” and looming problems than previously seen, but life is workable. Most people have jobs (ahem – see LISEP reference above), are housed, can buy food and generally obtain necessities if not some luxuries – although for a large portion of the population the prices for many things have been rising and some prices (like for cars) are reaching WTF-level, accompanied by an increasing reliance on debt to keep one’s lifestyle (relatively) intact.

    Ah yes, back to debt. Note how it keeps on coming up.

    Media and Digital Technology

    Much of the unreality that has been discussed so far has been in terms of narrative and data skewed by narrative. It is what is presented in mainstream news and in dominant stories such as the American Dream (such as dished out by the two main political parties). But there is another form of unreality that is even more insidious given its scope and effects. And that is the torrent of images and sounds that we are immersed in, akin to the air we breath. Emanating from the countless screens, both large and small (i.e. “smart” phones) and which now literally envelop most of us (so that they now constitute a major part of our physical environment), they capture our attention and shape our thoughts. It is a literal torrent, as if we expose ourselves, “willingly” (the quotes relate to a whole other discussion), to the direct blast of water from a fire hose.

    The Matrix

    The range of this onslaught is in itself overwhelming. Even “unedited” video footage is mediated (“framed” in some way). And much of even supposed raw footage involves some sort of performance. And it is ubiquitous, in location, courtesy of cell phone technology, as well as time. It is a 24×7 barrage that, if considering TikTok accounts for example, involves millions of channels. The onslaught is simply staggering in its dimensions.

    This torrent includes the glut of entertainment, where the choices are… well, staggering. Just about anything you wish to view is available just about anywhere and at any time. Many of us are immersed in all manner of dramas – our favorite shows! And much of it is not just ubiquitous but free. Free, that is, courtesy of all the ads. And this is yet another dimension rarely addressed. The sheer onslaught of idiotic skits and pseudo-dramas – many times harnessing the vast resources of the media industry – designed to hustle us, to inject references to products and brands and suggestions as to how they might enhance our lives.

    As far as the ads go, my take is that it constitutes an assault on cognition itself – a prime ingredient to a population becoming not just stupefied, but stupid.

    It is as if we have successfully replicated the situation described by Plato in the Allegory of the Cave, with many physical surfaces, not just screens, effectively converted into the cave walls upon which illusions are displayed. As far as The Matrix goes, there is no need for having to be literally “jacked in.” Especially as much of that torrent is designed to capture our attention, in a process that is nothing less than a form of addiction.

    And now we have the input of AI, including an onslaught of “AI slop” to “enhance” our media offerings.

    (Wow! Can’t help but insert a comment here on the irony of the so-called progress that is the result of advances in digital technology: a population sated and bloated not just on stuff – heretofore cheap – but stimulation.)

    Encapsulated Life

    Our everyday life, for the majority of the population, is without hyperbole drenched in this torrent of electronic stimulation. It is a major component for what I call Encapsulated Life. A life that is effectively buffered/cut off from the outside world, from the majority of fellow citizens (let along humanity), and from reality itself. This component works in conjunction with physical components (like much of our housing) to seal ourselves off.

    This buffered life has another dimension, which involves a subtle form of unreality. Namely, for the majority, the complete lack of acknowledgement/comprehension of what supports this life. It’s simply taken for granted that we have access to all the world’s resources. And besides material resources, there is the effort of countless human beings who are otherwise invisible (and in many cases working in harsh, even toxic, environments). A vast process (aka The System) making our enviable life possible.

    Add to the preceding the immense cost of all this. A cost that until recently has been invisible, but that is now starting to become apparent (see Reality Will Have Its Due) with recent inflation and high prices.

    The “Smart” Phone

    This preeminent example of modern computing and communication technology has become the main force behind the explosion of digital tech in scope and penetration in our society. A few elements of this technology are problematic as relates to the theme of unreality.

    For one, there is the “dopamine loop.” This is a more formal way of describing the addictive effects of constant usage, including constant notifications and clicking on “likes” and links – for more more more. And the hypnotic effect of being blasted by imagery that is designed to capture one’s attention (many times with the side effect of forcing ads on that captured attention). The end result is a form of capture.

    This leads to the idea of “distancing.” This is akin to the buffering/sealing off component of Encapsulated Life. It is literal. We see it in so-called zombie behavior, with people around us oblivious to the surrounding world and human beings.

    And there is the concept of the “reality bubble” (or silo). The attention so captured is further being managed by algorithms that are constantly on the look out for favored categories of content (what a user tends to click on for example). In this way we are steered toward “realities” that can include not just products or lifestyle choices, but political beliefs. These algorithms are now being supercharged by AI technology. (comment: progress!)

    This is a huge and very important topic in itself. For now it will be left that these devices are single-handedly deepening the condition of unreality. And are leading to subtle, negative consequences for society (such as the rise of mistrust and wariness towards those around us).

