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Government, Politics & Issues

Commentary: Flights of fantasy frequently crash

This article first appeared in the St. Louis Beacon, Oct. 11, 2012 - In his Post-Dispatch column last Sunday, Bill McClellan wrote about a 50-year-old man who’d been placed on probation for two counts of attempted use of a child in a sexual performance.

The man had never been involved in anything like this before. His wife of 25 years is a teacher; they have a grown daughter and a 17-year-old son. Now, this outwardly normal middle-age citizen is a registered sex offender thanks to misguided dalliances in cyberspace.

He met "Megan" in an adult chat room on the internet. In the virtual world, she was a 14-year-old girl who’d stumbled onto forbidden turf. In the alternate universe, he was a St. Charles County cyber crime detective.

The probationer had two sexual conversations with Megan and suggested they get together to do more than talk, although no concrete arrangements to do so were ever made. Ultimately, he entered an Alford plea to the resultant sex crimes indictment. Under terms of that legal nicety, he did not admit guilt but conceded the prosecution had enough evidence to convict him.

While offering no defense of sexual discourse between a grown man and a 14-year old girl, McClellan wondered if the computer, itself, might not be complicit in the man’s downfall. After all, the guy had never been accused of soliciting minors in the world of bricks and mortar.

That explanation would probably appeal to the late Marshall McLuhan who, long before the advent of the internet, advanced the notion that the medium was the message. He believed the way in which we communicate shapes the content of the communication.

McLuhan claimed that electronic media had transformed the world into a “global village,” fundamentally altering the way we perceive reality. But McLuhan was talking primarily about television and its effect on our world view. The internet, on the other hand, has created an entirely new dimension of existence.

Given the interactive nature of cyberspace, the audience is now free to create its own reality. It’s probably easier to misbehave with an imaginary teenager in a chat room than it would be to talk dirty to a real 14-year-old kid. However, as McClellan’s forlorn sex offender demonstrates, virtual sins can have real world consequences. And though computers can make fantasy seem more real, the intellect’s vulnerability to folly predates the digital age.

Charles Mackay wrote “Extraordinary Popular Delusions and the Madness of Crowds” in 1841.  His book detailed instances of mass hysteria throughout history. Though still in print, the tome has done little to suppress the appetite for deluded thought.

The financial collapse of 2008 is popularly attributed to unwise mortgage lending by unscrupulous bankers. That explanation is true as far as it goes. A lot of unqualified borrowers received loans they should have never been given based on the extraordinary misconception that real estate would continue to increase in value ad infinitum. When the market contracted, things began to fall apart.

But as Michael Lewis pointed out in “The Big Short,” the banking industry could have absorbed the losses on the mortgage debt. What it couldn’t survive was the collapse of the derivative market the sub-prime mortgages had spawned.

Increasingly exotic financial instruments in the form of credit default swaps and collateralized debt obligations were issued against securities backed by bundled sub-prime mortgages. These were essentially side bets that could function as a kind of insurance on the shaky mortgage securities. Eventually, these abstract instruments came to be traded as securities themselves, causing the financial system to drift ever further from reality.

When the time came to call the bets, nobody had the wherewithal to cover the action and the banks teetered on the brink of collapse. These wannabe bonds had no more material substance than the make-believe naughty teenager in the internet chat room. The controversial TARP bailout was the government’s effort to limit casualties during what was basically the crash of a flight of fancy.

That recent demonstration of the hazards of virtual reality should have a least sobered public discourse over financial matters. Apparently, it has not.

Today, Mitt Romney proposes to increase government revenue by reducing tax rates.  The fact that this plan resulted in then-record deficits when first tried by Ronald Reagan and later by George W. Bush does nothing to diminish his enthusiasm. In the world of supply-side economics, this strategy works.

For his part, President Obama pledges to invest the “savings” realized by ending the wars in Iraq and Afghanistan into domestic infrastructure. That would be an appealing plan were it not for the awkward fact that these savings don’t exist.

Both wars were financed entirely by borrowed money. When you stop borrowing, you stop acquiring additional debt but you can’t then spend the money that wasn’t loaned you.

The virtual world is a pretend place — an escapist diversion from the real one — where imagination trumps fact. But the more you examine the political and economic truths that shape our public dialog, the harder it gets to distinguish between fact and fiction.

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