Addict Nation

by

Ross M. Miller
Miller Risk Advisors
www.millerrisk.com
June 8, 2009

It has been a while since I have written anything for public consumption that more than vaguely concerns either finance or economics. Over the past year or so I have been tempted several times to write a commentary entitled "I Told You So," but for now this commentary is about as close as I am willing to come to that.

Addiction, the topic of this commentary, lurked behind several of my early commentaries. The basis for my inaugural piece on this site, "The Bull That Will Not Die," was my confidence that then-Fed Chairman Alan Greenspan would continue to feed the financial market's "addiction" to cheap money by holding off any serious increase in interest rates, which, in turn, would feed the bull markets in stock and real estate. Despite (or because of) going against the received wisdom in the markets, I was correct and the coup-de-grace for the markets would not come until well into Ben Bernanke's reign at Fed some years later. This time around however, low interest rates by themselves were not enough to do the trick, not even zero interest rates. The private sector had lost its desire to buy at any price. Unfortunately for us, the public sector was more than happy to step in and take up the slack even if it meant racking up debt that goes beyond insane.

Speaking as the "voice of reason," let me tell you what is going on. Americans have become addicted to spending more than they can afford no matter how you measure it. The spending itself is not bad; however, when you have to borrow money from the rest of the world every minute, every day, every month, every year, every decade, to do it, that is bad. It is especially bad (and insane) when your economy is relatively mature and so should be investing in the rest of the world (and receiving an ownership stake in it) rather than borrowing from it (and selling off your future in the process). And behind all of this insanity is the federal government of the U.S. (and its proxies, such as the Fed), whose actions have thwarted (and continue to thwart) the strong market forces that should have brought the current consumption binge to halt as much as twenty years ago.

It is time for a little perspective. I grew up in a middle-class family during the 1960s. Like most other middle class families of the day, mine did not have color TV, any stereo form of music-reproduction equipment, cable television, or a fuel-injected car. All of these were available back then, but you had to be "rich" to own them. Indeed, by 1960s standards, currently all Americans, except for the desperately poor, are "rich," at least the way that an economist would view things. Indeed, many key elements of daily life, from personal computers and the Internet to a variety life-saving pharmaceuticals and medical procedures, did not exist then and are a relatively new phenomenon. Strictly speaking, these items have a value of infinity in 1960s terms, since no amount of money could have bought them. Viewed objectively rather than nostalgically, the 1960s were considerable worse than today, but not entirely unlivable, unless one needed a heart transplant or cancer therapy that went beyond the power of prayer. Back then, people were addicted to lots of things, including spending money, but financial institutions (including your neighborhood loan shark) had much higher lending standards, so it was difficult to keep the consumption monkey fed for long on legitimately borrowed money.

Addiction of any kind is something that economists have a hard time incorporating into their thinking and their models. Many economists are happiest viewing addiction as just another rational choice and see the choices made by an addict as well to be rational. At the core of addiction, however, is the fact that the addict consumes the substance to which he or she is addicted in a way that any rational (non-addicted) person could readily see is harmful. While "coffee addicts" certainly suffer withdrawal symptoms if they cut out caffeine, only the most extreme use of coffee qualifies as a true addiction because there is substantial evidence that coffee use even well beyond the point of moderation confers health benefits.

The most visible sign of addiction in America is "food addiction," which reflects a radical change in eating habits. Back in the 60s, virtually classroom in school had its "fat kid." There was usually only one unfortunate sole and frequently a "gland problem" was said to be to involved. The rest of us were quite scrawny  and hunger was a major issue in America. Moreover, fast food had not yet reached a national, much less global, level. For most of us, eating outside of the home was a luxury reserved for special occasions. I don't doubt that when I was twelve years old that I could have told you every single time that I had eaten in a restaurant back as long as I could remember.

I ate my mother's cooking (thankfully she was a superb cook even if I failed to appreciate it) and I had no choice but to follow a diet that allowed for no soft drinks, no cake (except at birthday parties and such), and a daily allotment of four cookies. (Ice cream, however, was available in abundance because it was viewed as a dairy product.) My parents were not considered strict back then; I had friends who lived on a strict regimen of forced fruits and vegetables and were allowed no sweets whatsoever, including ice cream. Of course, our parents, having grown up during the Depression, viewed us as living one long feast.