    Yet Another Instance of Unreality

    … and perhaps the most pernicious: the belief/expectation that things will continue pretty much as they are now – with both the status quo and trends. This contains the implication that there are no serious repercussions to things such as the exploding deficit or that our lifestyle is dependent on resource extraction with problematic (even toxic) effects on other nations and the planet itself. This overall belief can be captured in specific instances, as found in the following statements (a list that is not exhaustive):

    • The United States will continue to be the most powerful nation on the planet (and history)
    • The surging (exploding) deficit – and debt – will not hinder or cripple it in any way, especially in connection with the next item:
    • The dollar will remain the world’s most important reserve currency
    • Speaking of debt – the consumer will be able to maintain their lifestyle with continued – and expanding – reliance on debt
    • The penultimate wealth creation machine – the US stock market – will despite a few stumbles now and then will always march up to new heights (that is, it will not see anything like a major crash that leads to an extended bear market, as has occurred several times in the past)
    • Technology, especially digital tech, will continue to innovate and bestow upon us, everyone, all manner of benefits – and any negative side effects can just be shrugged off (see “stupid” and “stupefaction” a few points below)
    • That the exemplary technology of AI will lead to not just benefits, but miracles – benefiting all humans
    • The wealth gap that has widened, though a bit troublesome, remains something we can live with
    • An increasingly stupid and stupefied populace will be able to come together and deal with any major problems that might arise (how about, for instance, an emerging water crisis in the Western US)

    Debt

    Debt has been mentioned a number of times in the preceding sections. I make the case that debt is one fundamental reason why we haven’t fully seen the SHTF. It is, in other words, a major (even “the” major) support in keeping up the appearance of normalcy, there is nothing to be overly concerned about, etc.; it is a primary force in staving off reality.

    A sketch of this debt includes:

    • The federal debt that has now surpassed $38 trillion (projected to reach $39 trillion in April 2026); this does not include many trillions more in
    • Total debt for consumers reached $18.8 trillion early 2026. This includes
    • $1.28 trillion in credit card debt (and counting)
    • Plus over a trillion for auto loans and student loans

    There’s more: how about all the margin debt (debt used to buy stocks on margin). And private credit. Which, btw, is showing worrying signs of strain, with an echo of the sub-prime crisis of the GFC.

    What is the unreality of all this? It’s not even so much in the staggering totals, but in the nature of debt as essentially borrowing from the future. The unreality is the magical-like thinking that somehow in the future all this debt will be adequately dealt with.

    Reality Will Have Its Due

    Again, it’s not that we are beset by unreality – it’s the expanded scope, and how it has so thoroughly insinuated into society and our lives. And this In the face of growing/widening cracks and accumulating warnings – some now flashing bright red. And this includes the ever rising level of debt that as I just laid out is one of the props of support keeping the whole thing from collapsing outright (and btw this includes our national debt continuing to be financed in the form of Treasuries). It’s as if we are at the edge of a cliff, and in fact beginning to lose our footing – see image at the end of this post.

    Btw, I have not delved into the political sphere, which is rife with unreality in all sorts of ways. The OG is only one aspect, albeit prominent given his outrageous performance as the “leader of the free world.” But overall, the whole political process has become an unnerving performance, complete with insults and bullying and tons and tons of bs. Unnerving because it (political process) is unable to squarely deal with all manner of problems on a national scale, with the surging deficit and looming Social Security shortfalls as only a few examples.

    Yeah, things look workable doe now. But things are slipping. And all the bravado and chest beating, the miracle of the Magic Money Machine and reliance on a mind-boggling pile of debt that for now help keep up the appearance of normalcy (The Mirage) cannot prevent the whole thing from eventually imploding. And the main force that is threatening us isn’t some enemy – external, such as Iran, or internal, such as Democrats or domestic terrorists – but reality itself.

    Wow, that escalated quickly – way beyond initial intention. And this discussion is, as I said at the top, just a sketch. It has allowed me to collect various disparate observations and analyses, and bring some clarity to a gut feeling. Namely, something has been, and is, very very off in this country…

    Part of this gut feeling has been an ongoing sense of unreality that has seeped into and encroached upon American life. It’s as if we can glimpse the edge of a cliff TO DO towards which our society is hurtling, much like that coyote (Wile E. Coyote) running after the roadrunner (which btw we can see literally with many drivers on our roads pressing hard on the gas pedal).

    And now we are in the midst of a major war, and an undeclared one at that. And with an opponent who, though beaten up after some weeks of relentless bombing, still appears to have a number of tricks up its sleeve, including the ability to launch sophisticated ballistic missiles every day to Israel (among other places). The rhetoric of our superiority, the mounting cost (which will be effectively borrowed and added to an already large deficit), and so on, will as I see it have one major and lasting effect on the country (even if soon we are able to truly declare “we won”) which is that we have effectively accelerated our descent into The Decline.

    I will end with a quote, from a poem by William Butler Yeats (which introduces Hedges’ Empire of Illusion):

    We had fed the heart on fantasy,

    The heart’s grown brutal from the fare.

    TO DO image showing Wile E. Coyote past the edge of the cliff (drawn as Seneca’s Cliff)