Nowadays however, America's most visible, wealthiest, and most influential media star, Oprah, is a recidivist food addiction, and food is one of her less serious additions. Her vast empire is based on consumption; if people failed to buy the goods that Oprah pushes on her television shows and magazine, she would be gone in a moment.

I browsed a copy of Oprah's magazine as research for this commentary, and was not surprised to find an ad for Lay's "Classic" Potato Chips along with ads for other processed foods. I can vouch for the appeal of Lay's flagship, bet-you-can't-eat-just-one product, but you would have to force feed them to me now—they are fried, full of fat, and certainly have too much sodium for people with a genetic disposition to high blood pressure, like many of those in Oprah's target market, for me ever to consider eating more than one of them. The ad in Oprah's mag contains no warnings of any kind about this product and fails to mention that Lay's makes a low-fat "baked" chip that is a healthier alternative to it.

Oprah herself caused mini-riots at KFC outlets by promoting free chicken and biscuits there, just the way the coke dealers give away free "tastes." (As a putative animal-rights activist, I doubt that Oprah personally slaughtered any of the chickens.)

It is easy to find out what it takes to do to live a happy, addiction-free life and I do not doubt that Oprah provides some helpful information on this account through her manifold media outlets. It is apparent, however that she does not follow her own advice. Interestingly enough, Oprah has challenged her viewers to follow an austerity program that lasts for just a single week. Her austerity measures include: "That thermostat is going way down…to 69 degrees. If you get cold, put on a sweater." All I can say is "WTF?" The winter thermostat in the Miller household is set at 66 degrees during the day and 63 degrees at night. My employers, the State of New York, is not about to pay to keep my office at a toasty 69 degrees. Oprah's other austerity measures include watching only one hour of television per night (of course, you can watch all you want during the day, especially if it's Oprah) and not buying any new clothes for a week.

Of course, reasonable "austerity" measures, like following the American Heart Association's dietary and lifestyle recommendations (and not just for a week, but forever), which have a lot of hard science showing that they work to improve and extend life, is more than Oprah could ever request of her audience. Indeed, it is clearly more than she could ever manage on her own.

Oprah clearly is addicted to all the perks that go along with being Oprah, and in order to conquer her manifold addictions, she would have to let go of her perks, private jet and all. Fat chance of that ever happening.

(Food addiction side note: Proper eating is not something that can occur in isolation by merely following the aforementioned AHA recommendations, which is, nonetheless, an excellent start. Proper eating is just one aspect of proper living. You cannot simply shop around for some good things you want to do and ignore the other bad things or even a single bad thing. Trust me on this.)

You see, like virtually every "public figure," Oprah has one of the worst addictions of all, an addiction to fame, which at its heart is an addiction to controlling others. When you have control freaks trying to "run" the global economy, you are in for big trouble. (See, I got back to the economy.) The current situation is currently one of desperation. Leaders are supposed to have dignity. Our president should not be joking around on the Tonight Show with Jay Leno our Fed Chairman should not be on 60 Minutes. Our leaders are betting the farm on the current green-shooted recovery. If their efforts succeed, then they are golden and our collective consumption addiction will continue to be fed for years to come, even though they have done nothing to deal with the real problems underlying the economy. If their efforts fail, however, it will be very painful in the short-run, but probably much better for the economy in the long-run.

None this ever had to be a problem. Suppose that the U.S. went on a natural consumption diet that eschewed any further public indebtedness beyond that normally associated with cyclical downturns, one that would undoubtedly knock several percentage points off of GDP and possibly even enough to qualify statistically as a "depression." (We are already down 3 percent on GDP despite our extravagant government spending.) We would still be vastly better off than things were when my generation grew up and, in time, by kicking our collective consumption addiction, we would be better off than we are now, even if economic statistics might fail to reflect that improvement. Simply letting the economy "do its thing" (which will certainly never happen without massive political change) would make sure that the dose of reality was spread around to everyone who needed it and would not favor special interests and campaign donors.

As in summers past, this summer I will revert to entertainment mode and present you with a three-part series on a single theme. This summer's theme is "Yuppie Music." Each month I will explore a popular musician or musical group associated with Yuppies. In keeping with the theme of meaningless and addictive consumption for its own sake, the first part of the series will focus on Jackson Browne.